HOUSE BILL NO. 206 "An Act relating to credit under the Public Employees' Retirement System for service as a village public safety officer." JOEL LOUNDSBURY, STAFF, REPRESENTATIVE PORTER testified in support of HB 206. He read the sponsor statement (copy on file). House Bill 206 would allow village public safety officers (VPSO) to obtain retirement credit for service rendered under the VPSO program. The eligible participant could receive credit for up to 5 years of service in the VPSO program. WILLIAM CHURCH, RETIREMENTS SUPERVISOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION explained that participants would be required to pay the full actuarial costs of benefits for the period of service. Participants would buy the employee and employer portion. The amount would be based on the benefit at the time of the claim and the individual's vesting years' salary. Co-Chair Hanley referred to the fiscal note by the Department of Administration. He observed the bill is estimated to have an unmeasureable impact on the Public Employee Retirement System (PERS) funding ratio. There is an increase to the unfunded liability of approximately $450 thousand dollars, which would result in an employer contribution increase of approximately $40 thousand dollars a year. Mr. Church explained that the full actuarial cost is based on the entire population that could be eligible to claim the service. He noted that there are some individuals that will not claim the service. Co-Chair Hanley summarized that other state employees will end up paying more to allow this group to buy their retirement. Mr. Church was uncertain if there would be a measurable cost. Co-Chair Hanley noted that, if the full actuarial cost is not covered, the system would not be as sound in the future. He observed that each state employee could have his or her contribution reduced by $2 dollars a year. In response to a question by Representative Davies, Mr. Church clarified that, under retirement law, a lifetime actuarial reduction is calculated for an individual who has claimed service and has indebtedness owed at retirement. If the retirement value for the service is greater than the lifetime actuarial reduction than it is to the member's advantage to buy back their service. He clarified that money paid into the retirement system is paid to the beneficiaries upon the individual's death. Representative Davies pointed out that some individuals would pay the money in anticipation of 25 years of benefits, but would not receive 25 years of benefits due to death. He questioned if the cost is over estimated. Mr. Church noted that costs are based on the interest assumptions of the fund and mortality rates. In response to a question by Representative Martin, Mr. Church clarified that village public safety officers are not state employees. They are under contract to Native Corporations. Representative Martin maintained that village public safety officers deserve to be covered as employees of the state of Alaska. He emphasized the danger of their job. Mr. Church clarified that in order to claim five years of service in the VPSO program an individual must first be vested in the state retirement system. Officers can purchase up to five years. Co-Chair Therriault observed that the proposal is similar to provisions for military service. He expressed concern that Village public safety officers be encouraged to remain in their positions. He provided members with an amendment requiring that applicants have a minimum of three years service in the VPSO program (copy on file). He noted that military service is generally for a three-year term of duty. In response to a question by Representative Davies, Mr. Church explained that approximately 125 village public safety officers would be eligible. He did not know if the assumption concluded that all 125 would take advantage of the provision. He noted that 8 of 10 VPSO contracts provide some form of retirement. He noted that the Legislature does not allow double dipping for military service. JOHN WALDRON, VILLAGE PUBLIC SAFETY OFFICER, YAKUTAT testified via teleconference in support of HB 206. He maintained that village public safety officers are the rural arm of the Department of Public Safety. Village public safety officers handle limited law enforcement, fight fires, do search and rescue, provide alcohol and drug enforcement training in schools and are agents for the state medical examiner. He noted that village public safety officers are the lowest paid law enforcement officers in the state of Alaska. He observed that most village public safety officers have minimal retirement programs. He noted that there are no geographical pay differentials for village public safety officers living in rural areas. Overtime pay is limited. His family is not covered by his health insurance. JIM GRIMES, VPSO PROGRAM MANAGER, BRISTOL BAY NATIVE ASSOCIATION testified via teleconference in support of HB 206. He added that he is a retired State Trooper. He stressed the importance of the VPSO program as a stepping- stone to a career in law enforcement. He observed that village public safety officers are not well paid. He noted that village public safety officers receive credit with the Alaska Police Standards Council for their time as a village public safety officer. Co-Chair Therriault asked if Mr. Grimes would support a restriction allowing only those that move into law enforcement to buy their retirement. Mr. Grimes stated that he would support limitation to law enforcement, police or fire service. Representative Martin questioned why village public safety officers are not state employees. Mr. Grimes spoke in support of making village public safety officers state employees. He noted that they are employees of one of the ten Native Corporations. He noted that legislative action would be needed to allow them to participate in PERS. He observed that the State decided that it would be less expensive to contract public safety officers with a nonprofit corporation where they are only paid $12.50 dollars an hour. Representative Davies stated that village public safety officers could be hired through municipalities. Mr. Grimes noted that a qualified municipality could hire half of the 12 village public safety officers in his region. He emphasized that the Department of Public Safety does not want to negotiate individual memorandums of agreements and contracts with every village in the state. JOHNNY EVANS, DILLINGHAM POLICE DEPARTMENT testified via teleconference in support of HB 206. He maintained that village public safety officers deserve more than they are getting. Village public safety officers are unarmed and have no backup. He observed that village public safety officers handle domestic violence and alcohol related crimes. They even handle felony crimes until the state troopers arrive. He urged passage of the legislation. BRENT MOODY, CHIEF, DILLINGHAM POLICE DEPARTMENT testified via teleconference in support of HB 206. He helped to run the VPSO program for Tlingit and Haida. He asserted that village public safety officers deserve the legislation. He stated that the legislation should be limited to law enforcement or fire service. He observed that he hires village public safety officers as policemen. Out of 7 officers in Dillingham, 3 were village public safety officers. In response to a question by Co-Chair Therriault, Chief Moody noted that the VPSO officers that he has employed have had 1 to 5 years' experience. He stated that a one-year requirement would be acceptable. He stressed that village public safety officers are the law enforcement heroes of the state of Alaska. DAISY STEVENS, ADMINISTRATIVE LIASION OFFICER, TANANA CHIEFS COUNCIL (TCC), FAIRBANKS testified in support of HB 206. She is a former VPSO coordinator for TCC. She urged passage of the legislation. CRAIG PERSSON, PUBLIC SAFETY EMPLOYEES ASSOCIAITON, FAIRBANKS testified in support of HB 206. He emphasized that the legislation is an incentive for village public safety officers that want to continue their law enforcement careers. He did not object to limiting the legislation to a police officer, fire fighter or correctional officer. He did not object to a one-year limitation. In response to a question by Co-Chair Therriault, Mr. Persson stated that Village public safety officers should be able to count years that were applied to another retirement system for PERS credit. Co-Chair Therriault noted that military personnel cannot buy military service if they are already getting a retirement from the United States government for the same five years. GLEN GODFREY, COLONEL, ALASKA STATE TROOPERS, DEPARTMENT OF PUBLIC SAFETY testified in support of HB 206. He was involved in the creation of the VPSO program while he was stationed in Bethel in 1979. He stressed that the VPSO program is a tremendous asset to the citizens of Alaska and the Alaska State Troopers. He acknowledged the high turnover rate in the program. He noted a progression from VPSO officer - to municipal police officer - to the Alaska State Troopers. He did not object to a one-year requirement. Colonel Godfrey observed that the original intention of the VPSO program was to hire people from a community to provide law enforcement to their constituents. He acknowledged that there are many non-native VPSO officers. Some villages have found that it is a problem for individuals to be law enforcement officers in their own communities. He supported restricting the program to individuals continuing in a public safety field. He did not support restrictions on "double dipping". In response to a question by Representative Martin, Colonel Godfrey observed that of 79 Alaska State Trooper field positions: - 26 were VPSO officers for 5 - 18 years - 3 were VPSO officers for 18 years, - 1 was a VPSO officer for 17 years, - 1 was a VPSO officer for 15 years, - 1 was a VPSO officer for 12 years, - 1 was a VPSO officer for 11 years, - 4 were VPSO officers for 9 years, - 3 were VPSO officers for 8 years, - 1 was a VPSO officer for 7 years, - 6 were VPSO officers for 6 years, and - 5 were VPSO officers for 5 years. Representative Martin questioned if the legislation would encourage Native Corporations to drop their retirement plans. (Tape Change, HFC 98 - 29, Side 2) Co-Chair Therriault explained that the intent of his proposed amendment is to allow officers that are not vested in their VPSO retirement system to count their time in PERS. Officers that are vested in a VPSO retirement plan would not be allowed to count the same years in the state system. Representative Davis asked if the legislation would discourage retention of VPSO officers. He noted the need to encourage VPSO officers to remain in their positions. Colonel Godfrey stressed that the best way to attract officers is by providing role models. He stated that VPSO officers cannot be expected to last on the job for 15 - 20 years. He stated that it is natural for good officers to progress to another police department or the Alaska State Troopers. Co-Chair Therriault provided members with Amendment 1. He amended Amendment 1 to reference the definition of a police officer or fire fighter under AS 39.25.200(28). Co-Chair Therriault MOVED to ADOPT Amendment 1. Representative Davies OBJECTED. He clarified that five years of an individual's vested years in PERS would have to be as a police officer or fire fighter. Representative Davies spoke against the amendment. He stressed that the amendment would limit the possible career choices of a VPSO officer. He observed that a public official could not buy his VPSO service. He emphasized that 99 percent of the cost is paid by the individual not the state of Alaska. He stressed that VPSO officers are under- paid. Representative Martin spoke against the amendment. He observed that there is no restriction for buy back of military service. Representative Davis noted that teachers transfer time within the same occupation. Private teaching service can be transferred to the state Teachers Retirement System. Representative Davies noted that there is no restriction on the purchase of municipal service under PERS. Representative Kelly pointed out that the question is whether the intent is to create an incentive or an award. He spoke against the amendment. Co-Chair Therriault noted that there is a natural progression in law enforcement. He stated that he would like to encourage a continuation in law enforcement. Representative Davies stressed that the intent of the legislation is to reduce the turnover rate of VPSO officers. He did not think that the intent was to encourage transfer to the upper ranks. He maintained that the "primary purpose of the bill is to look at a class of citizens that are serving us very well and to figure out someway to add some incentive to become a VPSO in the first place." Representative Martin agreed that the intent is to encourage participation in the VPSO program. A roll call vote was taken on the motion. IN FAVOR: Kohring, Mulder, Davis, Therriault OPPOSED: Grussendorf, Kelly, Martin, Moses, Davies, Hanley Representative Foster was absent from the vote. The MOTION FAILED (4-6). Co-Chair Therriault provided members with Amendment 2 (copy on file). He amended Amendment 2 by changing 3 years to one year. Amendment 2 would clarify that: "An employee is not entitled to credited service for employment as a village public safety officer unless the employee was employed as a village public safety officer for at least one year." Co-Chair Therriault MOVED to ADOPT Amendment 2. There being NO OBJECTION, the motion was adopted. There being NO OBJECTION, it was so ordered. Co-Chair Therriault MOVED to ADOPT Amendment 3. Amendment 3 would add a new subsection to read: "An employee is not entitled to credited service under this section if the employee is entitled to receive retirement benefits from another employer for the same service." Representative Davies OBJECTED. Co-Chair Therriault noted that the language is similar to restrictions of credited military service. Representative Davies stressed that village public safety officers deserve the additional benefit. He noted that the majority of the cost would be born by the officer. There is a small cost to the state of Alaska. Representative Davis spoke against the amendment. A roll call vote was taken on the motion. IN FAVOR: Kelly, Kohring, Martin, Mulder, Hanley, Therriault OPPOSED: Moses, Davies, Davis, Grussendorf Representative Foster absent from the vote. The MOTION PASSED (6-4). Co-Chair Hanley questioned the fiscal impact. He suggested that the fiscal note should reflect the fiscal impact. Mr. Church clarified that any cost would be born by the employer. Representative Davies requested that the impact of Amendment 3 be taken into account by the fiscal note. He added that some reduction should be taken to reflect the expectation that not everyone that is eligible would take advantage of the program. In response to a question by Representative Martin, Mr. Church observed that the actuarial account is 98 percent funded. Co-Chair Hanley noted that the amount of the indebtedness is equal to the full actuarial cost of providing benefits based on the service. Mr. Church clarified that the full actuarial cost is determined on an individual basis based on the individual's age and their salary in their vesting years. Co-Chair Hanley observed that the fiscal note assumes that the individual does not cover the full cost. Mr. Church reiterated that the there will always be some margin of additional cost. Representative Davies summarized that the full actuarial cost is based on the assumption that individuals will remain in the system. The legislation allows employees to select in the future. The selection will be based on the benefit to the individual. The actuarial cost is based on calculations further back in time. The actual cost is based on a future self-selection. Mr. Church stressed that the employee would be vested in PERS. Previous VPSO service could be purchased. They would add to their credited service. There is a lifetime adjustment on any indebtedness owed at retirement. Co-Chair Hanley noted that a determination is made at the time an individual purchases their previous service. He did not understand what would result in the additional cost outlined in the fiscal note. Co-Chair Therriault noted that the a new fiscal note would be prepared to reflect adopted amendments. Representative Davies reiterated that the fiscal note should address Amendment 3 and the assumption of how many are expected to take advantage of the provision. Representative Martin MOVED to report CSHB 206(FIN) out of Committee with the accompanying revised fiscal note. HB 206 was REPORTED out of Committee with a "do pass" recommendation and with a revised fiscal impact note by the Department of Administration.