Legislature(2005 - 2006)

04/18/2006 08:32 AM House W&M

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08:32:58 AM Start
08:33:08 AM Alaska Retirement Management Board Presentation - Recommendations to the Legislature
09:27:02 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                         April 18, 2006                                                                                         
                           8:32 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Bruce Weyhrauch, Chair                                                                                           
Representative Ralph Samuels                                                                                                    
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Norman Rokeberg                                                                                                  
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Kurt Olson                                                                                                       
COMMITTEE CALENDAR                                                                                                            
ALASKA    RETIREMENT    MANAGEMENT     BOARD    PRESENTATION    -                                                               
RECOMMENDATIONS TO THE LEGISLATURE                                                                                              
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
GAIL SCHUBERT, Chair                                                                                                            
Alaska Retirement Management Board (ARMB)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a brief overview of the                                                                           
background, purpose, and goals of the ARMB.                                                                                     
GARY BADER, Chief Investment Officer                                                                                            
Treasury Division                                                                                                               
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:     Provided  background   information  and                                                               
answered  questions  on   those  recommendations  and  strategies                                                               
considered by the ARMB.                                                                                                         
REPRESENTATIVE DAVID GUTTENBERG                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Asked questions  and voiced concern  on the                                                               
effect  of  rising  healthcare costs  to  the  Public  Employees'                                                               
Retirement System (PERS) and Teachers' Retirement System (TRS).                                                                 
LARRY SEMMENS, Board Member                                                                                                     
Alaska Retirement Management Board (ARMB)                                                                                       
Kenai, Alaska                                                                                                                   
POSITION  STATEMENT:   Presented the  ARMB recommended  solutions                                                               
for addressing  the unfunded liability  of the  Public Employees'                                                               
Retirement System (PERS) and Teachers' Retirement System (TRS).                                                                 
MARTIN PIHL, Member                                                                                                             
Alaska Retirement Management Board (ARMB)                                                                                       
Ketchikan, Alaska                                                                                                               
POSITION  STATEMENT:    Answered  questions  regarding  the  ARMB                                                               
recommendations  and   the  unfunded  liability  of   the  Public                                                               
Employees'  Retirement  System  (PERS) and  Teachers'  Retirement                                                               
System (TRS).                                                                                                                   
WILLIAM A. CORBUS, Commissioner                                                                                                 
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered  questions regarding other possible                                                               
funding  sources  to  address the  Public  Employees'  Retirement                                                               
System (PERS) and Teachers' Retirement System (TRS).                                                                            
SAM TRIVETTE, Vice Chair                                                                                                        
Alaska Retirement Management Board (ARMB)                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in  support of the recommendations                                                               
made by the ARMB.                                                                                                               
ACTION NARRATIVE                                                                                                              
CHAIR BRUCE WEYHRAUCH called the  House Special Committee on Ways                                                             
and  Means  meeting to  order  at  8:32:58 AM.    Representatives                                                             
Weyhrauch  and  Moses   were  present  at  the   call  to  order.                                                               
Representatives Gruenberg and Samuels  arrived as the meeting was                                                               
in progress.  Representative Olson was also in attendance.                                                                      
^ALASKA    RETIREMENT    MANAGEMENT    BOARD    PRESENTATION    -                                                             
RECOMMENDATIONS TO THE LEGISLATURE                                                                                            
[Includes brief  mention of SB  141, HB 278,  HB 492, HB  238, HB
375, SB 247, and HB 475.]                                                                                                       
8:33:08 AM                                                                                                                    
CHAIR WEYHRAUCH announced  that the only order  of business would                                                               
be a report  presented by the Alaska  Retirement Management Board                                                               
(ARMB)  with recommendations  to the  legislature for  addressing                                                               
the  unfunded  liability  of  the  Public  Employees'  Retirement                                                               
System (PERS) and the Teachers' Retirement System (TRS).                                                                        
8:34:38 AM                                                                                                                    
GAIL SCHUBERT, Chair, Alaska  Retirement Management Board (ARMB),                                                               
began by  providing the committee  with a brief  overview, noting                                                               
that the ARMB was established in  October 2005 as a result of the                                                               
passage of  SB 141.   She highlighted  that one of  the important                                                               
provisions of  SB 141 directed  the ARMB  to prepare a  report to                                                               
the legislature with short-term  and long-term recommendations to                                                               
address  the unfunded  liability of  PERS and  TRS.   She relayed                                                               
that many  of the recommendations  made in the  report, presented                                                               
in  January  2006,  are  already  underway  in  the  Division  of                                                               
Retirement  and  Benefits,  Department of  Administration  (DOA).                                                               
She explained  that the legislature  was informed that it  is the                                                               
ARMB's  goal to  identify funding  strategies to  fully fund  the                                                               
retirement  obligations to  the  state's  public employees  "with                                                               
minimal impact to the services to  the residents of Alaska."  She                                                               
reminded the  committee of the  March 2006 presentation  it heard                                                               
from the  board's actuary at which  time it was relayed  that the                                                               
combined unfunded  liability of  PERS and TRS  has grown  to $6.9                                                               
billion.  She  opined that the process of "digging  out [of debt]                                                               
will not be  pleasant," however, "delaying action  will only make                                                               
things worse."   She requested  that Gary Bader,  with Department                                                               
of  Revenue   (DOR),  provide   the  committee   with  background                                                               
information  on  the process  that  led  to the  recommendations,                                                               
followed  by  a  detailed explanation  of  those  recommendations                                                               
given by Larry Semmens, a member of the ARMB.                                                                                   
8:37:25 AM                                                                                                                    
GARY   BADER,  Chief   Investment  Officer,   Treasury  Division,                                                               
Department of Revenue (DOR), informed  the committee that a slide                                                               
presentation was  prepared to  provide background  information on                                                               
those strategies considered [in addressing  the debt of the state                                                               
retirement  systems]:     large  dollar  strategies,  incremental                                                               
strategies,  investment returns,  and extending  the amortization                                                               
period.   Regarding the  use of pension  obligation bonds  as one                                                               
possible large  dollar strategy, he  said that although  the ARMB                                                               
currently  has no  recommendation on  this strategy,  it has  not                                                               
been ruled out.                                                                                                                 
CHAIR WEYHRAUCH  interjected to question  the meaning of  slide 4                                                               
which read:                                                                                                                     
     HB 278  does not authorize  any debt instruments  to be                                                                    
     issued.   The  state or  a municipality  would need  to                                                                    
     take a separate  action to utilize this  new ability of                                                                    
     the Municipal Bond Bank Authority.                                                                                         
MR. BADER confirmed  that should HB 278 pass, it  would provide a                                                               
new ability  of the Municipal  Bond Bank Authority.   However, he                                                               
clarified that  although it  could be an  option for  a political                                                               
subdivision,  the ARMB  is not  proposing  it as  a strategy  for                                                               
addressing the unfunded liability.   In further response to Chair                                                               
Weyhrauch, he stated his understanding  that the authorization of                                                               
any  debt  instruments  would  [first]   require  action  by  the                                                               
Municipal  Bond Bank  Authority.   He then  noted a  second large                                                               
dollar strategy considered  by the ARMB:  the deposit  of a large                                                               
natural resource  asset of natural  gas leases as proposed  in HB
492.   He  said  that constitutional,  valuation,  and cash  flow                                                               
issues with  this legislation would  need to be  addressed before                                                               
this could be  considered a viable solution.   Regarding possible                                                               
incremental  strategies, he  relayed that  the Past  Service Cost                                                               
Offset  Account (PSCOA),  as proposed  in HB  238, is  a possible                                                               
means  of providing  a systematic,  long-term solution  to assist                                                               
communities and  employers with their growing  unfunded liability                                                               
payments by  cutting the cost  of contributions  approximately 56                                                               
percent over a 25-year amortization  period.  He briefly conveyed                                                               
other possible incremental  strategies as proposed in  HB 375, HB
376, and SB 247.   In noting that the rates set  by ARMB for this                                                               
year,  incremented  by  5  percent,  still  does  not  match  the                                                               
actuarial computed rate  required to fully fund the  system in 25                                                               
years,  he explained  that SB  247 would  bridge the  gap between                                                               
these  rates through  means of  an  underfunded liability  relief                                                               
MR.  BADER then  addressed  investment returns  as  shown in  the                                                               
chart  on  slide  8.    He highlighted  that  the  state  is  now                                                               
experiencing higher  rates of return:   approximately  15 percent                                                               
in fiscal  year 2004 (FY  04), 8.95 percent  in FY 05,  and 14.44                                                               
percent calculated  through December  [2006].  He  explained that                                                               
the  table  shown  on  slide  9  entitled,  "Extend  Amortization                                                               
Period,"  is  designed to  show  what  the required  supplemental                                                               
contributions would  be according  to the  different amortization                                                               
periods and employer contribution  rates selected and keeping the                                                               
normal  cost  rate  and the  average  member  contribution  rates                                                               
8:47:07 AM                                                                                                                    
MR. BADER,  in response to  Chair Weyhrauch, provided  an example                                                               
of  one possible  scenario:    an employer  rate  of 21  percent,                                                               
during a 30-year amortization period  with a 6.84 percent average                                                               
member  contribution rate  would result  in the  state having  to                                                               
supply another  $150 million to the  system in order to  be fully                                                               
funded in 30  years.  "So the 21 percent  by itself isn't enough.                                                               
It would require an additional increment," he said.                                                                             
CHAIR  WEYHRAUCH  inquired  as   to  whether  "dealing  with  the                                                               
amortization  period" requires  a  legislative or  administrative                                                               
MR.  BADER explained  that currently  the amortization  period is                                                               
determined by the ARMB.  He noted  that one of the sections in HB
475  proposes to  "essentially set  the amortization  rate at  30                                                               
years" and  that should the  legislature want to adopt  a 40-year                                                               
amortization period, it  would be in conflict  with the timeframe                                                               
proposed in HB  475.  In further response to  Chair Weyhrauch, he                                                               
confirmed  that any  one of  the funding  scenarios shown  in the                                                               
table on  slide 9 would require  some [supplemental contribution]                                                               
from either  the legislature or  the employers.  He  opined "that                                                               
this  is a  useful table  in  terms of  shaping the  size of  the                                                               
problem" and providing an array  of options.  He highlighted that                                                               
the table in slide 10 aims  to provide a similar array of options                                                               
for  TRS.    He  then  informed the  committee  of  some  of  the                                                               
suggestions made  to improve the  financial health of  the plans:                                                               
offer no enhancements  to PERS and TRS benefits for  at least two                                                               
years; to  index the health  deductible in  the new plan;  and to                                                               
create a new retirement health plan for new members.                                                                            
CHAIR WEYHRAUCH,  regarding the mention  of a two-year  period of                                                               
no  enhancements to  the plans,  questioned whether  this was  an                                                               
adequate amount of  time.  He suggested that  perhaps it actually                                                               
should be "an indefinite no enhancement."                                                                                       
MR. BADER said he agreed and  stated his belief that ARMB did not                                                               
want  to be  too  presumptuous with  what it  considers  to be  a                                                               
prerogative of the legislature.                                                                                                 
CHAIR WEYHRAUCH opined  that the "legislature needs  to get [its]                                                               
mind around  the problem"  which could extend  far beyond  a two-                                                               
year period unless [the state] substantially appropriates funds.                                                                
MR. BADER again  said he agreed.  He then  returned to addressing                                                               
the  recommendations   made  by   the  ARMB  and   confirmed  the                                                               
observation  made   by  Chair  Weyhrauch   that  some   of  these                                                               
recommendations and  issues are currently being  addressed by the                                                               
executive branch and therefore do  not require involvement by the                                                               
legislature at this time.                                                                                                       
8:53:21 AM                                                                                                                    
REPRESENTATIVE  DAVID   GUTTENBERG,  Alaska   State  Legislature,                                                               
inquired  as to  whether the  ARMB has  "worked on  any estimates                                                               
[on]  incremental  changes  to   either  the  preferred  provider                                                               
programs ... or the negotiated drug prices we do."                                                                              
MR. BADER explained that the  ARMB has not specifically done this                                                               
and deferred  to the  Division of  Retirement and  Benefits which                                                               
has.   He  relayed  that  the ARMB  has  largely  focused on  the                                                               
financial  aspects  and  not  the programmatic  ones.    He  then                                                               
concluded  his presentation  by  listing the  ARMB  goals:   full                                                               
funding  within   30  years;  no  severe   disruption  in  public                                                               
services; the  state's participation in the  solutions; rewarding                                                               
accelerated  contributions  from  employers;  ensuring  equitable                                                               
state support;  and minimizing the  supplanting of  federal funds                                                               
and other  non-general fund costs.   "So given  these objectives,                                                               
the board  went about crafting  a number of  possible solutions,"                                                               
he said, which would be addressed by Mr. Semmens.                                                                               
8:55:58 AM                                                                                                                    
LARRY SEMMENS,  Board Member, Alaska Retirement  Management Board                                                               
(ARMB),  directed the  committee's attention  to page  13 of  the                                                               
report in their  packets dated April 14,  2006, entitled, "Alaska                                                               
Retirement Management  Board - Final  Report to  the Legislature"                                                               
and paraphrased the following introduction:                                                                                     
     The  board   acknowledges  that  it  is   late  in  the                                                                    
     legislative  session  for consideration  of  additional                                                                    
     appropriation   legislation,    and   appreciates   the                                                                    
     endeavors  of  legislators,  committees, and  staff  to                                                                    
     address the unfunded liability.   However, it is in the                                                                    
     best  interest  of  the   retirement  systems  for  the                                                                    
     legislature  to  address  the   under  funding  of  the                                                                    
     systems in  both the fiscal  year 2007 and  2008 budget                                                                    
     process,  or the  unfunded liability  will very  likely                                                                    
     grow   larger.     The  board   offers  the   following                                                                    
     recommendations, listed  by priority for action  by the                                                                    
     legislature.   These  recommendations, both  short- and                                                                    
     long-term,  address employer  concerns with  escalating                                                                    
     contribution rates and  the growing actuarial shortfall                                                                    
     of the retirement systems.                                                                                                 
MR.  SEMMENS  explained  that "Priority  1"  establishes  a  past                                                               
service retirement liability  account for both PERS and  TRS.  He                                                               
then listed  the particulars for  the PERS  fund:  an  account is                                                               
established; a method to annually  calculate a specific amount to                                                               
be included in  the governor's budget is  provided; is applicable                                                               
to political  subdivisions and  school district  employer members                                                               
of  PERS; provides  incentives for  employers to  pay down  their                                                               
unfunded liability; and  anticipates that the ARMB  would set the                                                               
employer contribution rate at the  actuarially required rate.  He                                                               
noted  that for  the FY  07 budget,  the ARMB  set the  rate five                                                               
points above the  prior year rate - not  the actuarially required                                                               
rate - which means the  system will be underfunded unless further                                                               
contributions are made.  He  further clarified that if the system                                                               
is to be fully funded, this  requires the employers pay the lower                                                               
of the average  past service cost rate or their  own past service                                                               
cost rate  less 5 percent.   This means,  he said, that  the most                                                               
the state  would contribute to  an employer, is the  average past                                                               
service  rate of  all employers.   He  explained that  incentives                                                               
would be included for those  employers that paid in excess during                                                               
the fiscal year three years earlier.                                                                                            
MR. SEMMENS then listed the particulars  for the TRS fund on page                                                               
14 of  the report:   establish a past service  liability account;                                                               
provide a  method to calculate  a specific amount to  be included                                                               
in the governor's  budget; applicable to all  TRS employers; and,                                                               
as with  the PERS fund, anticipates  that the ARMB would  set the                                                               
employer  contribution  rate  at the  actuarially  required  rate                                                               
which exceeds 42  percent this year.  The  difference between TRS                                                               
and  PERS, he  noted, is  that  with the  former, the  calculated                                                               
amount  for distribution  would be  based  on 85  percent of  the                                                               
total  eligible  payroll  that the  employer  reported  to  [DOR]                                                               
during the fiscal  year three years earlier, in  order to capture                                                               
the  full cost  of those  federally funded  programs that  school                                                               
districts have.                                                                                                                 
MR. SEMMENS  went on to  explain "Priority 2"  on page 14  of the                                                               
report.     He   highlighted  that   in  2005,   the  legislature                                                               
appropriated  approximately   $17  million   of  "PERS   aid"  to                                                               
municipalities.    He  informed  the   committee  that  the  ARMB                                                               
recommends  an  appropriation  be  made this  year  as  well  yet                                                               
require the  employers share the  increasing PERS costs  with the                                                               
state,  50:50, with  a  5  percent increase.    He expressed  his                                                               
belief that  municipal employers "would very  much appreciate the                                                               
legislature repeating the  PERS aid program that was  done for FY                                                               
06."    He  then  explained that  "Priority  3"  recommends  "the                                                               
legislature appropriate  funds to  meet the  actuarially required                                                               
amount to  fully fund the system  this year."  He  clarified that                                                               
the intent of  this priority is not to have  the assets equal the                                                               
liabilities  but rather  focuses  on the  point  that should  the                                                               
legislature or  employers not contribute the  amounts required by                                                               
the ARMB's rates,  then the system will most  likely fall further                                                               
behind.   More specifically, he  identified that  the actuarially                                                               
required amount for PERS is  $461 million and [yet] the projected                                                               
actual contribution,  using the adjusted employer  rates, is $351                                                               
million - a difference of $110  million.  With TRS, he noted that                                                               
the actuarially  required amount is  $261 million, and  [yet] the                                                               
actual projected contribution  is $163 million -  a difference of                                                               
$98 million.  He reiterated  that it is the ARMB's recommendation                                                               
that  the state  provide  funding for  [these  differences].   He                                                               
concluded, "We understand  these are large numbers,  that this is                                                               
late in the session,  but we feel that it is  important for us to                                                               
communicate to you the magnitude of the shortfall."                                                                             
9:05:38 AM                                                                                                                    
CHAIR  WEYHRAUCH  conveyed some  of  the  comments he  has  heard                                                               
[regarding the unfunded liability] such  as, "Well, we don't have                                                               
to pay this now, so it's really  not a big problem; it's a future                                                               
MR. SEMMENS said that whereas  this is an accurate statement, the                                                               
problem remains if the  debt is not paid now.   He compared it to                                                               
a home mortgage:   if the debt is paid early,  much will be saved                                                               
in not paying interest for the life of the loan.                                                                                
CHAIR WEYHRAUCH  provided an example  of another comment  made by                                                               
some [legislators] who  feel the issue is not a  concern for them                                                               
because so  few of  their constituents  are in  professions which                                                               
PERS and TRS benefit:  teachers and government employees.                                                                       
MR. SEMMENS  said this  is incorrect, that  "it does  not benefit                                                               
teachers  or   public  employees   because  those   benefits  are                                                               
guaranteed by  the state  constitution."   He opined,  "What this                                                               
really benefits  is the people  of Alaska by reducing  the amount                                                               
of  money that  they  would pay  over time."    He expressed  his                                                               
belief that this time of surplus is  an ideal time to pay off the                                                               
debt and will save Alaskans money.   In further response to Chair                                                               
Weyhrauch, he  said that public  services would soon  be affected                                                               
[by the debt]  and that services and taxes will  be affected with                                                               
any  increase to  employers' PERS  rates.   He further  clarified                                                               
that whereas the  retirement reform passed last  year does impact                                                               
the  growth  of future  liabilities,  it  does  not pay  off  the                                                               
unfunded liability  of the  past.  Regarding  the belief  held by                                                               
some  that  should [oil  tax]  legislation  be adopted,  it  will                                                               
[sufficiently] address  the unfunded  liability of PERS  and TRS,                                                               
he  opined that  it might  make it  easier, however,  funding the                                                               
systems has  to be done at  the levels recommended by  the ARMB -                                                               
"$150 million a year."                                                                                                          
REPRESENTATIVE  DAVID   GUTTENBERG,  Alaska   State  Legislature,                                                               
inquired as to whether the passage  of SB 141 has either affected                                                               
the loss  of employees from or  into the system, and  whether new                                                               
liabilities have resulted from this.                                                                                            
MR.  SEMMENS  remarked that  should  there  be no  new  employees                                                               
coming into the  system, it would have the effect  of raising the                                                               
rates  that  each  public  employer would  be  required  to  pay.                                                               
However, he  said he did not  expect the numbers to  decline as a                                                               
result of SB 141.  He opined that  "the fix in HB 475, would make                                                               
it clear that  the payroll upon which the  past service liability                                                               
rate would apply,  is on the total employee  base, including Tier                                                               
IV and all prior years."                                                                                                        
9:11:40 AM                                                                                                                    
CHAIR WEYHRAUCH confirmed that Martin  Pihl, next to testify, was                                                               
appointed by  the governor to  the ARMB, represented  the private                                                               
sector, was retired from work  with his own private pension plan,                                                               
and has  never been a  public employee.   He then asked  Mr. Pihl                                                               
for  his  opinion on  the  status  of PERS  and  TRS  and on  the                                                               
recommendations made by the ARMB.                                                                                               
9:12:12 AM                                                                                                                    
MARTIN PIHL,  Member, Alaska Retirement Management  Board (ARMB),                                                               
expressed  his  belief  that  the debt  would  be  handled  quite                                                               
differently  if it  were  "corporate America."    He opined  that                                                               
although misled  by actuaries, the  state is responsible  for the                                                               
current  status  of the  pension  plans  and that  benefits  were                                                               
established  without realizing  the price  tag.   Furthermore, he                                                               
offered  his  belief  that  addressing the  debt  should  not  be                                                               
delayed, that  [the state] has a  cash flow problem, and  that he                                                               
likes "the idea of a possible fix through a few gas wells."                                                                     
CHAIR  WEYHRAUCH  stated  his  agreement with  Mr.  Pihl  on  the                                                               
possibility of using  future gas assets to help  fund the systems                                                               
as being a good idea.                                                                                                           
REPRESENTATIVE GRUENBERG  asked Mr.  Pihl to clarify  his comment                                                               
regarding the state being mislead by actuaries.                                                                                 
MR. PIHL stated  his understanding that the  legislature was told                                                               
[by the  actuaries] that  an increase to  benefits could  be done                                                               
without  increasing  contribution rates.    He  opined that  "you                                                               
don't  get to  $6.9 billion  without a  combination of  a lot  of                                                               
mistakes"  and  that  "actuarial  work using  national  data  for                                                               
Alaska doesn't work."                                                                                                           
REPRESENTATIVE   GRUENBERG   expressed  his   concern   regarding                                                               
statutes of limitations.                                                                                                        
CHAIR  WEYHRAUCH said  that with  no representation  present from                                                               
the  attorney general's  office,  he would  defer  this topic  to                                                               
legal counsel.                                                                                                                  
9:18:08 AM                                                                                                                    
REPRESENTATIVE GUTTENBERG  expressed his  thanks to the  ARMB for                                                               
its work  on the report.   He opined  that there were  both "good                                                               
and bad"  results from  passage of  SB 141.   In noting  that the                                                               
ARMB's recommendations largely address  financial ways to address                                                               
the  debt, he  expressed  his wish  that the  board  take a  more                                                               
aggressive stand  on addressing  rising healthcare costs.   "It's                                                               
out of control and it's completely inconsistent," he opined.                                                                    
MR.  SEMMENS informed  the committee  that the  ARMB does  have a                                                               
health committee which  is looking at ways  to control healthcare                                                               
CHAIR  WEYHRAUCH  expressed  his   belief  that  healthcare  cost                                                               
management "is probably the biggest  problem associated with most                                                               
of these national problems, not  just Alaska's, so we're going to                                                               
have to deal  with that in a  global manner."  He  then asked the                                                               
ARMB to  relay which  of its recommendation  the board  feels the                                                               
state should address first.                                                                                                     
MR.  SEMMENS informed  the  committee that  the  top priority  is                                                               
articulated  in  "Priority  1,"  the  long-term  solutions.    In                                                               
response  to Chair  Weyhrauch, he  confirmed  that this  priority                                                               
recommends establishing  past-service liability accounts  as well                                                               
as a  "method for funding them  and getting those dollars  in the                                                               
next [FY 08] budget cycle."                                                                                                     
CHAIR  WEYHRAUCH sought  confirmation of  his understanding  that                                                               
the top  priority not only  recommends establishing  the accounts                                                               
but also involves appropriating money.                                                                                          
MR. SEMMENS  said this is correct  and deferred to Mr.  Bader for                                                               
more detail.                                                                                                                    
MR. BADER  clarified that although this  first priority addresses                                                               
establishing  the mechanism,  the funding  would not  begin until                                                               
the 2008 budget.                                                                                                                
CHAIR WEYHRAUCH  asked Commissioner Corbus whether  there was any                                                               
creative  way   to  fund  the  liability   without  general  fund                                                               
appropriation or through taxes.                                                                                                 
9:23:50 AM                                                                                                                    
WILLIAM  A. CORBUS,  Commissioner, Department  of Revenue  (DOR),                                                               
offered his understanding that there was no such mechanism.                                                                     
CHAIR WEYHRAUCH  inquired as to  whether there was  any "specific                                                               
pool  of   money"  that   could  be   accessed  to   address  the                                                               
appropriation issue.                                                                                                            
COMMISSIONER CORBUS said he was not  aware of any and opined that                                                               
"the appropriate place is the general fund."                                                                                    
REPRESENTATIVE GRUENBERG called the  committee's attention to the                                                               
proposed  legislation in  "Appendix 1"  and "Appendix  2" of  the                                                               
ARMB report.   He said he would like to  make a conceptual motion                                                               
that would "get the ball  rolling" in this committee to introduce                                                               
similar legislation.                                                                                                            
CHAIR WEYHRAUCH  clarified that as  special committee,  there are                                                               
no existing rules permitting the  House Special Committee on Ways                                                               
and Means to  introduce legislation.  He said this  could be done                                                               
through a standing committee.                                                                                                   
9:25:48 AM                                                                                                                    
SAM  TRIVETTE, Vice  Chair,  Alaska  Retirement Management  Board                                                               
(ARMB), relayed that  he did participate in the work  of the ARMB                                                               
and  opined that  [the report]  offers  the best  effort at  this                                                               
time.   He  shared that  "unfortunately [the  ARMB] found  out in                                                               
[its] latest actuarial report, there  were other mistakes made by                                                               
the previous actuary  that just came to light last  month ... and                                                               
[will attempt to ensure] that it doesn't happen again."                                                                         
MS.  SCHUBERT expressed  thanks on  behalf  of the  ARMB for  the                                                               
[legislature's]  input in  the process  of solving  the [unfunded                                                               
liability of PERS and TRS].                                                                                                     
9:27:02 AM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
9:27 a.m.                                                                                                                       

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