Legislature(2003 - 2004)
04/14/2004 08:05 AM House STA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 14, 2004
8:05 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Jim Holm, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Paul Seaton
Representative Max Gruenberg
MEMBERS ABSENT
Representative Ethan Berkowitz
COMMITTEE CALENDAR
^OVERVIEW OF PUBLIC EMPLOYEES RETIREMENT SYSTEM (PERS) AND
TEACHERS RETIREMENT SYSTEM (TRS)
TAPES
04-61, SIDE(S) A & B
CHAIR BRUCE WEYHRAUCH convened the meeting of the House State
Affairs Standing Committee at 8:05 a.m.
SUMMARY OF INFORMATION
CHAIR WEYHRAUCH related his concerns regarding adequate funding
of the Public Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS).
MELANIE MILLHORN, Director, Division of Retirement and Benefits,
presented a report to the committee based on the following: 1)
what is the funding status of PERS and TRS today; 2) why [the
state] is where it is today; 3) a projection and information on
where the state will go on this issue in the future. Discussion
was held regarding the effects of the "Bull" and "Bear" [stock]
markets on the retirement systems. Ms. Millhorn stated under
funded retirement systems are a national issue.
ANSELM STAACK, Chief Financial Officer, Division of Retirement
and Benefits, spoke to the earning and investment criteria used
by the division. He answered inquiries by Chair Weyhrauch,
Representatives Seaton and Holm regarding funding the benefits.
Mr. Staack, in response to Representative Seaton, confirmed that
the medical amounts included the actuarial for the people
turning 65 and going on Medicare. Mr. Staack explained the
state is under a constitutional requirement to pay whatever
benefits have already been agreed upon. Rep. Weyhrauch asked if
the two-year time difference is a matter of policy or a matter
of pragmatic application. Mr. Staack responded that it is a
matter of practicality.
BOB REYNOLDS, Mercer Human Resource Consulting, spoke to his
company's working relationship with the retirement systems. He
explained that health trend assumptions are utilized based on
information available at the time and are intended to apply over
the longer term. Trends indicate that assumptions may need to
be adjusted.
MS. MILLHORN responded to comments from Representative Holm
regarding possible over utilization of the system by people who
have no idea of the actual costs of the services rendered by
clinics, hospitals, and doctors. She explained that the
division does have a healthcare subcommittee that meets
regularly to find ways to decrease the costs to the system and
work on employee awareness regarding cutting costs to the
system.
CHARLIE ARTEAGA, Chair, TRS Board, told of the board exploring
cost containment options with respect to the medical portion in
attempts to make some reductions. Double digit inflation and
the poor market return have heavily influenced costs to the
system.
GEORGE SULLIVAN, Chair, PERS Board, spoke briefly about the
board and the present under funding situation.
KEVIN RITCHIE, Executive Director, Alaska Municipal League,
testified on the impact of the under funded retirement systems
to municipalities and school districts. He said that the school
districts, municipalities, and the university system are also
meeting to try and look at the structural issues to see if
there's any way they can help. He reviewed the projected mil
rates in various areas of the state over the next several years
to address this issue. Mr. Ritchie responded to Representative
Holm's comments regarding the fact that the municipalities and
school districts, are themselves, responsible for the under
funding and now they want the state to fix the problem. He
reminded the members of bills presently in the process that will
alleviate some of this crisis.
CHAIR WEYHRAUCH commented on the bills referred to and the need
for absolute clarity of the testimony on the impact of the
legislation. He asked Mr. Ritchie for [conceptual] language
that would require certain elements to be met before the under
funding could be addressed. Chair Weyhrauch related his
interest in drafting legislation that would address this issue
from a policy view.
REPRESENTATIVE LYNN encouraged cooperation in solving the
problems with the under funding of PERS and TRS, which he
considered to be a very serious issue.
MS. MILLHORN spoke about various bills introduced during the
Twenty-Third Alaska State Legislature, which have an impact on
the retirement system. She mentioned another state that had
taken the initiative to write letters to its Senate President,
House Speaker, and governor asking that they delay action on any
bills that would affect the retirement system. Chair Weyhrauch
stated that at least half of the bills Ms. Millhorn referred to
came through the House State Affairs Standing Committee and had
the committee been advised, prior to taking action, of the
impact the legislation would have on the retirement system there
would [most likely] have been a different outcome.
ANNOUNCEMENTS
There were no announcements.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
CHAIR WEYHRAUCH adjourned the meeting at 9:45 a.m.
NOTE: The meeting was recorded and handwritten log notes were
taken. A copy of the tape(s) and log notes may be obtained by
contacting the House Records Office at State Capitol, Room 3,
Juneau, Alaska 99801 (mailing address), (907) 465-2214, and
after adjournment of the second session of the Twenty-Third
Alaska State Legislature this information may be obtained by
contacting the Legislative Reference Library at (907) 465-3808.
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