03/22/2005 03:30 PM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SJR14 | |
| SJR8 | |
| SJR14 | |
| HB90 | |
| HB97 | |
| SB143 | |
| SB24 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SJR 8 | TELECONFERENCED | |
| *+ | SJR 14 | TELECONFERENCED | |
| + | SB 24 | TELECONFERENCED | |
| *+ | SB 143 | TELECONFERENCED | |
| + | HB 90 | TELECONFERENCED | |
| + | HB 97 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
March 22, 2005
3:40 p.m.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Thomas Wagoner, Vice Chair
Senator Charlie Huggins
Senator Bettye Davis
Senator Kim Elton
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 14
Urging the United States Congress to amend the tax code to
permanently repeal the federal estate and generation-skipping
transfer tax.
MOVED SJR 14 OUT OF COMMITTEE
SENATE JOINT RESOLUTION NO. 8
Proposing amendments to the Constitution of the State of Alaska
relating to and limiting appropriations from and inflation
proofing the Alaska permanent fund by establishing a percent of
market value spending limit.
HEARD AND HELD
HOUSE BILL NO. 90
"An Act requiring warrants drawn by the Department of
Administration against the state treasury to be negotiable
instruments."
MOVED HB 90 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 97(FIN)
"An Act relating to the authority to take oaths, affirmations,
and acknowledgments in the state, to notarizations, to
verifications, to acknowledgments, to fees for issuing
certificates with the seal of the state affixed, and to notaries
public; and providing for an effective date."
MOVED SCS CSHB 97(STA) OUT OF COMMITTEE
SENATE BILL NO. 143
"An Act amending the definition of the term 'state agencies' as
it applies under Executive Order No. 113; relating to
information systems in the legislative branch and to the
Telecommunications Information Council; and providing for an
effective date."
HEARD AND HELD
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 24
"An Act relating to reemployment of and benefits for retired
teachers and public employees and to teachers or employees who
participated in retirement incentive programs and are
subsequently reemployed as a commissioner; repealing secs. 5, 7,
and 9, ch. 58, SLA 2001; providing for an effective date by
amending the delayed effective date for secs. 3, 5, 9, and 12,
ch. 57, SLA 2001, and repealing sec. 13, ch. 58, SLA 2001, which
is the delayed effective date for secs. 5, 7, and 9, ch. 58, SLA
2001; and providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SJR 14
SHORT TITLE: REPEAL FEDERAL ESTATE TAX
SPONSOR(s): SENATOR(s) HUGGINS
03/08/05 (S) READ THE FIRST TIME - REFERRALS
03/08/05 (S) STA, FIN
03/22/05 (S) STA AT 3:30 PM BELTZ 211
BILL: SJR 8
SHORT TITLE: CONST. AM: PERMANENT FUND P.O.M.V.
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT
02/14/05 (S) READ THE FIRST TIME - REFERRALS
02/14/05 (S) STA, JUD, FIN
03/17/05 (S) STA AT 3:30 PM BUTROVICH 205
03/17/05 (S) Scheduled But Not Heard
03/22/05 (S) STA AT 3:30 PM BELTZ 211
BILL: HB 90
SHORT TITLE: STATE TREASURY WARRANTS
SPONSOR(s): STATE AFFAIRS
01/21/05 (H) READ THE FIRST TIME - REFERRALS
01/21/05 (H) L&C, STA
02/02/05 (H) L&C AT 3:15 PM CAPITOL 17
02/02/05 (H) Moved Out of Committee
02/02/05 (H) MINUTE(L&C)
02/04/05 (H) L&C RPT 5DP
02/04/05 (H) DP: LYNN, KOTT, LEDOUX, GUTTENBERG,
ANDERSON
02/08/05 (H) RULES TO CALENDAR PENDING REPORT
02/08/05 (H) STA AT 8:00 AM CAPITOL 106
02/08/05 (H) Moved Out of Committee
02/08/05 (H) MINUTE(STA)
02/09/05 (H) STA RPT 7DP
02/09/05 (H) DP: GARDNER, LYNN, GATTO, GRUENBERG,
RAMRAS, ELKINS, SEATON
02/09/05 (H) TRANSMITTED TO (S)
02/09/05 (H) VERSION: HB 90
02/10/05 (S) READ THE FIRST TIME - REFERRALS
02/10/05 (S) L&C, STA
03/03/05 (S) L&C AT 1:30 PM BELTZ 211
03/03/05 (S) Heard & Held
03/03/05 (S) MINUTE(L&C)
03/10/05 (S) L&C AT 1:30 PM BELTZ 211
03/10/05 (S) Moved HB 90 Out of Committee
03/10/05 (S) MINUTE(L&C)
03/14/05 (S) L&C RPT 3DP
03/14/05 (S) DP: BUNDE, ELLIS, SEEKINS
03/22/05 (S) STA AT 3:30 PM BELTZ 211
BILL: HB 97
SHORT TITLE: OATHS; NOTARIES PUBLIC; STATE SEAL
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/21/05 (H) READ THE FIRST TIME - REFERRALS
01/21/05 (H) STA, JUD, FIN
01/26/05 (H) FN1: (GOV) - CORRECTED
02/03/05 (H) STA AT 8:00 AM CAPITOL 106
02/03/05 (H) Moved CSHB 97(STA) Out of Committee
02/03/05 (H) MINUTE(STA)
02/07/05 (H) STA RPT CS(STA) 6DP 1NR
02/07/05 (H) DP: LYNN, GATTO, ELKINS, GRUENBERG,
RAMRAS, SEATON;
02/07/05 (H) NR: GARDNER
02/16/05 (H) JUD AT 1:00 PM CAPITOL 120
02/16/05 (H) Moved CSHB 97(JUD) Out of Committee
02/16/05 (H) MINUTE(JUD)
02/18/05 (H) JUD RPT CS(JUD) 5DP
02/18/05 (H) DP: GRUENBERG, DAHLSTROM, COGHILL,
GARA, MCGUIRE
02/28/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/28/05 (H) Heard & Held
02/28/05 (H) MINUTE(FIN)
03/08/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/08/05 (H) Moved CSHB 97(FIN) Out of Committee
03/08/05 (H) MINUTE(FIN)
03/09/05 (H) FIN RPT CS(FIN) 2DP 7NR
03/09/05 (H) DP: FOSTER, MEYER;
03/09/05 (H) NR: HAWKER, MOSES, HOLM, STOLTZE,
JOULE, KELLY, WEYHRAUCH
03/17/05 (H) TRANSMITTED TO (S)
03/17/05 (H) VERSION: CSHB 97(FIN)
03/18/05 (S) READ THE FIRST TIME - REFERRALS
03/18/05 (S) STA, FIN
03/22/05 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 143
SHORT TITLE: STATE INFO SYSTEM PLAN: LEGISLATURE/UNIV
SPONSOR(s): STATE AFFAIRS
03/16/05 (S) READ THE FIRST TIME - REFERRALS
03/16/05 (S) STA
03/22/05 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 24
SHORT TITLE: REEMPLOYMENT OF RETIREES
SPONSOR(s): SENATOR(s) STEVENS G
01/11/05 (S) PREFILE RELEASED 12/30/04
01/11/05 (S) READ THE FIRST TIME - REFERRALS
01/11/05 (S) HES, STA
01/26/05 (S) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
01/26/05 (S) HES, STA
03/07/05 (S) HES AT 1:30 PM BUTROVICH 205
03/07/05 (S) Heard & Held
03/07/05 (S) MINUTE(HES)
03/08/05 (S) FIN REFERRAL ADDED AFTER STA
03/14/05 (S) HES AT 1:30 PM BUTROVICH 205
03/14/05 (S) Heard & Held
03/14/05 (S) MINUTE(HES)
03/16/05 (S) HES AT 1:30 PM BUTROVICH 205
03/16/05 (S) Moved CSSSSB 24(HES) Out of Committee
03/16/05 (S) MINUTE(HES)
03/18/05 (S) HES RPT CS 1DP 3NR 1AM NEW TITLE
03/18/05 (S) NR: DYSON, WILKEN, OLSON
03/18/05 (S) DP: ELTON
03/18/05 (S) AM: GREEN
03/22/05 (S) STA AT 3:30 PM BELTZ 211
WITNESS REGISTER
Deborah Grundmann,
Aide to Senator Huggins
Alaska State Capitol
Juneau, AK 99801
POSITION STATEMENT: Presented SJR 14 for the sponsor
Mike Williams
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Answered questions about the fiscal impact
of SJR 8 on the state
Mike Burns,
Chief Executive Officer
Alaska Permanent Fund Corporation
th
801 W 10 St., Suite 302
Juneau, AK 99802
POSITION STATEMENT: Answered questions about SJR 8
Laura Achee
Alaska Permanent Fund Corporation
th
801 W 10 St., Suite 302
Juneau, AK 99802
POSITION STATEMENT: Answered questions about SJR 8
Representative Max Gruenberg
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented HB 90
Kim Garnero,
Director of Finance
Department of Administration
PO Box 110204
Juneau, AK 99811-0204
POSITION STATEMENT: Supported HB 90
ACTION NARRATIVE
CHAIR GENE THERRIAULT called the Senate State Affairs Standing
Committee meeting to order at 3:40:25 PM. Senators Davis,
Huggins and Chair Therriault were present. Senators Elton and
Wagoner arrived during the course of the meeting.
SJR 14-REPEAL FEDERAL ESTATE TAX
CHAIR GENE THERRIAULT announced SJR 14 to be the first order of
business.
SENATOR ELTON joined the meeting.
3:41:03 PM
DEBORAH GRUNDMANN, Staff to Senator Charlie Huggins, told
members SJR 14 urges Congress to amend the tax code to
permanently repeal the federal estate and generation-skipping
transfer tax. Individuals accumulate assets using after tax
income and then the heirs pay additional tax on those assets in
the form of inheritance tax.
In 2001 Congress and President Bush enacted bi-partisan
legislation to phase out and eventually repeal the estate tax
until 2010. In 2011 the tax will be reinstated at its old rate
of up to 55 percent with an exemption level of $1 million.
SJR 14 expresses support for the legislation that has been
introduced in both bodies of Congress to permanently repeal the
estate tax.
3:42:36 PM
CHAIR THERRIAULT asked Mr. Williams if the state would be
impacted one way or the other.
MIKE WILLIAMS, Alaska Department of Revenue, participated via
teleconference. He read the following from the fiscal note
analysis that he had prepared:
This resolution requests Congress to permanently
repeal the federal estate and generation-skipping
transfer tax. [The] Alaska state tax, AS 43.31, is
based upon the state's death tax credit allowed under
federal law. In 2001, Congress changed the Internal
Revenue Code to phase out the state death tax credit
by December 31, 2004. Since Alaska's estate tax was
effectively reduced to zero by the change in federal
law, permanent repeal of the federal estate tax will
have no fiscal impact to general fund revenue.
CHAIR THERRIAULT asked whether the Murkowski Administration had
taken a position on SJR 14.
MR. WILLIAMS answered he was not aware of an official position.
SENATOR ELTON said given that state collections are predicated
on federal law, why wouldn't a general fund increment show in FY
2011 if the federal estate tax disappears in 2010.
MR. WILLIAMS clarified that the estate tax would spring back to
life in calendar year 2011. Estate tax for anyone who passed
away in that year wouldn't be due until 15 months after the date
of death so any return to the State of Alaska would come in FY
2012 or later.
SENATOR ELTON asked how much the state collected prior to the
change in federal law.
MR. WILLIAMS estimated the amount to average out at about $2
million per year.
SENATOR ELTON asked if a general fund increment of that amount
would show after 2012.
MR. WILLIAMS said that's correct.
CHAIR THERRIAULT remarked that would be dependent on whether or
not Congress permanently repeals the estate tax.
He said estate tax does have a negative impact and many people
devote considerable time and effort in estate planning. Its
repeal reduces the need for individuals to spend money on
attorneys and accountants to reduce estate size, which could
provide an ongoing savings to constituents.
SENATOR HUGGINS told members that he believes Representative Don
Young would be in full support of SJR 14.
3:48:30 PM
CHAIR THERRIAULT set SJR 14 aside.
SJR 8-CONST. AM: PERMANENT FUND P.O.M.V.
CHAIR THERRIAULT announced SJR 8 to be up for consideration. He
explained that the Alaska Permanent Fund trustees asked him to
bring the idea forward for discussion in the State Affairs
Committee because it's the logical place to hear proposals about
the management of the Permanent Fund.
3:49:23 PM
MIKE BURNS, Chief Executive Officer of the Alaska Permanent Fund
Corporation (APFC), recapped why the trustees believe the
Percent of Market Value (POMV) method is the best way to manage
the fund. He emphasized that the trustees do not view the POMV
as a fiscal plan. It wouldn't allow the Legislature greater
access to the earnings and most years it would reduce the amount
available for appropriation.
Implementation of POMV and the use of earnings are entirely
separate issues. POMV is predictable and understandable, but
most people are confused by the arcane nature of the current
distribution formula of the permanent fund. Most fund trustees
manage their funds on a real return methodology - the total
return of the fund less inflation. Most pension fund and
endowment fund managers view their fiduciary duties in the same
way.
MR. BURNS said the trustees have proposed the POMV method
because the current statutory realized-income based distribution
formula is broken. When the fund was created it was prudent to
restrict its investment authority to a bond only strategy. A
bond portfolio generates income in two ways: interest or coupon
income and capital gains from bonds that are sold at appreciated
prices. This formula made perfect sense at that time for that
portfolio. However, because the fund's asset allocation now
incorporates investments that generate significant unrealized
gains and realized income, the current payout methodology and
protection of principal doesn't serve the fund as well as it did
previously.
Only a POMV payout limited by the sustainable yield from the
fund can provide the necessary protection for the future while
allowing current generations an equitable share of fund
earnings. The only way to ensure full protection of the fund is
to place constitutional limitations.
The POMV proposal allows no more than 5 percent of the average
market value of the fund averaged over the previous 5 years may
be appropriated from the fund. This protects a minimum of 95
percent of the fund from being spent in any given year.
MR. BURNS concluded: "As I noted earlier, POMV is not a fiscal
plan and with oil at $50 plus, your interest in and focus on a
fiscal plan may well be elsewhere. But is this not the opportune
time to modernize and increase the transparency of the fund so
it can, not only be managed in harmony with its distribution
formula, but also be understood by Alaskans when other decisions
must be made?"
He urged committee members to support the trustees' proposal for
reasons of modernization, clarity, and better protection.
3:54:25 PM
SENATOR WAGONER arrived.
3:54:43 PM
CHAIR THERRIAULT asked if the primary motivation is to ensure
that inflation proofing is guaranteed for the future.
MR. BURNS replied inflation proofing is built in. The belief is
that over time a real return of 5 percent in addition to
inflation proofing is attainable. Over time a return of 5
percent allows a distribution to the Legislature, protects the
fund from inflation, and allows the fund to grow.
CHAIR THERRIAULT asked if the inflation proofing is deposited
with an annual appropriation and whether there is concern that
during tight times the appropriation might not be made.
MR. BURNS said the annual appropriation for inflation proofing
is in the province of the Legislature so a question about what a
future Legislature might do is clearly a legitimate question.
CHAIR THERRIAULT said if the goal is for the fund to be multi-
generational, that goal couldn't be achieved if the fund's
purchasing power isn't protected.
MR. BURNS agreed.
SENATOR ELTON said he had two questions. Legislators have
frequently heard that over time a 5 percent withdrawal is
workable. He wondered whether using the "over time argument"
because of language on page 2, line 2. He questioned whether use
of the word "annual" precludes the ability of looking at a
multi-year strategy.
MR. BURNS replied if line 2 were read in conjunction with a 5-
year average, the 5-year average would be the controlling
number. With respect to whether or not 5 percent is attainable
over time he said:
If you take our example of 8 percent and the fund
grows each year, it's 5 percent of the maximum amount
only in one year. And you go back the trailing 5 years
- the actual amount of the fund is smaller. And I
think if you use a straight 8 percent growth on the
balance of the fund, the payout actually is less than
4.7. It's 5 percent but it's 5 percent of a smaller
year - 5 a little bit bigger - year 4 a little bigger
still. So it's only 5 percent of the very last year in
the 5-year formula - if you think of a stair-step.
SENATOR ELTON said he assumed POMV supplants the 5-year rule and
he questioned whether Mr. Burns was saying that the 5-year rule
would still control when the Legislature makes the annual
decision.
MR. BURNS said yes, the formula is based on taking 5 percent of
the average of the last 5 years.
CHAIR THERRIAULT added the 5 percent would turn out to be less
than 5 percent each year because it is based on the 5-year
average of a growing balance.
MR. BURNS said that is correct and the trustees' have estimated
the amount to be 4.65 percent each distribution year.
CHAIR THERRIAULT asked about the average return over the life of
the permanent fund given recent down markets.
MR. BURNS said the return has been about 10 percent over the
life of the fund. Last year, the return was 14.1 percent.
SENATOR ELTON questioned whether the word "predictable" on page
2 would constrain the Legislature from deciding to appropriate
less than 5 percent.
MR. BURNS responded it's what the fund makes available to this
process. Whether the Legislature distributes that amount or not
is a separate issue.
SENATOR ELTON said the annual appropriation would be
predictable, but it isn't if the percentage varies from year to
year. He again questioned whether the word "predictable" would
constrain the Legislature from appropriating a lower percentage.
4:02:52 PM
LAURA ACHEE, Communications and Research Liaison, Alaska
Permanent Fund Corporation, said the Legislature would not be
constrained to take 5 percent. The word "predictable" goes to
two issues. First is knowing that no more than 5 percent of the
market value for the previous five years would be available. The
other side of the issue is that as the Legislature contemplates
use of earnings using a funding source that has a lot of
volatility makes it difficult for the Legislature to know that
in any given year they're going to have 5 percent of the average
market value of the fund available to them.
4:05:20 PM
CHAIR THERRIAULT read from page 2, line 2:
...and limited so the real value of the permanent fund is
preserved over time.
He asked if the trustees would be tracking the value of the fund
and the added inflation-proofing amount. If a protracted down
market occurred and the 5 percent allowed an erosion of the fund
going forward, he questioned whether that would put a limit on
the 5 percent.
MR. BURNS said not as currently proposed. In a down market you
could actually take 5 percent of principal or reserved assets.
MS. ACHEE said keep in mind it would take several years of
protracted down markets before dipping into the fund would
occur. At that point, the same mechanism that stair stepped up
would kick in as well because the annual appropriation would be
5 percent of values that were going down.
Certainly it should be within the Legislature's purview to take
the full 5 percent or to not withdraw any money. She pointed out
that a few years ago - because of market changes - the realized
earnings account was almost dry so paying any dividend was
questionable.
SENATOR ELTON noted the current proposal contains language such
as "predictable" and "real value" that weren't discussed last
year.
4:08:04 PM
MS. ACHEE said that's correct. Both resolutions in the last
Legislature started out reading as SJR 8 does but one body
removed that language in an early committee hearing.
SENATOR ELTON noted it would be instructive for the committee to
find out why those words were removed.
MR. BURNS responded this proposal has been the trustees'
starting point over a number of years.
CHAIR THERRIAULT asked about the dollar amount outside of the
protected principal.
MR. BURNS estimated that about 11 percent isn't protected today,
but that number jumps to about 16 percent if one goes through
the process of realizing the unrealized gains.
CHAIR THERRIAULT calculated that there would be a starting $5
billion cushion above and beyond the protected principal if POMV
is adopted.
MR. BURNS said yes but it would all be protected principal if
the POMV method were adopted.
CHAIR THERRIAULT offered the opinion that many citizens don't
understand that under the Alaska State Constitution, the
Legislature has access to about $5 billion.
MS. ACHEE clarified, "Of that $5 billion some of it is - at this
point - considered principal. However it is unrealized gains so
it's merely the matter of realizing." They're partially
protected because until realized they are part of the principal.
4:11:15 PM
WAYNE STEVENS, President and CEO of the Alaska State Chamber of
Commerce, stated support for SJR 8. The chamber business
advisory committee lists the adoption of a state fiscal plan as
a priority and one part is to statutorily establish the POMV
management tool for the Alaska Permanent Fund.
"Recognizing that SJR 8 speaks to a constitutional percentage of
market value we would support that. But as an intermediate step
perhaps one would consider a statutory percent of market value."
He suggested that had the POMV method been adopted last year,
Alaskans wouldn't have seen a significant change in the dividend
checks. The chamber supports steadying the budget process now
and in the future and SJR 8 would help accomplish that.
CHAIR THERRIAULT noted there was no further testimony and
announced that he would set SJR 8 aside.
SJR 14-REPEAL FEDERAL ESTATE TAX
4:13:27 PM
CHAIR THERRIAULT returned to SJR 14 and recapped the issue for
Senator Wagoner. He noted there were no questions and asked for
a motion.
SENATOR WAGONER moved SJR 14 from committee with individual
recommendations and accompanying fiscal note.
CHAIR THERRIAULT announced that without objection, the motion
carried.
HB 90-STATE TREASURY WARRANTS
4:14:59 PM
CHAIR THERRIAULT announced the next order of business to be HB
90. He noted that the prime sponsor is Representative Paul
Seaton, but that Representative Gruenberg would introduce the
bill.
REPRESENTATIVE MAX GRUENBERG told members similar legislation
passed the House last year, but didn't make it through the
Senate. HB 90 simply codifies the National Bank of Alaska v.
Univentures 1231 decision, which dealt with whether state
warrants are negotiable instruments.
The Legislature has never adopted the use of checks to pay state
debts; it uses warrants. Until that case was decided, the
state's position was that it didn't have to consider warrants as
negotiable instruments in the technical sense. That means the
state could stop payment on a warrant even after a bank had made
payment on it.
HB 90 specifically states that warrants drawn by the state are
negotiable instruments under the Uniform Commercial Code. That
makes it clear the state must honor the checks unless
requirements and procedures set out in the Uniform Commercial
Code are followed. Certainly, the state could dishonor a check
if it notifies the bank before it is cashed.
CHAIR THERRIAULT asked what a negotiable instrument allows that
wasn't allowed on a warrant.
REPRESENTATIVE GRUENBERG answered a negotiable instrument is
defined in AS 45.03.104(a) as a document drawn on a bank that is
to be served as evidence of a debt to be paid. If properly drawn
and presented, it must be honored unless proper notice is given
to the bank in advance. That allows the bank to rely on the bona
fides of that instrument.
Although the state pays a lot of its debts electronically rather
that with checks, those that it does pay would be honored under
the Uniform Commercial Code.
4:20:07 PM
KIM GARNERO, Director of Finance, Department of Administration,
affirmed that HB 90 simply codifies a 1992 Alaska Supreme Court
ruling. Since that decision, the state has administered its
warrants as negotiable instruments so no administrative changes
are necessary if this legislation passes.
SENATOR HUGGINS asked why, if the court ruling was in 1992,
there is a rush to do something about it now in 2005.
MS. GARNERO responded it's not a bad idea to align the statutory
language with the Alaska Supreme Court ruling.
CHAIR THERRIAULT recapped this would align statutes with the
findings of the court.
MS. GARNERO said that is correct.
4:22:02 PM
REPRESENTATIVE GRUENBERG maintained that in the area of
commercial law, financial institutions and lawyers look to the
statutes rather than case law.
CHAIR THERRIAULT added HB 90 would reduce confusion because
someone could reference the statutes and they would have to know
that the court overrode it.
REPRESENTATIVE GRUENBERG agreed.
CHAIR THERRIAULT noted there was no further testimony. He
mentioned the zero fiscal note and asked for a motion.
SENATOR WAGONER moved HB 90 out of committee with individual
recommendations and attached fiscal note.
CHAIR THERRIAULT announced that without objection, the motion
carried.
4:23:52 PM
CSHB 97(FIN)-OATHS; NOTARIES PUBLIC; STATE SEAL
CHAIR THERRIAULT announced HB 97 to be up for consideration. He
reminded members that they heard the Senate version at the same
time that HB 97 was undergoing changes in the House Judiciary
Committee. The decision was to wait for the House vehicle to
come forward.
SCOTT CLARK, Office of the Lieutenant Governor, reported that
the House Judiciary Committee amended the bill to remove
obstacles to electronic notarizations. The House Finance
Committee then amended the bill to take into consideration a
person convicted of a felony that didn't serve jail time. It
also combined the two revocation sections and clarified that any
decision to revoke a notary commission could be appealed.
4:25:31 PM
CHAIR THERRIAULT remarked the House Finance Committee questioned
why anyone convicted of a felony could act as a notary.
MR. CLARK replied the ten-year waiting period was a compromise.
CHAIR THERRIAULT asked if the lieutenant governor would have the
power to permanently ban a notary who abused his or her notary
power.
MR. CLARK answered it's a technical problem with the current
version of the bill. Currently a person loses the ability to
apply for a future commission any time a commission is revoked.
The House Finance Committee amended the bill to add the 10-year
provision so if a commission is revoked, the notary must wait 10
years to reapply.
A commission could also be revoked for technical reasons such as
a notary that moved out of state. In that instance the person
shouldn't have to wait 10 years to reapply if they were to move
back to the state. The lieutenant governor proposed an amendment
to further refine the concept of revocation.
CHAIR THERRIAULT said he would sponsor Amendment 1. It proposes
to differentiate between notaries whose commission was revoked
because they moved from the state and notaries whose commission
was revoked as a result of conviction for commission of a felony
offense.
MR. CLARK clarified the felony offense is a different section,
but it's based on the same idea that a person with a felony
conviction could have his or her commission revoked and he or
she couldn't reapply for 10 years.
SENATOR HUGGINS asked Mr. Clark to restate the explanation.
MR. CLARK reiterated a notary commission could be revoked under
the bill for several reasons. Revocation would occur for
violation of the terms of the notary statutes or if a notary
moved out of state. If the revocation occurred because the
person moved out of state, he or she wouldn't have to wait 10
years to reapply after moving back to the state.
4:29:32 PM
SENATOR HUGGINS restated the explanation.
MR. CLARK said the amendment is to clarify the revocation
process and not inadvertently penalize people.
CHAIR THERRIAULT asked if revocation due to abuse of the notary
power could preclude a person from reapplying for 10 years.
MR. CLARK said yes.
SENATOR HUGGINS said, "I thought they are precluded."
ANNETTE KREITZER, Chief of Staff to Lieutenant Governor Loren
Leman, clarified that they are precluded currently. The intent
of Amendment 1 is to address those people who have not complied
with the law. She pointed out that AS 44.50.068 (a)(2) and (3)
lists the reasons for revocation and suspension. The Department
of Law crafted the language in Amendment 1, which sorts out when
a 10-year revocation would occur based on incompetence and
malfeasance. That type of revocation is separate from someone
who simply moved from the state and had his or her commission
revoked. The latter could reapply after moving back to the state
without waiting 10 years.
SENATOR ELTON recollected there were no revocations when he
worked in the Lieutenant Governor's Office. If a notary moved
out of state the commission simply lapsed. He questioned how
often revocations occur.
MS. KREITZER acknowledged that the Lieutenant Governor doesn't
currently have the power to revoke any commission. Anyone with a
complaint must file under the Administrative Procedures Act.
Last year notaries were included in the administrative hearing
officer bill so if this legislation passes a hearing officer
would hear appeals. Because some problems have come up relating
to notaries, her office has looked at the specific issues very
carefully as the bill was crafted.
Complaints about notaries would come in one of two ways. First,
the notary administrator in the Lieutenant Governor's Office
would have direct dealings with notaries and would be aware of
compliance or lack thereof. If a notary doesn't comply the
notary administrator would determine whether a discipline letter
is required. If compliance isn't forthcoming a suspension might
occur. If the notary still doesn't comply then the Lieutenant
Governor would have no option but to revoke. However, the notary
would have the option of the administrative hearing officer
appeal process.
A second way that complaints would be generated is when a member
of the public becomes dissatisfied and contacts the Lieutenant
Governor's Office with a complaint.
MR. CLARK said although serious complaints have been lodged, the
current process doesn't allow the Lieutenant Governor's Office
to follow up on those complaints.
4:34:55 PM
CHAIR THERRIAULT moved Amendment 1 and noted that without
objection it was adopted.
A M E N D M E N T 1
Page 8, lines 17-19
Delete "may not, within 10 years before the commission
takes effect, have committed acts for which a notary
public commission may be denied or revoked under this
chapter; and"
Insert "may not, within 10 years before the commission
takes effect,
(i) have had the person's notary public commission
revoked under AS 44.50.068(a)(2) or (3) or
under the notaries public laws of another
state; or
(ii) have been disciplined under AS 44.50.068 or
under the notaries public laws of another state
if the disciplinary action prohibits the person
from holding a notary public commission when
the person applies for a commission; and"
CHAIR THERRIAULT noted that electronic signature user groups had
been contacted as he had requested. He questioned whether the
Alaska Bar Association (ABA) had taken a position on the use of
electronic signatures.
MR. CLARK said he had contacted the ABA, but it didn't send a
letter. However, his office had received several letters from
outside notary organizations and notary law organizations.
CHAIR THERRIAULT said the lobbyist for Wells Fargo didn't
express any concerns and he hadn't sensed concern from any other
organizations that rely on notaries.
He recapped HB 97 extends the power to the Lieutenant Governor's
Office to write regulations and use electronic notarizations,
even though it has no immediate plans to do so.
MS. KREITZER said that is correct, but she wanted to clarify
that the bill deals with electronic notarizations. A separate
law deals with electronic signatures.
"I have confidence that whoever's in the Lieutenant Governor's
Office when the technology catches up to it will be able to do
this in a way that's going to benefit the business community,"
she said. With passage of HB 97 there wouldn't be need to return
to the Legislature and ask for amendment. As previously
discussed, one of the reasons this effort has failed in other
states is because those Legislatures defined an electronic
notarization too narrowly. HB 97 intends to remove the
impediments. The Lieutenant Governor's Office would write the
regulations and the Administrative Regulation Review Committee
would review the regulations that are promulgated to ensure that
they are fair.
CHAIR THERRIAULT asked if person-to-person contact with a notary
would be required when an electronic signature is used.
MR. CLARK said that is required in the bill. The technical
nature of the notary's signature is left open in this bill, but
the signatory would have to be present and the notary would
check the identification. "Nothing would change along those
lines," he assured.
CHAIR THERRIAULT drew attention to the positive fiscal note and
asked for a motion.
4:39:35 PM
SENATOR WAGONER moved SCS CSHB 97(STA), [amended \I version]
from committee with individual recommendations and attached
fiscal note. There being no objection, it was so ordered.
SB 143-STATE INFO SYSTEM PLAN: LEGISLATURE
4:40:08 PM
CHAIR THERRIAULT announced SB 143 to be up for consideration. He
informed members this legislation springs from the discussion
the committee had with regard to Executive Order 113 relating to
information technology (IT) functions. He asked Ms. Brakes to
introduce the bill.
4:40:30 PM
HEATHER BRAKES, Staff to Senator Therriault and to the Senate
State Affairs Committee, read the following into the record:
Under art. III, sec. 23 of the Alaska Constitution,
the Governor may, by executive order, make changes in
the organization of the executive branch. As the
committee might remember, it received an overview from
the Administration on Executive Order 113, which, in
effect, dissolves the Telecommunications Information
Council and transferred the powers and duties of the
Council to the commissioner of the Department of
Administration. The legislature under that same
provision has 60 days to consider the order. The order
subsequently took effect March 14. The definition of
'state agency' as currently defined under the order
includes the legislature and, in doing so, effectively
places the legislative branch under the jurisdiction
of the executive branch as it relates to
telecommunications operations.
SB 143 removes the legislative branch from that
definition and sets the legislature apart from the
executive branch.
Mr. Chairman, Karla Schofield, the deputy director of
the Legislative Affairs Agency and Curtis Clothier,
the manager of Data Processing for the agency, are
both here to speak to the specific provisions of the
bill and the proposed amendment that members should
have before them. Just one further point, if you would
turn to page 11 on the executive order, line 20, it
appears the word 'under' is missing so that the line
would read 'transferred under this order.' So that
might be something the committee might consider
sending a memo to the legislative attorneys to bring
to their attention.
4:43:34 PM
CHAIR THERRIAULT asked Ms. Schofield to come forward.
KARLA SCHOFIELD, Deputy Director, Legislative Affairs Agency,
stated support for SB 143. The passage of SB 143 would reflect
how the Legislature actually operates within the state's data
processing community and would allow the legislative branch the
same autonomy as the judicial branch.
The Legislative Affairs Agency has always had a cooperative
relationship with data processing services within the Department
of Administration and SB 143 would allow the agency to continue
to work with, but not be under the department.
The Legislative Affairs Agency has its own data processing group
and it makes its own long and short-range goals, which are
approved by the Legislative Council IT subcommittee. It is
important for the agency to have the flexibility to develop its
own programs because legislative branch goals sometimes differ
from those that the executive branch might have for the entire
state.
4:45:29 PM
CHAIR THERRIAULT asked Ms. Schofield if she had comments on the
proposed amendment.
MS. SCHOFIELD replied the agency supports the proposed
amendment. It is similar to the public records law procedures
that the agency follows and the Legislative Council oversees.
CHAIR THERRIAULT introduced Amendment 1, labeled F.1.
24-LS0746\F.1
Craver
3/22/05
A M E N D M E N T 1
OFFERED IN THE SENATE
TO: SB 143
Page 1, following line 4:
Insert a new bill section to read:
"* Section 1. AS 24.20 is amended by adding a new section to
read:
Sec. 24.20.055. Information systems. The executive
director of the Legislative Affairs Agency shall establish
information systems guidelines and prepare a short-range
and long-range information systems plan for the legislative
branch. The guidelines and plan must be adapted to the
special needs of the legislative branch as determined by
the Alaska Legislative Council and, when it is in the
agency's best interest, consistent with the
telecommunications information guidelines and plan adopted
by the commissioner of administration under AS 44.21.350 -
44.21.390."
Page 1, line 5:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
SENATOR ELTON questioned why the amendment directs the executive
director of the agency and not the Legislative Council to
establish the plan.
CHAIR THERRIAULT acknowledged it could read, "The Legislative
Council shall establish..." and the executive director of the
agency would probably fulfill that role.
SENATOR ELTON said it would then be the designee of the Council.
He suggested that would take care of a situation in which the
executive director's position were vacant.
CHAIR THERRIAULT asked Mr. Clothier to come forward.
CURTIS CLOTHIER, Data Processing Manager, Legislative Affairs
Agency, stated support for SB 143. He said the existing language
is dated and needs to be cleaned up to reflect reality.
Legislative Affairs is in a separate branch of government from
the executive branch and as such the data processing section in
the agency has its own plans and procedures and has been
purchasing its own equipment, supplies and materials. They work
closely with the executive branch and serve jointly on several
committees and work groups. With passage of SB 143 that
relationship wouldn't change; it would merely put the agency on
the same footing as the judicial branch.
4:49:43 PM
CHAIR THERRIAULT said Ms. Brakes pointed out that the drafter
patterned this language after the language used in the Executive
Order page 2, line 17.
MR. CLOTHIER said he understands Senator Elton's concern that
the executive director could be gone for an extended period, but
the opposite could be true when the Legislative Council chair
isn't in town or the position is in flux.
CHAIR THERRIAULT announced that without objection, Amendment 1
was adopted.
He noted that the University of Alaska requested exemption from
executive branch oversight. The Alaska Railroad Corporation and
judicial branch are currently exempt and the University argues
that it is involved with levels of technology that are above and
beyond that of the state agencies.
The committee could leave the language as is and take the matter
up on the Senate floor or make that policy call today. A member
of the executive branch told him that exempting the University
is the Legislature's call, but if there was a move to take out
other quasi-judicial groups that could cause concern. He asked
whether members had a feeling one way or another.
4:53:27 PM
SENATOR ELTON said there is a beauty to centralizing the
telecommunications system as much as possible, but he would like
to hear a response from both the University and the executive
branch. The larger issue for him is why the Alaska Railroad
Corporation is exempted.
CHAIR THERRIAULT held SB 143 in committee to await testimony
from the University.
SB 24-REEMPLOYMENT OF RETIREES
4:55:22 PM
CHAIR GENE THERRIAULT announced SB 24 to be up for
consideration. He remarked the committee heard an overview on
the issue but hadn't heard the bill. He asked whether the
sponsor would be addressing his comments to the sponsor
substitute.
CHAIR GARY STEVENS, Sponsor, said he would address his comments
to the Senate HESS committee substitute. [CSSSSB 24(HES)]
The committee took an at-ease and reconvened at 5:00:29 PM.
SENATOR GARY STEVENS explained that SB 24 extends the retiree
rehire program established in 2001. That program allowed retired
state workers and teachers to rejoin the workforce without
giving up retirement payments. He reminded members that no
employee of an early Retirement Incentive Program (RIP) is
allowed to return unless employed as a commissioner.
Employers who use the program are required to pay any resultant
increase to the unfunded liability in the retirement system. It
also requires the PERS and TRS administrators to give an annual
report to the Legislature on the effect of the program.
Municipalities or public organizations that use the program
would be required to adopt a policy and resolution that permits
the employment of retirees. In addition, they must show that a
true shortage of qualified applicants exists.
TRS employees already have such a program and Governor Murkowski
just issued Administrative Order 225, which sets very strict
sideboards for recruitment of state employees.
Extending the program would help public employers attract and
retain qualified workers in hard-to-fill positions. It would
give employers four more years to transition the current
workforce before the reemployment provisions sunset. Finally, it
is cost neutral in that it eliminates any additional retirement
credit during re-employment.
5:03:46 PM
SENATOR HUGGINS said he can see the merit in the proposal, but
he is concerned that this would allow older employees to remain
in the workforce and prevent entrance to younger employees. He
recalled a graph from the Department of Administration that
showed seven teachers aides were rehired and several rehires
were in urban areas. He suggested the qualifications for those
positions aren't that high and many people would probably apply.
He said, "That's my case in point and concern of what we do is
we choose, through the good old boy network, we just retain our
buddies."
SENATOR STEVENS said he became interested in the issue when he
realized several outstanding teachers in his district had
retired and decided they wanted to return to work a few years
later but were precluded from doing so. Those teachers were lost
to Oregon, which is a terrible shame. It's not his intention to
create a good old boys club. Rather, this extension would allow
retirees to be rehired for hard-to-fill positions. It requires
employers to begin thinking about how they will eventually
replace certain positions.
SENATOR WAGONER said he understands the intent, but this program
is one of the most abused programs he has ever seen. He
suggested other approaches could be taken to address shortages
in the education area. He pointed to SB 98, which lists the
villages that have difficulty recruiting teachers and suggested
limiting the bill's application to specific areas.
5:08:31 PM
SENATOR GARY STEVENS said he appreciated the concern and
certainly there have been abuses, but this is an effort to
tighten the program. In addition, Administrative Order 225 does
a fine job of setting up sideboards for the rehiring process for
public employees. He repeated TRS retirees have already been
addressed and a true shortage of applicants must be demonstrated
before this could occur.
SENATOR KIM ELTON declared a potential conflict of interest,
because he is a retired public employee.
5:10:20 PM
SENATOR ELTON said the sponsor has noted that the employer would
pick up any hit on either of the retirement accounts. However,
this bill goes further in that it has a retroactive clause for
both TRS and PERS accounts.
He agreed with Senator Wagoner that the previous extension
assumed good behavior on the part of all employers, but abuses
probably did occur. This bill makes the director of the Division
of Retirement and Benefits the responsible party and he or she
would have to certify that the employer proved a failed
recruitment and they would have to demonstrate how in-house
training would occur to bring skills up to date to "bring in new
blood." He credited the Murkowski Administration with stepping
forward to address abuses.
He offered two instances for consideration. First is the
community hospital, which is a PERS employer that has rehired
retired nurses. Recruiting nurses has been difficult because the
field is competitive and the hospital is no longer competitive.
Without this program, service in each of the elements in the
hospital would be impacted.
The second instance relates to the potential impact on local
school districts with regard to hiring long-term subs. According
to statewide contract provisions, any sub that is hired for
longer than 20 days automatically becomes a TRS member. Having
to pay the employer TRS contribution creates an additional cost
to the school district and without this program school districts
couldn't rehire a retired teacher as a long-term sub.
A number of different issues come into play regarding rehiring
retirees, and the last two situations speak to the need for a
rehire program in place that is better written and precludes
abuse, he concluded.
5:15:16 PM
SENATOR BETTYE DAVIS declared herself a retired public employee.
SENATOR WAGONER declared himself a retired TRS member with no
thought of coming out of retirement.
Acknowledging recruitment and pay scale issues in the nursing
field, he suggested that this type of program could be used to
get around increasing pay scales. He opined that when people
retire the ulterior motive is to change lifestyle, but the
ulterior motive of this process has become nothing but money.
People are retiring and returning to work to substantially
increase their annual income. For instance the Alaska Department
of Fish and Game has at least 37 rehired employees that are
affected. "It became a good old boys system," he asserted. He
urged members to be very careful before re-enacting the program.
"Even with the sideboards that are there, I'm not very
comfortable with it," he said.
5:17:57 PM
SENATOR GARY STEVENS declared himself to be a retired TRS
member. Responding to the comment that it's nothing more than
money, he said a retiree could go anywhere and get a job and
continue to work while collecting retirement. "I don't know that
it should be seen as such a negative thing that someone wants to
have retirement and earn a salary," he said. And remember, this
is only for a year at a time
Certainly everyone recognizes the difficult situation with PERS
and TRS and from the start the intention was to ensure that PERS
and TRS weren't impacted. "I think we've achieved that," he
concluded.
5:19:13 PM
CHAIR THERRIAULT declared he isn't old enough to retire.
Referencing demographic information from the 2/10/05 overview on
the impact of the retiree/rehire program, he noted that 45
people age 45 to 49 retired from TRS and were subsequently
rehired. He suggested that the general public's discontent with
the program stems in part from the fact that the system allows a
person to draw retirement after working for 20 years when he or
she is clearly not of retirement age. However, the situation
isn't outside the norm in his district that has two military
installations. It's not at all uncommon for military personnel
retire after 20 years. "Certainly if you've spent 20 years in
the military moving around and possibly in active duty, I don't
begrudge people the right to do that," he said.
He acknowledged that a number of constituents offered the
opinion that, at the very least, the system needed sideboards.
It's still not clear whether or not the sideboards established
through Administrative Order 225 are adequate.
SENATOR ELTON commented the retired PERS employees who were "20
and out" are generally in public safety. For those PERS
employees who weren't in the line of fire, the earliest
retirement age was age 50 and that was considered an early
retirement.
5:21:39 PM
SENATOR WAGONER indicated the savings of $1,091,720 is correct
as far as it goes. However, had the retirees not been allowed to
return under contract and had other people taken those jobs
contributions would have been made to the PERS/TRS accounts. The
number is misleading, he argued, because rehires create a
negative impact on those accounts and if new people had been
hired the impact would have been positive.
SENATOR HUGGINS agreed with the previous statement then reported
that reemployment after military retirement has sideboards.
He asked that the administration discuss the net effect to the
people currently working under the provision if it's renewed.
Taking exception to the comment that a retired teacher is the
best substitute teacher, he said that if he were making the
decision he would insist on hiring a new person rather than a
retiree. That way the new hire could gain experience. This is a
contrast in styles he said. There isn't a right or wrong answer.
CHAIR THERRIAULT told members he was ready to take testimony
from the public.
SENATOR ELTON referenced Senator Wagoner's comment and said his
understanding is that bringing a retired teacher into the system
is preserving the status quo and if a new person is brought in
it would increase the unfunded liability.
SENATOR WAGONER didn't believe that to be the case and said the
Division of Retirement and Benefits could weigh in.
CHAIR THERRIAULT said he had questions on the fiscal note, but
would open teleconference testimony first.
5:26:20 PM
ROBERT McHATTIE, retired PERS employee from Fairbanks, said he
is interested in protecting the PERS retirement program against
too many people occupying state, borough, or municipal jobs
while not paying into PERS or TRS. The argument that experienced
employees can't be replaced doesn't wash because employees go on
vacation, become ill, die and are terminated and the various
organizations don't fall apart as a result. Every employee is
replaceable and it's an administrator's job to ensure that the
rehiring effort is effective, aggressive and one in which a
competitive wage is offered.
His experience is that state human resource personnel tend to be
passive when replacing high-level employees and he suggested
following:
· Consider the retirement check to be a payment for
retirement, not just a quasi pay increase.
· Find a replacement since one will be necessary sooner or
later.
· If a person must be rehired, hire that person as a
temporary and continue to look for a replacement. Allow one
year for this process.
· Increase mentoring or training so that the workplace can
move on when a person retires.
5:30:30 PM
CHARLES SWANTON, 20-year employee with the Alaska Department of
Fish and Game (ADF&G), testified via teleconference. He is
currently under the 30-year retirement program and his comments
related strictly to ADF&G.
He opposed the retiree rehire program in its current form as it
is a benefit to a select few and won't benefit the department's
core employees, who are unlikely to be offered participation in
a similar program in the future. It's ironic, he said, that most
department employees who currently participate in the program
are making more money than the department commissioner.
MR. SWANTON said the basis for the 2001 legislation was ill
founded and without appropriate instruction for application. He
commended the sponsor of SB 24 for the addition of the
application criteria, however he continued to oppose the bill on
a number of elements.
PERS needs fiscal input from all current active employees to
remain semi-solvent. If the program didn't exist the department
would be provided an opportunity for a new era of positive
change. Specialized knowledge and skills is acquired while
working up through the ranks and can be replaced albeit with
some bumps. "Keeping the bumps from occurring are worth what to
the state in terms of cost?" He offered the opinion that several
program participants are very deserving of additional
compensation, but they are the exception and not the rule. This
program has and will continue to diminish departmental morale.
"And at what cost," he asked.
5:32:58 PM
SENATOR WAGONER asked what the program has done to the overall
morale of employees that are trying to work up the ladder to
administrative level.
MR. SWANTON said he could best describe it as a kick in the gut.
5:33:48 PM
TIM VIAVANT, Fairbanks resident and current ADF&G employee,
testified via teleconference to urge members to oppose SB 24.
The concept goes against the principle of how PERS is supposed
to work. Language in the CS requires the employer to make up the
shortfall in contributions, but the employee's share wouldn't be
added to the PERS account.
The concept has a negative affect on employee morale and on the
recruitment of new employees. In addition it has a negative
affect on retaining employees who may not yet be vested in PERS.
Certainly the argument about a potential "brain drain" has been
overblown. Finally, the whole idea of recruitment and retention
would be less problematic if adequate cost-of-living allowances
had been negotiated in contracts over the last 18 or 19 years.
5:36:59 PM
JACK KERIN, testified from Fairbanks, to comment on previous
testimony about rehired retirees who were incorrectly told they
would be grandfathered in when the original legislation sunset.
Concern has been expressed about possible litigation if the
employees aren't grandfathered, but he questioned whether there
shouldn't be greater concern about litigation from all
retirement age employees over the discriminatory process used to
determine who is offered the "platinum parachute benefit." The
concept is poor and the program needs to sunset.
With regard to the argument that the program is cost neutral, he
suggested that the actuaries for Tier I employees who don't
retire because they can't afford to are often overlooked. Those
employees aren't offered the opportunity to receive a double
salary and they're supporting PERS with 50 to 58 percent of
their salary.
5:39:56 PM
TINA HABIB testified from Craig in opposition to the bill. She
is a retired PERS employee working for the municipality. She
agreed with former comments about animosity among employees and
how the system is abused. She reminded members that PERS has
been in existence since 1961 and for 40 years the provision was
unnecessary. Employers and employees have had 5 years to get
prepared for the July 1 sunset.
With regard to the argument that the sunset would impact cities
she pointed out that Craig's employer obligation is 20.33
percent so it's already an impact. The more people that are out
of PERS the greater the impact, she said.
5:41:44 PM
MIKE TIBBLES, Deputy Commissioner, Department of Administration
spoke in support of SB 24. He said he would highlight two
important goals that SB 24 would provide then discuss two main
concerns that were raised and how the department has worked to
resolve those concerns.
SB 24 would allow the approximately 335 employees currently
working under the HB 242 waiver to continue receiving retirement
benefits beyond the original sunset date. That's important for
several reasons. First, it's unfortunate but a number of those
employees were told they would be able to stay on after July 1.
Also, if the issue isn't addressed a number of senior employees
might exit the system to retain their retirement benefits. This
would have a great impact on school districts, municipalities,
and the state. Finally, SB 24 would provide an effective
management tool to help employers fill positions they aren't
otherwise able to fill, which was the intent of the original
legislation.
MR. TIBBLES pointed out the state is facing severe recruitment
challenges; it can't compete with the 25 percent federal COLA
and it doesn't pay market wages. The system is based on internal
alignment so the state classification and pay system isn't based
on market wages. For example, it doesn't allow salary increases
based on inequities between the State of Alaska and Providence
Hospital. To ensure internal alignment, the system compares a
nurse working for the state to like duties and responsibilities
in another state position such as a social worker. What the
program can do is fill those positions on a short-term basis.
MR. TIBBLES referenced the cost and savings aspects and
explained that individuals that come back on a 242 waiver don't
accrue any additional retirement benefits and the employer
doesn't contribute the normal cost rate on the employee's
behalf. However the cost comes into play because the pool of
employees that are otherwise contributing to pay off the
unfunded liability becomes smaller. The actuaries indicate that
there is currently an impact for the TRS system at a rate of
$106,000 per year. The impact can be quantified by .02 percent
of the base salary.
The savings of bringing someone back who is no longer
contributing the normal cost rate is 12.75 percent for the PERS
system. So even though there's a cost to the system, there's a
larger savings for that employer. SB 24 requires that employers
pay into the system at the point that a cost is triggered. The
computation involves taking the wage base of the employee and
calculating it into the past service rate. That contribution
would still represent a savings to the employer.
As was previously stated, "There's been a $1 million savings to
the State of Alaska since this program's been in place because
the state is not contributing for those individuals to a normal
cost rate - not in the past service rate."
MR. TIBBLES addressed the concern about making sure the program
is used as intended, which is only when there are demonstrated
recruitment difficulties. Referencing Administrative Order 225
he said the requirements are:
· That agency is going to have to competitively recruit the
position.
· If somebody would like to retire then come back they could
take the risk that that position is going to be
competitively recruited for a minimum of 15 days.
SENATOR WAGONER suggested that the person that retires from a
position should be excluded from the pool of future applicants
until after the position is competitively advertised and the
pool is generated.
MR. TIBBLES said under AO 225 the individual could apply but the
recruitment must be statewide and once the applicant pool is
gathered a recruitment challenge would have to be demonstrated
to the Division of Personnel indicating why no other candidate
has the knowledge, skill, and ability to perform the job. Also,
if the recruitment brings more than five qualified applicants
then the retiree wouldn't be eligible. "It's in effect and it
has been working," he said.
Because the process of bringing people back is a short-term
solution, the Division of Personnel in the Department of
Administration will be very proactive in working with
departments that want to bring people back from retirement to
make sure they are building workforce plans.
5:53:38 PM
CHAIR THERRIAULT asked Mr. Tibbles touch on the highlights so
that public testimony could be closed. Ms. Steinberger from the
Attorney General's Office was on line to talk to the committee
under an executive session about the possible legal
ramifications of grandfathering or not grandfathering.
5:54:35 PM
MR. TIBBLES advised that Administrative Order 225 requires the
following before an agency could bring someone back from
retirement to fill a position:
· The position must be recruited through a competitive
process
· The competitive process must post the position for a
minimum of 15 days
· The hiring authority must consider all applicants not
just a selected pool
· All individuals brought back under 242 must be
separated from state service for a minimum of 30 days
· Before a position is offered to an applicant, the
administrative order would require that the
recruitment process result in an applicant pool of
fewer than 5 qualified, eligible and available
applicants
· The hiring authority must demonstrate why no other
individual has the knowledge, skills and ability to
perform those duties
· The approval for hire must be secured in writing from
the director of personnel
· Within 60 days after receipt of the director of
personnel's approval for a waiver, the department
seeking the waiver must identify the critical
components of the position
· The department must identify the knowledge skills and
abilities that need to be developed in the workplace
to assure that the work can be accomplished when the
rehired retiree separates from service again
· A development plan that accomplishes a transfer of
knowledge is required
· Applicable statutes and personnel rules will apply
· State agencies are encouraged to develop a strategic
view of human resource needs including development of
a workforce plan with the assistance of the division
of personnel
5:57:51 PM
SENATOR HUGGINS commented, "There's something fundamentally
wrong that a person says, 'I'm going to retire.' and they turn
the switch off and they come back to work in 30 days in the same
job."
MR. CHRIS CHRISTENSEN, Deputy Administrative Director, Alaska
Court System, informed members that the court system has found
the retiree rehire program to be very helpful and it hopes the
program will be extended. The court system has approximately 650
non-judicial employees of which 10 participate in this program.
Given the nature of those positions, those employees are
significant to court system operations.
The program has helped address two problems. First, the court
system has a large number of one-person job classifications such
as the state law librarian. When the primary responsibility of a
position is unique, continuity of service is problematic. When
such a position becomes vacant, no one on staff can pick up the
work.
He stressed the importance for these one-person job classes to
remain filled with knowledgeable and experienced people.
Internal recruitment is difficult because the positions often
require an advanced degree and in the court system most
employees are range 15 or less clerical workers.
Another problem is that the court system frequently has few
qualified applicants for its supervisory positions so
supervisors are often retained. The fundamental problem and
reason for this is high turnover. More than 50 percent of court
system employees are paid at ranges 6, 8 or 10 so an annual 50
percent turnover is typical. Forty percent of the court system's
employees are located in Anchorage so it is competing with the
Municipality of Anchorage (MOA). Although the salary structure
is similar, MOA pays more employee benefits. In some rural
locations the court system has experienced 100 percent turnover
in one year. Certainly public service doesn't have the draw it
did years ago and the court system would be struggling without
the retiree rehire program.
The RIP program became extremely problematic for the court
system and the retire rehire program partially compensates for
those problems.
CHAIR THERRIAULT asked if he had requested that the Legislature
not participate in the RIP program.
MR. CHRISTENSEN didn't recall.
6:03:12 PM
MS. BARBARA HUFF-TUCKNESS, Director of Governmental and
Legislative Affairs for Teamsters Local 959, stated support for
SB 24. She represents employees with the MOA who have
participated in this program and for whatever reason MOA hasn't
suffered from the program.
When this program first went into effect, language was
negotiated in the collective bargaining agreements that
addressed the retiree rehire issue. Of the 18 waivers requested
by the MOA, 12 retirees were rehired in a system that has over
2,025 employees.
MOA has a tremendous number of retired military that have
returned to classified, non-classified and politically appointed
positions. This isn't viewed as a negative because they bring
valuable resources and knowledge to the workplace.
The program has been used very successfully in the engineering
and public health sectors because it's been difficult to keep up
with cost of living increases, health benefit changes, and
competition with the private sector.
Individuals that are currently enrolled in the program and are
within MOA were under the belief that they would be
grandfathered in. In fact many structured work and retirement
plans based on that fact. "For the record I would request that
the least that could be done here would be grandfather in those
particular individuals that are currently participating in the
program," she said.
The Municipality of Anchorage has saved over $.25 million with
the 12 individuals that have been participating in the program.
She urged the committee to seriously look at the pros and cons
of the program and move the bill from committee.
6:07:26 PM
SENATOR WAGONER announced that U.S. Senator Ted Stevens
mentioned that this might be the last year that federal
employees living in Alaska receive the cost of living allowance
differential.
CHAIR THERRIAULT noted there was no further testimony.
He asked for a motion that the committee move into executive
session to take testimony from the Department of Law on whether
the grandfathering question raises a legal issue.
SENATOR WAGONER moved that the Senate State Affairs Committee go
into executive session under AS 44.62.310 to consider matters
the immediate knowledge of which could clearly have an adverse
affect upon the finances of the State of Alaska. There being no
objection, the committee went into executive session.
SB 24 was held in committee.
CHAIR THERRIAULT reconvened the meeting after the executive
session and adjourned at 6:51:52 PM.
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