ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 7, 2021
1:29 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Roger Holland, Vice Chair
Senator Joshua Revak
Senator Elvi Gray-Jackson
MEMBERS ABSENT
Senator Gary Stevens
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Board of Certified Direct Entry Midwives
Tanya Kirk - Anchorage
Hannah St. George - Fairbanks
- CONFIRMATIONS ADVANCED
Board of Veterinary Examiners
Rachel Berngartt - Juneau
- CONFIRMATION ADVANCED
Board of Pharmacy
Tammy Lindemuth - Anchorage
- CONFIRMATION ADVANCED
Occupational Safety & Health Review Board
Vincent Perez - Wasilla
- CONFIRMATION ADVANCED
SENATE BILL NO. 41
"An Act relating to health care insurers; relating to
availability of payment information; relating to an incentive
program for electing to receive health care services for less
than the average price paid; relating to filing and reporting
requirements; relating to municipal regulation of disclosure of
health care services and price information; and providing for an
effective date."
- HEARD & HELD
SENATE BILL NO. 6
"An Act relating to retirement incentives for members of the
defined benefit retirement plan of the teachers' retirement
system and the defined benefit retirement plan of the Public
Employees' Retirement System of Alaska; and providing for an
effective date."
- HEARD AND HELD
SENATE BILL NO. 26
"An Act repealing the certificate of need program for health
care facilities; making conforming amendments; and providing for
an effective date."
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 93
"An Act repealing the certificate of need program for health
care facilities; making conforming amendments; and providing for
an effective date."
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 38
"An Act repealing the certificate of need program for health
care facilities; making conforming amendments; and providing for
an effective date."
- SCHEDULED BUT NOT HEARD
REVIOUS COMMITTEE ACTION
BILL: SB 41
SHORT TITLE: HEALTH INSURANCE INFO.; INCENTIVE PROGRAM
SPONSOR(s): SENATOR(s) HUGHES
01/25/21 (S) PREFILE RELEASED 1/15/21
01/25/21 (S) READ THE FIRST TIME - REFERRALS
01/25/21 (S) L&C, FIN
04/07/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 6
SHORT TITLE: RIP FOR PUBLIC EMPLOYEES/TEACHERS
SPONSOR(s): SENATOR(s) KAWASAKI
01/22/21 (S) PREFILE RELEASED 1/8/21
01/22/21 (S) READ THE FIRST TIME - REFERRALS
01/22/21 (S) EDC, L&C, FIN
03/15/21 (S) EDC AT 9:00 AM BUTROVICH 205
03/15/21 (S) Heard & HELD
03/15/21 (S) MINUTE(EDC)
03/22/21 (S) EDC AT 9:00 AM BUTROVICH 205
03/22/21 (S) Moved CSSB 6(EDC) Out of Committee
03/22/21 (S) MINUTE(EDC)
03/24/21 (S) EDC RPT CS 1DP 2NR SAME TITLE
03/24/21 (S) NR: HOLLAND, HUGHES
03/24/21 (S) DP: BEGICH
03/24/21 (S) EDC AT 9:00 AM BUTROVICH 205
03/24/21 (S) <Bill Hearing Canceled>
04/07/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
TAMMY LINDEMUTH, Appointee
Board of Pharmacy
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified for reappointment to the Board of
Pharmacy.
TANYA KIRK, Appointee
Board of Certified Direct-Entry Midwives
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified for reappointment to the Board of
Certified Direct-Entry Midwives.
RACHEL BERNGARTT, PhD; Appointee
Board of Veterinary Examiners
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Testified for reappointment to the Board of
Veterinary Examiners.
HANNAH ST. GEORGE, Appointee
Board of Certified Direct-Entry Midwives
Department of Commerce, Community and Economic Development
Fairbanks, Alaska
POSITION STATEMENT: Testified for reappointment to the Board of
Certified Direct-Entry Midwives.
VINCENT PEREZ, Appointee
Occupational Safety and Health Review Board
Department of Labor and Workforce Development (DOLWD)
Wasilla, Alaska
POSITION STATEMENT: Testified for reappointment to the
Occupational Safety and Health Review Board.
SENATOR SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 41.
LISA HART, Staff
Senator Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint on SB 41.
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided information related to SB 41.
EMILY RICCI, Chief Healthcare Administrator
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Testified that, should it pass, the division
could absorb SB 41 into their standard health plan programming.
SENATOR SCOTT KAWASAKI
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 6.
DOUG WOOLIVER, Deputy Administrative Director
Alaska Court System
Alaska, Alaska
POSITION STATEMENT: During the hearing on SB 6, described the
Court System's 2016 retirement incentive program.
RICHARD SEWELL, representing self
Anchorage, Alaska
POSITION STATEMENT: Raised questions about SB 6.
JIM PUCKETT, Deputy Director
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on SB
6.
EMILY RICCI, Chief Health Administrator
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on SB
6.
ACTION NARRATIVE
1:29:45 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:29 p.m. Present at call to order
were Senators Gray-Jackson, Holland, Revak, and Chair Costello.
She reviewed the agenda.
^CONFIRMATION HEARING(S)
CONFIRMATION HEARING(S)
Board of Certified Direct Entry Midwives
Board of Veterinary Examiners
Board of Pharmacy
Occupational Safety & Health Review Board
1:30:54 PM
CHAIR COSTELLO announced the consideration of Governor
Appointees to Boards and Commissions. She reviewed the
procedure.
She asked Tammy Lindemuth to introduce herself, provide a brief
background, and tell the committee why she is interested in
serving on the Board of Pharmacy.
1:31:52 PM
TAMMY LINDEMUTH, Appointee, Board of Pharmacy, Department of
Commerce, Community and Economic Development, Anchorage, Alaska,
stated that she is seeking reappointment to one of the public
seats on the Board of Pharmacy to continue this important work.
She highlighted that she has enjoyed being an active voice on
the Controlled Substance Advisory Committee and recently became
chair.
CHAIR COSTELLO asked what feedback the board has received on the
Prescription Drug Monitoring Program (PDMP).
MS. LINDEMUTH answered that the feedback from pharmacists has
been positive. The PDMP is effective in helping the board
monitor [controlled substance] prescriptions in the state and
protecting both the community and pharmacists.
1:34:04 PM
CHAIR COSTELLO opened public testimony on the nomination of
Tammy Lindemuth to the Board of Pharmacy; finding none, she
closed public testimony.
CHAIR COSTELLO asked Tanya Kirk to introduce herself, provide a
brief background, and tell the committee why she is interested
serving on to the Board of Certified Direct-Entry Midwives.
1:34:39 PM
TANYA KIRK, Appointee, Board of Certified Direct-Entry Midwives,
Department of Commerce, Community and Economic Development,
Anchorage, Alaska, stated that she has lived in Alaska for 30
years and she received her RN degree and master's degree as a
family nurse practitioner at the University of Alaska Anchorage.
Later she received a post-masters certificate as a certified
nurse midwife. She has been working at Providence Medical Center
in Anchorage and recently became interested in serving on the
Board of Certified Direct-Entry Midwives to help improve
collaboration with all care providers.
CHAIR COSTELLO found no questions or comments.
1:36:47 PM
CHAIR COSTELLO opened public testimony on the nomination of
Tanya Kirk to the Board of Certified Direct-Entry Midwives;
finding none, she closed public testimony.
CHAIR COSTELLO asked Rachel Berngartt to introduce herself,
provide a brief background, and tell the committee why she is
interested in continuing to serve on the Board of Veterinary
Examiners.
1:37:23 PM
RACHEL BERNGARTT, Phd; Appointee, Board of Veterinary Examiners,
Department of Commerce, Community and Economic Development,
Juneau, Alaska, stated that she has served on the board since
2016 and is seeking reappointment. She has lived and worked in
Alaska in various locations since 2002. She said the need for
veterinary access is paramount, from zoonotic disease risk
management in COVID-19 to increased pet adoptions during the
pandemic. She said her work with the board last year was focused
on meeting the needs of the public for safe access to veterinary
care by providing best practices and guidance to licensees and
monitoring COVID-19 related emergency regulations and mandates.
She reported her participation in legislative testimony and
outreach on bills related to the practice of veterinary medicine
and collaboration with other professionals and boards related to
the COVID-19 and prescription drug topics. She represented the
board at local and statewide veterinary meetings to provide
updates to licensees. She said she would like to continue on the
board to help keep the momentum on regulations review and making
necessary updates.
MS. BERNGARTT advised that her resume did not reflect that in
2020 she received a degree of Juris Doctor magna cum laude from
Seattle University School of Law.
CHAIR COSTELLO asked if she had heard the complaint that the
Prescription Drug Management Program (PDMP) had burdened
veterinary examiners because the animal owner's medical records
link through the PDMP.
MS. BERNGARTT replied, the board has spent significant time over
the last three years on issues related to PDMP and they support
legislation to exempt veterinarians from participating in the
program. It is a burden on the board and costly to licensees.
Veterinarians would still be required to register and are
monitored by the Drug Enforcement Association (DEA), veterinary
suppliers, and pharmacies they prescribe out through. There
would be no loss of data if veterinarians were exempted from the
PDMP. Confidentiality of pet owner's prescription medication is
also a big concern.
1:44:31 PM
CHAIR COSTELLO thanked her for the response. She opened public
testimony on the nomination of Rachel Berngartt to the Board of
Veterinary Examiners; finding none, she closed public testimony.
CHAIR COSTELLO asked Hannah St. George to introduce herself,
provide a brief background, and tell the committee why she is
interested in serving on the Board of Certified Direct-Entry
Midwives.
1:45:07 PM
HANNAH ST. GEORGE, Appointee Board of Certified Direct-Entry
Midwives, Department of Commerce, Community and Economic
Development, Fairbanks, Alaska, stated that she is the mother of
10 children and has attended more than 30 births as a support
figure. She said she is working on her doula certification and
she provides postpartum support to new mothers. She is seeking
reappointment to the board and looks forward to learning more
about the laws and regulations governing midwifery. This great
team works to ensure safe births for mothers and babies, she
said.
CHAIR COSTELLO asked if the number of mothers with postpartum
depression increased during the COVID-19 pandemic.
MS. ST. GEORGE answered that COVID-19 had a profound effect on
mothers before during and after birth. She related her own
experience with postpartum depression during the pandemic. She
was one of the new mothers who slipped through the crack and did
not make it to the very important six-week checkup. She hopes to
see some changes made.
CHAIR COSTELLO said it sounds as though you will be able to draw
on your own difficult experience to help other Alaskans. "My
heart goes out to moms who are bringing children into the world
at this time."
1:49:11 PM
CHAIR COSTELLO opened public testimony on the nomination of
Hannah St. George to the Board of Certified Direct-Entry
Midwives; finding none, she closed public testimony.
CHAIR COSTELLO asked Vincent Perez to introduce himself, provide
a brief background, and tell the committee why he is interested
in serving on the Occupational Safety and Health Review Board.
1:49:45 PM
VINCENT PEREZ, Appointee, Occupational Safety and Health Review
Board, Department of Labor and Workforce Development (DOLWD),
Wasilla, Alaska, stated that he is the safety manager for
Chugach Electric and was the safety manager for Municipal Light
and Power for ten years before it was acquired by Chugach
Electric. He has been in the safety field since he left the US
Army in 1991. He is seeking reappointment to the Occupational
Safety and Health Review Board because it makes a difference in
people's lives by keeping them safe on a daily basis.
CHAIR COSTELLO asked him to share what he learned at the US Army
Chemical School and how he put it into practice.
MR. PEREZ replied the Army combines chemical and occupational
safety. He started out working as a chemist in the field of
environmental health and safety shifted to focus strictly on
safety in the late 1990s.
SENATOR GRAY-JACKSON asked how merging Municipal Light and Power
with Chugach Electric is going from a safety perspective.
MR. PEREZ answered that it was a challenge getting to this
point, but things have been going well since the first of the
year.
SENATOR GRAY-JACKSON asked if he is member of any organizations,
councils, or steering committees that relate to the position on
this board.
MR. PEREZ answered that he is an active member and participates
in the local activities of the American Society of Safety
Professionals (ASSP).
1:54:32 PM
CHAIR COSTELLO opened public testimony on the nomination of
Vincent Perez to the Occupational Safety and Health Review
Board; finding none, she closed public testimony.
CHAIR COSTELLO thanked him for being willing to serve the state
on this important board.
1:54:50 PM
SENATOR HOLLAND stated that in accordance with AS 39.05.080, the
Senate Labor and Commerce Standing Committee reviewed the
following and recommends the appointments be forwarded to a
joint session for consideration:
Board of Certified Direct-Entry Midwives
Tanya Kirk - Anchorage
Hannah St. George - Fairbanks
Board of Veterinary Examiners
Rachel Berngartt - Juneau
Board of Pharmacy
Tammy Lindemuth - Anchorage
Occupational Safety & Health Review Board
Vincent Perez - Wasilla
Signing the reports regarding appointments to boards and
commissions in no way reflects individual members' approval or
disapproval of the appointees; the nominations are merely
forwarded to the full legislature for confirmation or rejection.
CHAIR COSTELLO thanked the appointees.
SB 41-HEALTH INSURANCE INFO.; INCENTIVE PROGRAM
1:55:44 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO. 41
"An Act relating to health care insurers; relating to
availability of payment information; relating to an incentive
program for electing to receive health care services for less
than the average price paid; relating to filing and reporting
requirements; relating to municipal regulation of disclosure of
health care services and price information; and providing for an
effective date."
1:56:13 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 41, introduced the legislation speaking to
the sponsor statement:
Alaska's health care costs are among the highest in
the nation and continue to rise. Through free market
principles, SB 41 will bend the cost curve down over
time to help relieve the disproportionate burden of
health care costs on family budgets, seniors on fixed
incomes and employers providing insurance coverage to
their employees.
Senate Bill 41 will provide Alaskans with the
information they need to plan financially for their
health care decisions. The bill requires health care
provider and facilities to list meaningful cost
information online and onsite. The bill also requires
a health care provider and insurance company disclose
full cost information within five days of request by a
patient specific to their condition, including any
expected out of pocket costs.
The bill also adds a mechanism so insurance companies
will provide an incentive a shared savings check to
policyholders who choose an in-network provider who
charges below the average in-network cost. Employers
providing insurance coverage for employees will also
be eligible for some of the shared savings. This
approach will help bring down the high cost of
healthcare in Alaska by encouraging consumers to shop
and providers to compete for Alaska's healthcare
dollars.
Several states have either passed or are currently
working on healthcare cost transparency legislation.
SB 41 is among the most innovative approaches as a
result of the incentive provision and is expected to
bend the cost curve more effectively than other
efforts because of this.
The Alaska Health Care Consumer's Right to Shop Act
will empower Alaskans with the tools needed to make
healthcare choices that fit their needs and work for
their budgets while introducing a bit of competition
into the healthcare market in Alaska to help nudge
down the costs over time.
SENATOR HUGHES explained that somebody who selects a provider
who charges less than the average cost for that procedure will
be able to share in the savings. For example, if the average
cost of a procedure is $14,000 and the insured selected the
provider who charged $12,000 for the procedure they would share
in the $2,000 savings with the employer and the insurer. The
bill allows the insured to receive a minimum of one third of the
savings. Somebody who does not have an employer would receive
half of the savings. The idea is to provide an incentive for
Alaskans to think about the providers they select. The price
comparison tool will be an asset.
2:03:27 PM
SENATOR GRAY-JACKSON referred to the example and asked if the
insured would pay $12,000.
SENATOR HUGHES answered yes if the insured had met the
deductible.
SENATOR HOLLAND expressed appreciation for the bill; it seems
complicated but in essence is fairly simple.
SENATOR HUGHES expressed appreciation for Lori Wing-Heier's help
with the bill. She said there is no silver bullet, but SB 41
will help loosen free market principles and offer help to nudge
prices down in the healthcare industry.
2:05:49 PM
LISA HART, Staff, Senator Shelley Hughes, Alaska State
Legislature, Juneau, Alaska, read the following text from the
PowerPoint describing SB 41 into the record:
Alaska has the highest health care costs per capita in
the entire United States.
The cost of healthcare is eroding the bottom line for
business owners small, medium and large. More money
that employers put into healthcare means less money to
create more jobs.
Observers have offered several explanations for
Alaska's extra-high health care costs:
• Limited competition among providers, especially
specialty physicians
• Particularly high compensation for providers,
specialty physicians who perform procedures (such
as orthopedic surgeons, cardiologists, and
neurosurgeons)
• Hospital profit margins in urban Alaska that are
higher than national averages
• Regulation by the State of Alaska, particularly
the "80th percentile rule"
• Absence in Anchoragethe state's largest
communityof public and/or teaching hospitals
that are open to all patients
Right to Shop empowers patients by rewarding them when
they seek out high-value care.
It is pro-patient as it lowers healthcare costs,
improves patient care, contains out-of-pocket costs
and increases patient access.
Prices vary widely in health care. For example, the
same x-ray on the same kind of machine in different
locations can vary in price from a couple hundred
dollars to thousands. Surgery by the same doctor but
in different facilities can range from a few thousand
dollars to tens of thousands.
2:08:01 PM
How does Right to Shop work?
1. A doctor recommends a medical service
2. Patients connect with their insurer by phone or
go on-line to find their best options
3. Patients choose the best location at the best
value
4. Patients have their procedure at the location of
their choice
5. Patients, employers and insurance companies share
in the savings
The Transparency in Coverage rule was released by the
Trump administration in Oct 2020.
The rule requires most group health plans, and health
insurance issuers in both the group and individual
market to disclose price and cost-sharing information
to participants, beneficiaries, and enrollees.
Right now the requirements are being finalized to give
consumers real-time, personalized access to cost-
sharing information, including an estimate of their
cost-sharing liability, through an internet based
self-service tool, essentially an online price
comparison tool. These tools are being developed now
with an expected launch date of January 2022.
Some states have initiated Right to Shop programs for
state employee health plans while others have enacted
legislation encouraging private insurers to develop
shared savings incentive programs.
Florida, Maine, Nebraska, Tennessee, Utah and Virginia
enacted legislation requiring or encouraging private
health plans to initiate Right to Shop programs for
enrollees.
SB 41 is among the most innovative approaches as a
result of the incentive provision and is expected to
more effectively bend the cost curve.
Right To Shop empowers patients with the knowledge
they need to make smart choices about how and where
they consume health care.
They're given tools to find the best value providers
and, when they choose those options, they get a share
of the savings.
SENATOR HOLLAND asked her to repeat which states have enacted
similar legislation.
MS. HART listed Florida, Maine, Nebraska, Tennessee, Utah and
Virginia and clarified they are in the private insurance group,
not public employee.
SENATOR HOLLAND asked if any states have adopted the incentive
provision.
MS. HARD replied Maine has enacted this legislation and New
Hampshire did something similar for public employee health
insurance programs.
CHAIR COSTELLO related her experience that it is almost
impossible to determine the cost of a procedure until the
billing stage. She asked if consumers in states that have
similar legislation have actually been able to shop.
SENATOR HUGHES acknowledged that the final cost might differ
from the quote because there could be complications. There would
be an allowance for that. She understood that the states that
have this legislation have a provision for that and Alaska would
want that too. She acknowledged that this makes it difficult for
insurers to develop the cost comparison tool.
SENATOR HUGHES said it is a little unique to offer the employer
a share in the savings, but the belief is that it will motivate
employers to encourage their employees to shop.
CHAIR COSTELLO invited Lori Wing-Heier to comment on the bill.
2:14:13 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), Anchorage,
Alaska, advised that she and the sponsor have held many
Microsoft Teams meetings to give insurers access to the sponsor
and the division to address any concerns with the bill. To that
end, Senator Hughes has said she will look at an effective date
so the tools the insurers need to do for the federal bill can be
finished and in operation when SB 41 goes into effect. The
federal tools are to be available January 1, 2022, but
colleagues in Washington, DC have indicated there is a concern
about being ready by that date. She described it as a chicken
and egg situation because the federal government has to tell
states what those tools should look like and that has not
happened. She said to have the tools designed and working on all
Blue Cross systems, Moda, Aetna, and UnitedHealthcare is a large
undertaking, and it is not clear that the federal government
will make the January 1 date.
CHAIR COSTELLO asked if SB 41 is dependent on the all-payer
database (APCD) passing.
MS. WING-HEIER answered no; they would piggyback nicely but one
could pass without the other.
CHAIR COSTELLO offered her understanding that depending on the
insurance coverage, the price of a procedure differs from one
consumer to the next. Based on that assumption, she asked if an
average cost is calculated by geographic region or statewide.
MS. WING-HEIER answered it is both. When the division interacted
with the Centers for Medicare and Medicaid on the federal bill,
they submitted information by geographic region because the cost
of a procedure differs based on where it is performed. She
predicted that the ACPD would implement a one-stop-shop for
consumers to look at costs of procedures, whereas the federal
bill would necessitate looking to each insurance company. She
acknowledged that it would be cumbersome for families that have
coverage from more than one insurance company.
CHAIR COSTELLO asked if this would increase costs for providers
for administration or data entry.
MS. WING-HEIER answered no because the insurers will provide the
database.
CHAIR COSTELLO asked Emily Ricci if the administration had a
position on SB 41.
2:18:18 PM
EMILY RICCI, Chief Healthcare Administrator, Division of
Retirement and Benefits, Department of Administration, Juneau,
Alaska, summarized her understanding of SB 41 and said the
division could absorb the provisions of SB 41 into their
standard health plan programming and strategic development,
should the bill pass.
2:19:21 PM
CHAIR COSTELLO stated she would hold SB 41 for further
consideration.
2:19:33 PM
At ease
SB 6-RIP FOR PUBLIC EMPLOYEES/TEACHERS
2:20:32 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SENATE BILL NO. 6 "An Act relating to
retirement incentives for members of the defined benefit
retirement plan of the teachers' retirement system and the
defined benefit retirement plan of the Public Employees'
Retirement System of Alaska; and providing for an effective
date."
[CSSB 6(EDC) was before the committee.]
2:20:46 PM
SENATOR SCOTT KAWASAKI, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 6, introduced the legislation paraphrasing
the following sponsor statement:
Senate Bill 6 would implement a temporary, voluntary
Retirement Incentive Program to increase state savings
by allowing public employees to retire up to three
years early. Long serving public employees are among
the highest paid in the state. In many cases, pensions
paid to retiring employees would cost the state less
money than their current salaries. Providing high-
salaried employees the option to retire early would
save Alaska money through lower personnel costs.
SB 6 could also help prevent layoffs. The bill
presents a method of cost-cutting and payroll
reduction without forcing anyone out of the workforce
before they are ready to retire. This gives the State
of Alaska the opportunity to reduce operating costs by
opening vacancies that enable the placement of more
junior employees. Retirement incentive programs are
regularly used in the private sector to efficiently
control personnel costs through market incentives
rather than heavy-handed layoffs.
Retirement Incentive Programs have been used on a
temporary basis three times in Alaska's history and
was last proposed in 2004. In 1986, Senator Jim Duncan
estimated savings at approximately $25 million. A
Legislative Audit of the 1989 Retirement Incentive
Program demonstrated a savings of $22.9 million with
nearly 1,764 individual participants. In 1996, Rep.
McGuire calculated the state gained $41 million in
savings through identical legislation.
Senate Bill 6 is an innovative policy option for state
agencies, municipalities and school districts to
consider as a means to reduce payroll costs without
layoffs.
CHAIR COSTELLO moved to invited testimony.
2:24:46 PM
DOUG WOOLIVER, Deputy Administrative Director, Alaska Court
system, Anchorage, Alaska, stated that the Court System does not
have a position on SB 6, but the sponsor asked him to testify
about the retirement incentive program (RIP) the court
implemented in 2016. The idea was to reduce the workforce
without having to lay off any employees. The court offered an
incentive of three month's salary to anybody who had been
eligible to retire for at least three years and employees of the
Court System for at least 10 years. Of the 28 employees who were
eligible, 18 took advantage of the RIP, which has resulted in an
annual savings of $680,000. The upfront cost of three month's
salary was about $400,000. He acknowledged that this was a small
number compared to PERS and TRS, but it accounted for much of
the savings the court was looking for in FY16 and FY17
MR. WOOLIVER said the Court System RIP was a little different
than SB 6. The court did not have the ability to change who was
eligible to retire but they did have the authority to provide an
incentive to those already eligible to retire. It was a good
program for the court at the time; it made a lot of sense, he
said.
CHAIR COSTELLO asked if the court found it difficult to replace
the older, seasoned employees and provide training to the
replacements.
MR. WOOLIVER replied, the court did lose expertise and
experience but within a few years, everybody had the experience
so that was not problem with the court's RIP.
2:29:39 PM
CHAIR COSTELLO noted that the state was recovering from COVID-19
and asked the sponsor it he had contemplated offering the RIP to
people with preexisting health conditions. She asked if the
legislation intended to address the budget situation or the
COVIC-19 situation.
SENATOR KAWASAKI replied he introduced the legislation in a
previous legislature with the intention of avoiding layoffs, but
he would acknowledge that COVID-19 has fast-tracked a new group
of people into the retirement community. He recounted the
requirements to qualify for this RIP and pointed out the
employers have the ability to limit the program to prevent a
brain drain. He said the applicable conditions would be in
regulation.
CHAIR COSTELLO asked if this applies to both Public Employee
Retirement System (PERS) and Teacher Retirement System (TRS)
employees.
SENATOR KAWASAKI answered yes.
CHAIR COSTELLO asked for the number of PERS and TRS employees.
SENATOR KAWASAKI offered to run a report to find the information
but about 2,000 employees qualified in each of the 1986, 1989,
and 1996 RIPs.
2:32:40 PM
SENATOR GRAY-JACKSON stated support for the bill and asked for
the age limitations.
SENATOR KAWASAKI answered that participants must have at least
17 years of state service and be at least 50 years of age.
CHAIR COSTELLO asked him to clarify whether that was for the
bill or normal retirement. She noted that Mr. Puckett was
available to answer questions.
SENATOR GRAY-JACKSON advised that a firefighter reached out when
the bill was introduced in the last legislature to ask if he
might qualify. She suggested that she follow up with the sponsor
offline to discuss the situation.
2:34:09 PM
SENATOR HOLLAND asked if the big savings come from the
difference between the old and new salary and that the retiree
is paid through PERS or TRS and not the department.
SENATOR KAWASAKI replied that is correct.
2:35:37 PM
CHAIR COSTELLO opened public testimony on SB 6.
2:35:52 PM
RICHARD SEWELL, representing self, Anchorage, Alaska, stated
that as a Tier I PERS employee of a certain age, he has a
personal interest in SB 6, particularly the last sentence in
Section 1 that seems to require the elimination of certain
position control numbers (PCN) if the employee opts for the RIP.
He said that language is troubling because members who are
eligible for a RIP typically are senior employees who would be
the last to be laid off because the union layoff rules are based
on seniority. Furthermore, these senior employees typically are
in key positions that commissioners need to run the department
so they would be unlikely approve those RIPS. He suggested the
solution could be to allow the department to have a net loss of
one position for every employee that took a RIP as opposed to
losing the particular position. He said he had other comments on
the bill, but the foregoing was the most important.
CHAIR COSTELLO said Section 1 is uncodified law but even if it
were law, her reading is that this is an option for employers,
not a requirement. She asked the sponsor if he agrees with her
reading and Mr. Sewell's comment about losing the PCNs.
2:39:55 PM
SENATOR KAWASAKI agreed that the Purposes and Intent in Section
is uncodified law so there is no requirement. The position could
be held, vacant, or eliminated.
CHAIR COSTELLO asked if he agrees that the entire bill is
uncodified law.
SENATOR KAWASAKI answered no; just Section 1 is uncodified. The
bill itself is in Sections 2-10.
CHAIR COSTELLO said she would follow up and talk about that
offline.
2:41:05 PM
CHAIR COSTELLO closed public testimony on SB 6. She thanked Mr.
Sewell for his testimony. She welcomed him to submit his
comments in writing.
2:41:36 PM
MR. SEWELL said he had one more comment relating to Section 2,
page 3, lines 28-31 to page 4, lines 1-2. Paragraph (f)(3)(B)
talks about 20 years [of credited service] as an employee and he
wondered if that was total time accrued in various
jurisdictions. He said he started as a PERS employee with the
Municipality of Anchorage and now works for Department of
Transportation and Public Facilities (DOTPF) but he does not 20
years of service. He asked how his employment is counted.
2:42:20 PM
CHAIR COSTELLO said she reads the bill to mean 20 years total
with the state and it could be in one or more jurisdictions. She
asked Senator Kawasaki if he agreed.
SENATOR KAWASAKI answered yes; the employment could be with the
state and a municipality.
CHAIR COSTELLO asked if PERS and TRS employment could be
combined to reach 20 years.
SENATOR KAWASAKI suggested that Mr. Puckett might be able to
answer the question.
CHAIR COSTELLO asked Mr. Puckett to respond to the questions.
2:43:25 PM
JIM PUCKETT, Deputy Director, Division of Retirement and
Benefits, Department of Administration, Juneau, Alaska, answered
that a combination of PERS and TRS can be used in some cases. He
offered to provide more information in writing.
CHAIR COSTELLO asked him to send the information to her office
and she would distribute it to the members.
SENATOR GRAY-JACKSON pointed out that the savings when there is
a RIP is not only the salaries but also the benefits, leave
accruals, and PERS contributions.
CHAIR COSTELLO asked Ms. Ricci if she wanted to respond to
Senator Gray-Jackson's comment about savings in addition to
salaries.
2:45:55 PM
EMILY RICCI, Chief Health Administrator, Division of Retirement
and Benefits, Department of Administration, Juneau, Alaska, said
the division will have a better idea of the savings once the
bill reaches the Finance Committee and the division analyzes it
with help from their actuaries.
CHAIR COSTELLO noted that the Finance Committee was the next
committee of referral.
CHAIR COSTELLO asked the sponsor's staff to visit the members in
their offices to answer any questions and address concerns
before the next meeting. The sectional analysis could wait until
then.
CHAIR COSTELLO held SB 6 in committee.
2:47:08 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:47 p.m.