Legislature(2023 - 2024)SENATE FINANCE 532
03/09/2023 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Comparing Retention Data Between Defined Benefit and Defined Contribution Employees | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 9, 2023
9:13 a.m.
9:13:07 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:13 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator David Wilson
MEMBERS ABSENT
Senator Kelly Merrick
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division;
Senator Cathy Giessel.
SUMMARY
PRESENTATION: COMPARING RETENTION DATA BETWEEN DEFINED
BENEFIT and DEFINED CONTRIBUTION EMPLOYEES
Co-Chair Stedman discussed the agenda. He relayed that the
committee would hear a presentation comparing employee
retention data between the defined benefit (DB) and defined
contribution (DC) plans. He noted that the meeting was only
one of several meetings on the topic. The current
presentation would consider the Public Employees'
Retirement System (PERS) only. The committee would consider
the Teachers Retirement System (TRS) in forthcoming
meeting. He considered that separating the systems would
make the data more clear.
^PRESENTATION: COMPARING RETENTION DATA BETWEEN DEFINED
BENEFIT and DEFINED CONTRIBUTION EMPLOYEES
9:14:59 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
addressed a PowerPoint presentation entitled "Vacancies,
Recruitment, and Retention," (copy on file).
Mr. Painter looked at slide 2, "Outline":
• State Government Vacancies
Historical Comparison
National Comparison
Current Vacancy Rates
• Retention Data from Retirement and Benefits
Retention data for PERS employees of the State of
Alaska
Retention data for non-State PERS employees
Mr. Painter noted that the presentation had two parts
looking at state government vacancies more broadly, and
looking at retention data from the Division of Retirement
and Benefits (DRB).
Mr. Painter spoke to slide 3, "Current Vacancies
Explanation of Data Sources":
• Vacancy data in following slides comes from OMB data
that shows filled status of positions from state
accounting system.
• Data excludes state corporations, University of
Alaska, AMHS, the Judiciary, and the Legislature.
• Data shows whether a position was filled as of the
15th of each month.
• To avoid seasonal distortions, these slides use
permanent full-time (PFT) positions only.
Mr. Painter referenced slide 4, "State of Alaska Budgeted
versus Filled PCNs, 2015-2022," which showed a line graph.
The blue line showed budgeted PCNs versus filled PCNs
going back to January 2015.
Co-Chair Stedman asked Mr. Painter to define PCN.
Mr. Painter relayed that PCN denoted position control
numbers, which were used to track budgeted positions in the
accounting system.
Mr. Painter continued to discuss slide 4, and noted that
between 2015 and 2018, the number of budgeted PCNs had
declined substantially by several hundred. During the
period, the state had been reducing the budget and had been
deleting long-vacant PCNs. Since that time, the number had
ticked up slightly, with the number of filled PCNs steadily
dropping. The rate of decrease of filled PCNs was greater
than the rate of shedding budgeted PCNs. He summarized that
the vacancy rate was not just due to the fact that PCNs
were deleted, but had continued despite having removed many
PCNs during the period.
9:18:39 AM
Senator Wilson asked if it would be possible to get the
percentage between the two over the same time frame.
Mr. Painter turned to slide 5, "Percentage of Full-Time
State PCNs Filled, 2015-2022," which showed a line graph
depicting the same data as the previous slide reflected in
percentages. The slide showed that during the entire
period, the percentage filled had decreased. Beginning in
2015, around 89 percent of budget PCNs were filled; and by
the end of 2022, the number decreased to about 85 percent.
He noted that having more vacancies was not a new trend. He
noted that the data started in 2015 because it had been
available in the current state accounting system.
Senator Wilson asked when the last job classification
studies had taken place.
Mr. Painter cited that there had been a classification
study done in 2009 but was not sure when the last study had
been implemented.
Mr. Painter considered slide 6, "Full-Time Employee
Turnover Rate since FY18," which showed a line graph
showing the turnover rate. The blue line depicted the
percentage of positions hired each month and the red line
showed the percentage of positions vacated each month,
while the turnover rate added the two. The turnover rate
had the appearance of doubling the change, but it was a
standard way of looking at the information. He noted that
the turnover rate had increased since mid-2019, and had
decreased during the pandemic from 6 percent to 4-5 percent
in 2020. The turnover rate had increased again, peaking at
7 percent and hovering in the 5 to 6 percent range in most
months. The time of lowest turnover rate was in 2020 during
the pandemic, which he pointed out was unusual among other
states.
9:21:41 AM
Mr. Painter displayed slide 7, "Comparison of State of
Alaska Turnover to State Governments Nationwide," which
showed a line graph comparing Alaska turnover shown by the
blue line, with the data from the National Bureau of Labor
Statistics. The data showed turnover by job type, and
compared the turnover rate for state and local government
employees nationally to the turnover rate seem from the
Office of Management and Budget (OMB) data. He noted that
the data was not seasonally adjusted, but there could be
seasonal spikes shown in the national data that might be
different than Alaskas. He observed that generally
Alaska's turnover rate had been about one to two percent
higher than the national rate for state governments.
Mr. Painter highlighted slide 8, "Full-Time PCN Vacancy
Percentages by Agency, Calendar Year 2022," which showed a
bar graph. He had ordered the agencies by the most PCNs to
the least, shown on the table at the bottom. The highest
vacancy rates were in the Office of the Governor, the
Department of Revenue (DOR), the Department of Labor and
Workforce Development (DLWD), the Department of Family and
Community Services (DFCS), and the Department of Commerce,
Community and Economic Development. The lowest rates were
in the Department of Fish and Game (DFG), the Department of
Transportation and Public Facilities (DOT), the Department
of Environmental Conservation, and the Department of
Education and Early Development. The line showed the
statewide average of 14.2 percent vacancy rate, and one
could observe which agencies were above or below the line.
Mr. Painter continued to address the slide. He noted that
following slides would address the reasons for the vacancy
rates. He commented that many of the vacant positions were
low-wage positions, such as in the Division of Elections,
DOR, and DLWD. He noted that DFCS had many positions with
high vacancy rates but not all with low ranges. Some of the
agencies that had low vacancy rates had career sciences
positions that tended to have more stable career paths than
positions in lower ranges with more turnover.
9:25:22 AM
Mr. Painter looked at slide 9, "Vacancy Percentages by
Range, Calendar Year 2022," which showed a bar graph. He
noted that in the state budget, positions were assigned a
range between 8 and 30. A range of 30 could signify a
position such as the chief psychologist at the Alaska
Psychiatric Institute (API). He observed that the highest
vacancy rates were range 29, which were mostly
psychiatrists or pharmacists. The low range positions had
the next highest vacancy rates. The highest vacancy rates
were in range 8 to range 11. He noted that the next slide
would show position titles with the higher vacancy rates.
Mr. Painter addressed slide 10, "Vacancy Percentages by
Location, Calendar Year 2022," which showed a bar graph. He
reiterated that the statewide average was about 14 percent.
Most of the positions were in Anchorage, Juneau, or
Fairbanks, which all had vacancy rates that were close to
the statewide average. The Matanuska-Susitna Borough had
the lowest vacancy rate. The Kenai-Peninsula Borough (with
Seward excluded) had a fairly low vacancy rate. The areas
with the highest vacancy rates were Seward, Bethel, Nome,
and Ketchikan. He highlighted that most of the positions in
Seward worked for either the correctional facility or for
the Alaska Vocational Technical Center (AVTEC). The other
two locations had vacancies spread across a variety of
departments. He cited that some of the areas had in excess
of a 20 percent vacancy rate.
9:28:20 AM
Mr. Painter advanced to slide 11, "Position Titles with
Highest Vacancy Rates, Calendar Year 2022," which showed a
table. He noted that for the position names he had combined
job series with multiple levels. He had only included job
classes with at least 25 people and listed the top 24 job
titles. The vacancy rate for calendar year 2022 was shown.
He cited three of the top ten positions were various types
of nursing positions, which all had a 24.5 percent vacancy
rate or higher. There were also a number of low range
positions (range 8 to 12) such as Child Support Specialist
or Office Assistant. He mentioned the position of Juvenile
Justice Officers and Probation Services Specialist, with
vacancy rates in excess of 20 percent. He mentioned
probation officer positions.
Mr. Painter observed that there were two positions with
wildly higher ranges, because of unions with different pay
scales that did not conform to the standard pay scale. He
summarized that the positions that were most likely to be
vacant were the nursing positions and some of the lower
range positions such as office assistants, entry level
probation officers, and hard-to-fill professions. He
mentioned the challenge the state had with filling
maintenance positions due to the inability to compete with
private sector wages.
9:31:45 AM
Senator Wilson asked why the University of Alaska (UA) was
not on the slide.
Mr. Painter relayed that UA was not part of the state
accounting system and did not budget positions like the
rest of the state. The positions could be analyzed
separately but could not be compared to the other
positions.
Co-Chair Stedman thought that UA had a different retirement
system.
Mr. Painter looked at slide 12, "Historical Retention Data
About the Data Source":
• The Division of Retirement and Benefits provided
data on employee retention from FY03-22.
• The data shows whether employees hired in a given
fiscal year are still employed by the same PERS
employer in subsequent years.
• The data is broken out by employer in three
categories: the State as an employer, other SBS
employers, other non-SBS employers.
• It's further broken out for TRS, PERS public safety
and fire employees (PERS P/F), and all other PERS
employees. This presentation will only cover PERS
"non-P/F" employees.
• Finally, it distinguishes between employees in a DB
or DC system.
• One limitation of this data: if an employee leaves
and comes back, they show up as a new employee when
they return. This may skew the comparisons for the
early years of the DC system if returning employees
and new employees have meaningful differences in
retention.
Mr. Painter noted that slide 12 began the second part of
the presentation, which would address historical retention
data. He was not confident in the data related to public
safety and fire employees, and was working with DRB to
ensure the accuracy of the data.
9:33:55 AM
Co-Chair Stedman asked Mr. Painter to pronounce words
rather than use acronyms.
Mr. Painter agreed.
Mr. Painter continued to read from slide 12. He added that
public employees that began service in 2007 were entered
into the defined contribution (DC) system, while employees
hired prior to July 1, 2006 were entered into the defined
benefit (DB) system. He thought that employees that left
and returned to the system would make it appear as if the
retention rates were lower than in reality. He discussed
manners in which the data could have a margin of error.
Co-Chair Stedman reiterated his request for Mr. Painter not
to use acronyms.
Senator Kiehl referenced the second bullet on slide 12, and
asked if the state was considered one employer or multiple
employers.
Mr. Painter relayed that the state was one employer.
Senator Kiehl asked Mr. Painter to discuss the difference
between turnover data and retention data.
Mr. Painter explained that turnover data looked like a
percentage of the number of employees, but did not reflect
the years of service. He thought about 30 percent to 40
percent of state and municipal employees left within the
first year of employment. He thought turnover data showed
that people left right away, while retention data was more
granular.
9:38:55 AM
Mr. Painter showed slide 13, "Retention Rate by Class Year,
PERS Non-P/F, State Only," which showed a line graph
comparing the year people entered employment. He explained
that he had averaged four years together to make the graph
easier to read. He had converted the data so that all
employees first year was on the same line. He thought some
of the trends over time were hidden, and relayed that he
would present the data in two different ways.
Mr. Painter discussed the blue line that depicted the DB
group from FY 03 to FY 06, which showed that about 30
percent of employees did not make it through the first
year. The red showed the first four years of the DB system,
the green was the following four years, and the last was FY
15 to FY 18. The people who had entered more recently had
worse retention, and by year four only 46 percent of the
employees were retained versus other groups at 49 percent
to 50 percent. He reiterated that the state vacancy rate
had steadily increased since 2015. He continued to address
the graph on slide 13, and observed the differences between
the groups over time.
Senator Bishop asked if the declining line was due to
retirements.
Mr. Painter thought some of the decline was due to the
change in retirement. He mentioned that there were DC
employees that had retired because of years of service with
other employers. Some would have left because of
retirement, and some for other reasons. He did not have
data for all of the years that would distinguish between
the two factors. The Division of Personnel had a report
that it published between 2005 and 2011 that distinguished
reasons for leaving. The division no longer produced the
report, but he thought it would be helpful to see the data.
Senator Bishop thought it was important to know.
9:44:51 AM
Senator Wilson observed that FY 15 to FY 18 started lower
because of uncertainty within the state budget. He asked if
Mr. Painter had an overlay slide of the state budget to
combine with the retention data.
Mr. Painter referenced slide 5, which showed the turnover
rate since 2015, but noted that the same data was not
consistently available going farther back in time. There
was no consistent source of data that would show the
turnover rate from 2003 to 2022. Because of changes in the
accounting system, it was hard to get data that looked
identical from before and after the change in the system.
Senator Wilson was interested to see if turnover changed
over time compared with the budgetary system. He asked if
there was any data to show generational trends in the
retention rate.
Mr. Painter was not certain if DRB could link the age data
with the retention data. He noted that DRB had data for the
average age of people that entered the system. He offered
to ask DRB if it was possible to add the data point.
Senator Wilson wondered if Millennials or younger
generations that wanted more flexibility within jobs would
show a difference in state service longevity.
Mr. Painter added that looking at FY 03 to FY 06 average,
and the FY 07 to FY 10 average and did not think there
would be a massive generational difference. He thought it
would be possible to observe a gradual change over time on
the following slides.
9:47:49 AM
Mr. Painter referenced slide 14, "Year 6 and 11 Retention,
PERS All Others, State Only," which showed two bar graphs.
He noted that the graphs addressed year 6 and year 11,
which were chosen for being right after key vesting years
in the retirement and healthcare systems. The employees
that remained after the vesting dates helped to provide a
comparison of how the vesting dates influenced behavior. He
cited that the red showed DB years, and blue showed DC
years. The average for the DB years was 42.3 percent versus
the DC years was about 40.2 percent. He observed that the
retention rate for the DC system had been gradually
declining and noted that there was a gradual downward trend
for the state.
Mr. Painter addressed the graph on the right, which showed
year 11 retention, which showed when DB employees would
vest in health insurance. There was not as much of a
difference between the two systems after year 11. There was
not as much of a slope on the line there was with year 6.
He was uncertain of the reason but noted there was not a
clear downward trend as in year 6.
9:50:44 AM
Senator Wilson asked if Mr. Painter would say that
retirement was not much of an issue with retention.
Mr. Painter clarified that he was trying to present the
data so the decision-makers on the committee could make
conclusions.
Senator Wilson asked if statistically speaking there was
much of a difference.
Mr. Painter cited that there was about a one percent
difference between the two systems at year 11. He
reiterated that he did not have the granularity of data
available to see if the difference was statistically
significant.
Senator Kiehl asked about the potential relevance of
economic conditions considering the two charts on slide 14.
He considered the chart on the right-hand side and pondered
that someone that was employed by the state from FY 03 to
FY 14 had the opportunity for many other jobs because it
was a good economic period. He contrasted that there had
been more economic downturn from FY 11 to FY 22, when there
were not as many other jobs. He asked how Mr. Painter had
factored in the conditions.
Mr. Painter thought there were many factors that went into
why people would leave. He noted that the state's economy
had often moved with an inverse relationship with the
country's economy, often because of oil prices. He
suspected that different job classes could move in and out
of the private sector more easily. He could not estimate
how much a statistical factor the economic conditions were,
but suspected that the economy would affect job classes at
different strengths.
9:54:05 AM
Mr. Painter turned to slide 15, "Non-State Employers in
Social Security/SBS":
• In addition to the DB or DC system, all State of
Alaska employees are in the Supplemental Annuity Plan
(SBS), which is a defined contribution plan with a
6.13% employee contribution, matched by 6.13% employer
contribution. This system essentially replaces Social
Security for these employees.
• Non-State PERS employers have varied supplemental
plans. Of the 14,163 non-State, non-P/F PERS employees
in the DC system, 7,473 are in Social Security, 1,645
are in SBS, and 5,045 are in neither plan.
• See the handouts for details by employer:
Handout 1 shows the employers (including the
State) that are in SBS
Handout 2 shows the employers that are in
Social Security
Handout 3 shows the employers that are in
neither system
Mr. Painter referenced the three handouts listed on the
slide (copy on file). He explained that Handout 1 showed
the employers that participated in SBS (no social
Security). Handout 2 showed employers that participated in
social security (no SBS), and Handout 3 showed employers
that participated in neither Social Security nor SBS. He
mentioned that the lists included some school district non-
teacher employers and noted that teachers would be included
in future discussions. The next few comparisons would show
non-state employees.
Co-Chair Olson asked if a state employee that was not in
SBS and was in Social Security would not get the 6.13
percent employer contribution.
Mr. Painter stated that all state employees were in SBS,
while non-state employers could either elect to be in SBS
or in Social Security, which had a 6.2 percent contribution
by employer and employee.
9:59:13 AM
Mr. Painter considered slide 16, "Retention Rate by Class
Year, PERS Non-P/F, NonState, Non-SBS Only," which showed a
line graph. He noted that the data had been put into four-
year classes for averaging and he had normalized them to
the same start year. The retention rate after year one was
60 percent to 62 percent, while the state was roughly 69 or
70 percent. He observed that the employees had a lower
retention rate overall than those employees of the state.
The blue line showed DB years from FY 03 to FY 06. The red
line showed FY 07 to FY 10 for DC employees. The green line
showed FY 11 to FY 14, and the purple line showed FY 15
through FY 18. He explained that there was a little more
difference from the state between the FY 03 through FY 06
classes and the other classes. He reminded that the
employees on the graph did not have a supplemental system.
Mr. Painter displayed slide 17, "Year 6 and 11 Retention,
PERS Non-P/F, NonState, Non-SBS Only," which showed two bar
graphs comparing year 6 and year 11 for the employees on
the previous slide. He noted that in year six (on the left
in red) there were DB years, and on the right in blue it
showed DC years. The difference in the average was about
four percent, where in year 6 about 37 percent of DB
employees remained compared to about 33 percent of DC
employees. In year 11, the average for DB was 26.2 percent
compared to 23.8 percent for DC employees. Unlike the
state, there was not much slope to the DC line. There was
not a huge linear trend other than the difference between
the DB and the DC groups in FY 05 and FY 06.
Senator Kiehl asked if the employees on slide 17 received
Social Security.
Mr. Painter relayed that the data had a mix of employees
that did or did not receive Social Security. He estimated
that about a bit over half of the people were in Social
Security. He thought some of the individuals had a
supplemental system and acknowledged that it was not a
homogenous group.
10:03:28 AM
Mr. Painter highlighted slide 18, "Retention Rate by
Employer Type, PERS Non-P/F FY03-06 (DB) only," which
showed a line graph which compared the three employer types
for retention rates to see how the employer type many
change retention rates. The blue line showed the state as
an employer, the red line showed non-state SBS employers,
and the green showed non-state, non-SBS employers. He
reminded that the green line could include those who may or
may not be in Social Security. The comparison showed a
significant and persistent difference between the non-SBS
employers and both state and other SBS employees through
year 7. After the period, the state had better retention
than either of the non-SBS employers.
Mr. Painter observed that some of the differences could be
due to employee movement and pondered that the state had
many more employees than any other PERS employer. If an
employee moved from Juneau to Anchorage municipal
governments they would be shown as leaving employment,
while state employees had mobility to move within many
agencies and locations. He summarized that it was expected
that the state had better retention than other PERS
employers because of its statewide presence and number of
employees, but it took until year 7 or 8 to show up. The
non-SBS employers had worse retention than the state and
SBS employers throughout the period.
Mr. Painter looked at slide 19, "Retention Rate by Employer
Type, PERS Non-P/F FY07-10 (DC) only," which showed a
line graph comparing like employees together. The blue
line represented the state as an employer; the red line
represented non-state SBS employers; and the green line
represented non-state, non-SBS employers. The biggest
observable difference was between the SBS employers and the
non-SBS employers, where the non-SBS had significantly
lower retention rate in all years in the DC plan. The
difference was larger than shown in the previous slide
because the non-SBS employers that switched to the DC
retirement systems showed a larger change in retention as
well as an overall lower retention rate.
Co-Chair Stedman asked if the state was telling non-state
employers not to be in SBS and not to be in Social
Security, or whether it was a voluntary decision.
Mr. Painter relayed that it was a voluntary decision.
10:07:11 AM
Senator Kiehl asked if there was opportunity to reverse the
decision regarding Social Security.
Mr. Painter understood that an election could be made to
get out of Social Security and into the SBS system, and
thought employers could still opt into Social Security and
then could immediately transition from Social Security to
SBS, but it would require two different votes by the
employee memberships and action by the employer. He thought
DRB could discuss the matter in more detail.
Co-Chair Stedman thought that the committee could ask
Senator Kiehl's question to the department when it was in
committee. He thought the matter needed to be understood.
He thought the question of Social Security offsets would
come up when the committee had a discussion on TRS.
Senator Kiehl asked if it was fair to say the value of a
retirement plan made a difference in retention rates.
Mr. Painter thought there was definitely a difference in
the non-SBS employers and the SBS employers. He qualified
that it seemed like the SBS system did have value, unless
there was some underlying characteristics to the employers
he was not aware of.
Senator Wilson thought Mr. Painter had indicated that the
state seemed to have better retention than the small
municipal employers. He asked if there was exit interview
data that might provide information about the work
environment.
Mr. Painter agreed that the state did not have exit
interviews, particularly for non-state employers. He
thought the state did exit interviews but was not certain
the data was categorized in a way that was usable. He
commented that it was expected that a small employer would
have greater turnover over time than a larger employer when
it had less room to advance and less opportunity to move
geographically. He reminded that he did not know of other
systematic differences in the non-state SBS employers and
non-state non-SBS employers beyond the retirement systems.
Co-Chair Stedman reminded that there was a breakdown on all
the employers in Handout 3. He used the example of the
Juneau School District, which had 274 employees that had
neither Social Security nor SBS. He thought the fact
impacted the ability to accumulate assets for retirement.
He thought there was a policy issue that needed to be
addressed in the future. He did not think there was any
interest in having employees that were not enrolled in
either system.
10:12:05 AM
Mr. Painter showed the final slide entitled "Questions?":
Contact Information
Alexei Painter
Legislative Fiscal Analyst
(907) 465-5413
Alexei.Painter@akleg.gov
Subscribe to email notifications from LFD:
https://www.legfin.akleg.gov/EmailNotifications/subscr
ibe.php
Mr. Painter relayed that there was a lot more data he hoped
to get and to provide more in-depth analysis. He thought
there were areas to look at in the future.
Co-Chair Stedman relayed that the committee would be having
a special meeting on TRS and would consider contribution
rates and the inclusion or exclusion of Social Security and
SBS, and the potential impact on teacher retention and
retirement. He relayed that the committee would be working
with DRB to get answers to some questions that had arisen.
Co-Chair Stedman discussed the agenda for the following
day.
ADJOURNMENT
10:14:10 AM
The meeting was adjourned at 10:14 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 030923 Handout 3 - in neither.pdf |
SFIN 3/9/2023 9:00:00 AM |
|
| 030923 Handount 1 - in SBS.pdf |
SFIN 3/9/2023 9:00:00 AM |
|
| 030923 Handout 2 - in Soc Sec.pdf |
SFIN 3/9/2023 9:00:00 AM |
|
| 030923 Vacancies Recruitment and Retention SFIN.pdf |
SFIN 3/9/2023 9:00:00 AM |