Legislature(1993 - 1994)
04/18/1994 09:12 AM Senate STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 CHAIRMAN LEMAN brings up SB 378 (NO PFD:PERSONS JAILED FOR FELONY 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 statement. 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; and (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 amendment) 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 incarceration. 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 criminal. 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 appropriation. 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 misdemeanor. 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 questions. 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 CHAIRMAN LEMAN brings up HJR 60 (AMEND US CONSTIT. TO LIMIT FED. 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 recommendations. 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 statement. Number 385 CHAIRMAN LEMAN asks Mr. Harding if HB 494 is similar to a previous bill. 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 authority. 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 proposal. 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 compensation. 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 country. 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.