Legislature(1993 - 1994)

04/18/1994 09:12 AM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                SENATE STATE AFFAIRS COMMITTEE                                 
                         April 18, 1994                                        
                           9:12 a.m.                                           
  MEMBERS PRESENT                                                              
 Senator Loren Leman, Chair                                                    
 Senator Robin Taylor                                                          
 Senator Jim Duncan                                                            
  MEMBERS ABSENT                                                               
 Senator Mike Miller, Vice Chair                                               
 Senator Johnny Ellis                                                          
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 378                                                           
 "An Act relating to permanent fund dividend program notice                    
 requirements and to dividends of individuals convicted of felonies            
 or misdemeanors; and providing for an effective date."                        
 HOUSE JOINT RESOLUTION NO. 60                                                 
 Relating to an amendment to the Constitution of the United States             
 prohibiting federal courts from ordering a state or a political               
 subdivision of a state to increase or impose taxes.                           
 CS FOR HOUSE BILL NO. 494(STA) am                                             
 "An Act changing the Alaska State Pension Investment Board to the             
 Alaska Pension Investment Authority and relating to the authority;            
 and providing for an effective date."                                         
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SB 378 - No previous senate committee action.                                 
 HJR 60 - No previous senate committee action.                                 
 HB 494 - No previous senate committee action.                                 
  WITNESS REGISTER                                                             
 David Skidmore, Aide                                                          
 Senate Finance Committee                                                      
 State Capitol, Juneau, AK 99801-1182¶465-3709                                 
  POSITION STATEMENT:  sponsor of SB 378                                       
 Tom Williams, Director                                                        
 Permanent Fund Dividend Division                                              
 Department of Revenue                                                         
 P.O. Box 110460, Juneau, AK 99811-0460¶465-2323                               
  POSITION STATEMENT:  testified on SB 378                                     
 Joseph Easaw, Jr., Aide                                                       
 House State Affairs Committee                                                 
 State Capitol, Juneau, AK 99801-1182¶465-3719                                 
  POSITION STATEMENT:  sponsor of HJR 60                                       
 Dave Harding, Aide                                                            
 Representative MacLean                                                        
 State Capitol, Juneau, AK 99801-1182¶465-4833                                 
  POSITION STATEMENT:  prime sponsor of HB 494                                 
 Bill Corbus, Chairperson                                                      
 Alaska State Pension Investment Board                                         
 612 W. Willoughby Ave., Juneau, AK 99801¶586-2222                             
  POSITION STATEMENT:  in favor of HB 494                                      
 Gail A. Oba, Vice-Chairperson                                                 
 Alaska State Pension Investment Board                                         
 10615 Main Tree, Anchorage, AK ¶276-1550                                      
  POSITION STATEMENT:  in favor of HB 494                                      
 Darrel J. Rexwinkel, Commissioner                                             
 Department of Revenue                                                         
 P.O. Box 110400, Juneau, AK 99811-0400¶465-2300                               
  POSITION STATEMENT:  testified on HB 494                                     
 Bob Stalnaker, Director                                                       
 Division of Retirement & Benefits                                             
 Department of Administration                                                  
 P.O. Box 110203, Juneau, AK 99811-0203¶465-4470                               
  POSITION STATEMENT:  testified on HB 494                                     
 Claudia Douglas, President                                                    
 NEA Alaska                                                                    
 114 2nd St., Juneau, AK 99801¶586-3090                                        
  POSITION STATEMENT:  in favor of HB 494                                      
  ACTION NARRATIVE                                                             
 TAPE 94-28, SIDE A                                                            
 Number 001                                                                    
 CHAIRMAN LEMAN calls the Senate State Affairs Committee to order at           
 9:12 a.m.                                                                     
 Number 005                                                                    
 OR MISD.) as the first order of business before the Senate State              
 Affairs Committee and calls Mr. Skidmore to testify.                          
 Number 013                                                                    
 DAVID SKIDMORE, Aide to the sponsor of SB 378, states SB 378 was              
 drafted to create some compensatory provisions for the State of               
 Alaska's criminal justice system for costs caused by misdemeanants.           
 Mr. Skidmore describes the bill as outlined in the sponsor                    
 Number 049                                                                    
 MR. SKIDMORE announces that Senator Frank proposes an amendment to            
 SB 378, which would insert a new section on page 1, line 5.  The              
 amendment reads as follows,                                                   
  "*Section 1. PURPOSES. The purposes of the amendments to AS                  
  43.23.005(d) and AS 43.23.028(b) in this Act are to obtain                   
   (1) additional funding for the State agencies specified;                    
   (2) full or partial reimbursement from individuals                          
  convicted of a felony or misdemeanor for the costs imposed on                
  the State criminal justice system that are related to                        
  conviction and incarceration."                                               
 Renumber following bill sections accordingly.                                 
 Number 060                                                                    
 SENATOR TAYLOR moves the adoption of amendment #1 (Senator Frank's            
 CHAIRMAN LEMAN asks if there are any objections to amendment #1.              
 SENATOR TAYLOR says it is important to establish that SB 378 is a             
 cost-recovery factor, and that the state incurs significant costs             
 in incarcerating people.  Senator Taylor stresses that SB 378 is in           
 no way intended as a punitive, or additional punitive matter.                 
 Number 079                                                                    
 CHAIRMAN LEMAN asks if there are any further comments on amendment            
 The chairman asks if there is any objection to the adoption of                
 amendment #1.  Hearing none, the chairman states amendment #1 has             
 been adopted.                                                                 
 Number 083                                                                    
 MR. SKIDMORE states he has discussed a conceptual amendment with              
 the staff of the Senate State Affairs Committee, which would exempt           
 from this legislation, individuals convicted of misdemeanors for              
 which statute provides a mail-in bail schedule, and misdemeanors              
 which do not require a mandatory court appearance.                            
 CHAIRMAN LEMAN moves the adoption of amendment #2 (the conceptual             
 amendment just described).                                                    
 Number 099                                                                    
 SENATOR TAYLOR objects for purposes of discussion.  Senator Taylor            
 states he had assumed SB 378 would apply mainly to the costs of               
 CHAIRMAN LEMAN states amendment #1 refers to those persons who have           
 been incarcerated.                                                            
 SENATOR DUNCAN observes that lines 9 and 10 probably override that.           
 MR. SKIDMORE informs the committee that section 1 of SB 378 is not            
 restricted to individuals who are incarcerated.  It also applies to           
 individuals who were solely convicted of a misdemeanor or felony.             
 Number 119                                                                    
 SENATOR TAYLOR comments he thinks that in the conceptual amendment,           
 the list of exceptions will be rather long.                                   
 Number 124                                                                    
 CHAIRMAN LEMAN states there is a motion before the committee.                 
 SENATOR TAYLOR says unless a person has been incarcerated or has              
 cost the system a significant amount of money, SB 378 probably                
 should not be applicable.                                                     
 Number 129                                                                    
 MR. SKIDMORE states that during the drafting of SB 378, agencies of           
 the criminal justice system were contacted for average costs                  
 misdemeanants impose on the system.  Estimates from those agencies            
 are included in members' bill files.  Mr. Skidmore repeats the                
 estimates that were made by agencies of the criminal justice                  
 system, and states that persons who are convicted, but do not serve           
 time, still have a fiscal impact on the criminal justice system.              
 Number 153                                                                    
 CHAIRMAN LEMAN asks if there is any further discussion involving              
 amendment #2.                                                                 
 Number 156                                                                    
 SENATOR TAYLOR asks if the language in 43.23.055 is the language              
 which enables the state to file for and collect the dividend of a             
 MR. SKIDMORE responds in section 2, the statutory site is                     
 43.23.028(b).  That statute currently provides that the money that            
 would have been paid to these individuals in a given fiscal year,             
 will be available to the state in the next fiscal year for                    
 Number 175                                                                    
 CHAIRMAN LEMAN states the conceptual amendment, when drafted, will            
 exclude those misdemeanors that do not require a mandatory court              
 appearance.  The chairman states the committee does not want to               
 inadvertently increase the number of court appearances.  If a                 
 person is charged with an offense with a fine of $75, and the                 
 person will lose their permanent fund dividend by not contesting              
 the charges, that person is going to request a court appearance.              
 SENATOR DUNCAN asks if it might include misdemeanors where the                
 person is not incarcerated.                                                   
 CHAIRMAN LEMAN requires that it could.                                        
 Number 191                                                                    
 SENATOR TAYLOR is concerned that a department, as it attempts to              
 recover costs, would recover more money from a persons PFD than it            
 would from a fine.                                                            
 Number 200                                                                    
 CHAIRMAN LEMAN says he presumes that will be the case in many                 
 instances.  The chairman asks if there is any objection to                    
 amendment #2.  Hearing none, the chairman states amendment #2 has             
 been adopted.  The chairman calls Mr. Williams to testify.                    
 Number 205                                                                    
 TOM WILLIAMS, Director, Permanent Fund Dividend Division,                     
 Department of Revenue, states the fiscal note from the department             
 shows zero impact, which assumes the Department of Corrections or             
 the Court System would continue to notify the Department of Revenue           
 of the individuals who meet the criteria outlined in SB 378.  Mr.             
 Williams adds that the only other impact SB 378 would have, would             
 be to reduce other attachments on these individuals dividends, such           
 as attachments from the Child Support Enforcement Division and the            
 Public Defender Agency.  Mr. Williams continues to discuss the                
 fiscal note from the Department of Revenue.                                   
 Number 232                                                                    
 SENATOR DUNCAN asks for a clarification on whether a person would             
 lose their whole dividend, and not simply an amount that would                
 cover the cost involved.                                                      
 Number 240                                                                    
 MR. WILLIAMS responds a person would simply lose their whole                  
 dividend.  Under current law, the state can only withhold dividends           
 from persons incarcerated as a result of a felony conviction.  SB
 378 would cover persons convicted of a felony, convicted of a                 
 misdemeanor, or incarcerated for conviction of a felony or                    
 SENATOR DUNCAN states a person could still lose their dividend in             
 a case where they are not incarcerated, but have a mandatory court            
 appearance for a minor traffic infraction.  Senator Duncan comments           
 he has some concerns about the bill; paying costs out of one's                
 dividend is one thing, but losing the whole dividend...                       
 CHAIRMAN LEMAN asks Mr. Williams if the bill can be crafted to take           
 a portion, instead of the whole dividend.  The chairman is also               
 concerned about taking monies away from child support.                        
 Number 263                                                                    
 MR. WILLIAMS responds he would defer to the sponsor on those                  
 Number 264                                                                    
 CHAIRMAN LEMAN asks if there is any more discussion on SB 378.                
 Number 268                                                                    
 SENATOR TAYLOR states he thinks the idea of recovering costs is a             
 good one, but the questions that have been raised today give him              
 concern about the legislation.                                                
 Number 294                                                                    
 CHAIRMAN LEMAN states he shares some of those concerns also.  The             
 chairman announces the committee will hold SB 378 to continue to              
 work on it.                                                                   
 Number 300                                                                    
 COURTS) as the next order of business before the State Affairs                
 Committee and calls Mr. Easaw to testify.                                     
 Number 315                                                                    
 JOSEPH EASAW, Aide to the House State Affairs Committee, sponsor of           
 HJR 60, states the intent of the resolution is very                           
 straightforward.  Mr. Easaw gives the committee background                    
 information on why HJR 60 was introduced.                                     
 Number 345                                                                    
 CHAIRMAN LEMAN asks Mr. Easaw if he can submit the backup material            
 to which he is referring to the Senate State Affairs Committee.               
 MR. EASAW responds he will do so.                                             
 CHAIRMAN LEMAN asks if there is any committee discussion on HJR 60.           
 Number 348                                                                    
 SENATOR TAYLOR makes a motion to discharge HJR 60 from the Senate             
 State Affairs Committee with individual recommendations.                      
 Number 350                                                                    
 CHAIRMAN LEMAN asks if there is anyone in the audience who wishes             
 to testify on the resolution.  Hearing none, he asks if there is              
 objection to the motion to discharge.  Hearing no objection, the              
 chairman orders HJR 60 released from committee with individual                
 Number 355                                                                    
 CHAIRMAN LEMAN brings up HB 494 (ALASKA PENSION INVESTMENT                    
 AUTHORITY) as the next order of business before the Senate State              
 Affairs Committee and calls Mr. Harding to testify.                           
 Number 362                                                                    
 DAVID HARDING, Aide to Representative MacLean, prime sponsor of HB
 494, states the bill would offer several opportunities that would             
 lead to greater long-term financial stability and more appropriate            
 lines of authority in the state's pension investment system.  Mr.             
 Harding further describes the bill as outlined in the sponsor                 
 Number 385                                                                    
 CHAIRMAN LEMAN asks Mr. Harding if HB 494 is similar to a previous            
 Number 388                                                                    
 MR. HARDING responds it has been around before, but he does not               
 remember how far through the legislative process the bill got.  He            
 states there are differences between HB 494 and the previous                  
 legislation relating to this subject.                                         
 CHAIRMAN LEMAN calls Mr. Corbus to testify.                                   
 Number 394                                                                    
 BILL CORBUS, Chairperson, Alaska State Pension Investment Board,              
 introduces Ms. Oba and other witnesses in the audience.  Mr. Corbus           
 reads a written statement.  There are several items in committee              
 members' bill file on HB 494 from the Alaska State Pension                    
 Investment Board and the Department of Revenue.                               
 Number 437                                                                    
 GAIL A. OBA, Vice-chairperson, Alaska State Pension Investment                
 Board, states HB 494 was modeled after previous legislation                   
 introduced by Senator Pourchot.  Ms. Oba gives a brief history of             
 the previous legislation and of HB 494.                                       
 MS. OBA tells the committee of a survey conducted by the Department           
 of Revenue, the intent of the survey being to gather information              
 about boards, staff, and accountability of state pension funds.               
 Number 461                                                                    
 CHAIRMAN LEMAN asks if there are any questions for Ms. Oba or Mr.             
 Corbus.  Hearing none, the chairman calls a brief at ease of the              
 Senate State Affairs Committee.                                               
 Number 462                                                                    
 CHAIRMAN LEMAN calls the committee back to order.                             
 Number 464                                                                    
 SENATOR TAYLOR makes a motion to adopt the committee substitute for           
 HB 494.                                                                       
 Number 467                                                                    
 SENATOR DUNCAN objects and asks Mr. Corbus if he has seen the                 
 proposed committee substitute.                                                
 MR. CORBUS responds he has not.                                               
 Number 470                                                                    
 SENATOR DUNCAN states the only change, from what he understands, is           
 that on page 4, section 7, employees of the authority would be in             
 the exempt service.                                                           
 MR. CORBUS thinks the board would prefer the committee substitute.            
 Number 480                                                                    
 MS. OBA points out that no other authority has language restrictive           
 like the language here.  This is unique to the state pension                  
 SENATOR DUNCAN asks if subsection (b) was also in the house bill.             
 MR. CORBUS responds that language was put in the house bill at the            
 very last minute, and was not part of the authority's original                
 Number 488                                                                    
 SENATOR DUNCAN states he has no problem with that.  He is focusing            
 on the last sentence of the new language.                                     
 Number 490                                                                    
 CHAIRMAN LEMAN clarifies for Senator Duncan that the only change in           
 this amendment was the deletion of that second part.  The other               
 part was language that came from the house.                                   
 MS. OBA responds she did not understand the question, and that was         
 original language from the authority.                                         
 Number 507                                                                    
 CHAIRMAN LEMAN asks if there is further objection to the adoption             
 of the Senate State Affairs committee substitute for HB 494.                  
 Hearing none, the chairman announces the cs has been adopted.                 
 CHAIRMAN LEMAN asks who in the audience is planning to testify on             
 HB 494.                                                                       
 Number 521                                                                    
 COMMISSIONER REXWINKEL states Mr. Prussing and Mr. Storr are                  
 available to answer questions on the fiscal note.                             
 SENATOR DUNCAN asks if the department can explain the two different           
 fiscal notes on HB 494.                                                       
 DARREL REXWINKEL, Commissioner, Department of Revenue, states the             
 Treasury Division now has twenty-nine employees.  Those employees             
 work on various funds; the department has at least eighteen funds.            
 Four of those funds are the pension trust funds.  The fiscal note             
 for the pension investment board consists of twenty positions.  The           
 pension note for the remaining management functions consists of               
 about seventeen employees.  The important component is in the                 
 salaries.  Commissioner Rexwinkel continues to explain the fiscal             
 notes for HB 494.                                                             
 Number 555                                                                    
 COMMISSIONER REXWINKEL states it is important to note that there is           
 a continuing cost of 497,000$ for the pension authority operations.           
 Those monies all come out of the pension trust fund.  There is over           
 7 billion dollars in the pension trust fund.  One basis point,                
 which is 1/100th of a percent of 7 billion dollars would be                   
 700,000$.  So if the fund were to only earn 1 basis point, it would           
 more than cover the cost of operations.                                       
 COMMISSIONER REXWINKEL states that the board had approved and                 
 expenditure of 398,000$, but the House Finance Committee cut that             
 to 200,000$, just because.  There was no calculation of the number.           
 The board believes 398,000$ is the appropriate figure, and would              
 enable the investment authority to be a functional entity.                    
 Number 575                                                                    
 COMMISSIONER REXWINKEL states the fiscal note for the Treasury                
 Division reflects that costs will be continuing costs, and not                
 first year costs.  The commissioner states that, though the fiscal            
 note reflects an increased cost, there will also be an estimated              
 increase in revenue from 10 million dollars to 30 million dollars.            
 TAPE 94-28, SIDE B                                                            
 Number 595                                                                    
 SENATOR TAYLOR asks why the state should limit employees from                 
 further investment in their retirement system.                                
 Number 575                                                                    
 COMMISSIONER REXWINKEL responds that monies the department is                 
 managing now are definite state programs established by the State             
 of Alaska.  To start accepting other monies would put the state in            
 direct competition with private business enterprises.  In addition,           
 if the state did accept other monies, and did not return at an                
 expected rate, then the department would receive a lot of critique            
 that could significantly interfere with the ability to provide                
 proper management of the fund.                                                
 Number 565                                                                    
 SENATOR TAYLOR asks if the funds can be managed to defer employee             
 Number 560                                                                    
 COMMISSIONER REXWINKEL explains the relationship between the                  
 pension investment board and the Department of Administration.  In            
 terms of accepting additional funds, the board would have to start            
 registering with the FCC, and would have to do a lot of additional            
 administrative work, which the board does not think would be in the           
 best interest of the state.                                                   
 Number 550                                                                    
 SENATOR TAYLOR asks if, under deferred compensation, that money               
 will still be managed through the pension investment board, and               
 will return the same amount of money.                                         
 Number 548                                                                    
 COMMISSIONER REXWINKEL responds that would not be the case.  The              
 board has been working on the deferred compensation option, and               
 there are at least eight investment options opening up, into which            
 an individual could elect to put their money.                                 
 SENATOR TAYLOR asks what the return has been on the deferred                  
 compensation investments.                                                     
 Number 530                                                                    
 BOB STALNAKER, Director, Division of Retirement & Benefits,                   
 Department of Administration, states the Department of                        
 Administration administers the state pension plans, including                 
 deferred comp.  Mr. Stalnaker thinks federal government fiscal                
 policy has more to do with the bottom line.  The plans that the               
 state manages are qualified through the Internal Revenue Service.             
 The IRS does not want people to defer all their income, and so puts           
 limitations on the amount an employee is allowed to defer.  In the            
 deferred comp plan, the limitation is 7,500$ per year.  In the SBS            
 plans, as combined with PERS, is a maximum cap of 25% of their                
 income as tax deferred contributions.  Mr. Stalnaker states the               
 blended rate of return was about 7%.  The stocks and the bonds                
 return varying rates.                                                         
 Number 502                                                                    
 SENATOR TAYLOR thanks Mr. Stalnaker for his explanation.                      
 Number 496                                                                    
 MR. STALNAKER says there is no question that the deferred                     
 compensation program is under-utilized.                                       
 Number 493                                                                    
 COMMISSIONER REXWINKEL adds that there are no back-in fees in the             
 state deferred compensation program.                                          
 Number 484                                                                    
 MR. STALNAKER points out that, even if an employee severs their               
 employment relationship with the state, that person can elect to              
 leave their money in the deferred comp system.                                
 Number 477                                                                    
 SENATOR TAYLOR asks where the state is on the unfunded liability of           
 the various investment programs.                                              
 Number 471                                                                    
 MR. STALNAKER responds that PERS and TERS were recently reviewed,             
 and the funding status of TERS is at 93.5%, while PERS is at 95+%.            
 These figures include prefunding health insurance.  Alaska is one             
 of the only states in the country that prefunds health insurance as           
 part of pension costs.  If the state did not prefund health                   
 insurance, the state's funding ratios would be in excess of about             
 120% in both systems.  So the funding status of the systems are               
 very good.                                                                    
 Number 455                                                                    
 SENATOR TAYLOR asks how that compares with other funds across the             
 Number 451                                                                    
 MR. STALNAKER responds that PERS and TERS are in about the top 10%            
 of funded status of most systems.  Without the health insurance               
 prefunding, the state would probably be up in the top 1-2%.  The              
 state's philosophy is that a system should not reach 100% funded.             
 It should strive for just below 100% funded.  It would put undue              
 burden on employers by over-funding a system.                                 
 Number 440                                                                    
 SENATOR DUNCAN asks if the fiscal notes would allow flexibility to            
 the board for needed staffing requirements.                                   
 Number 435                                                                    
 COMMISSIONER REXWINKEL replies that question goes back to the whole           
 allocation function.  The board believes that twenty positions                
 would be the minimally accepted staffing level.                               
 SENATOR DUNCAN asks why the fiscal note only allows the appointment           
 of a director.                                                                
 COMMISSIONER REXWINKEL responds that the fiscal note Senator Duncan           
 is looking at only shows the increase resulting from HB 494.                  
 SENATOR DUNCAN asks if the state pension board agrees with the                
 figures in the fiscal notes.                                                  
 COMMISSIONER REXWINKEL replies that the fiscal notes were approved            
 of by the pension board.  The commissioner repeats that the one               
 change made by the House Finance Committee reducing one fiscal note           
 from 398,000$ to 200,000$ was an arbitrary reduction.  There is a             
 continuing discussion of the Department of Revenue fiscal notes.              
 Number 396                                                                    
 COMMISSIONER REXWINKEL states that monies will be shifted from                
 other programs within the Department of Revenue to cover the cost             
 of the state pension board if that board is not fully funded.                 
 Number 390                                                                    
 CHAIRMAN LEMAN thanks the commissioner for his testimony and calls            
 the next witness.  The chairman announces HB 494 will be held over            
 until Wednesday's committee meeting, at which time he intends to              
 move the bill.                                                                
 CLAUDIA DOUGLAS, President, NEA-Alaska, states that the NEA                   
 supports HB 494, and reads a brief, written statement.                        
 Number 373                                                                    
 CHAIRMAN LEMAN thanks Ms. Douglas for her testimony and restates              
 that HB 494 will be held until Wednesday.                                     
 CHAIRMAN LEMAN adjourns the Senate State Affairs Committee meeting            
 at 10:22 a.m.                                                                 

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