HOUSE BILL NO. 467 "An Act relating to employees of the legislature who are employed under a personal services contract." Jim Hornaday, Staff, Representative Kott spoke in support of the legislation. He observed that the purpose of the bill is to add the option of hiring legislative employees using a personal services contract and eliminate the Public Employees Retirement System (PERS) membership requirement for the employment under the contract. Mr. Hornaday explained that most State agencies have the ability to hire temporary or nonpermanent employees who do not receive retirement benefit credit while they are employed. Temporary or nonpermanent employees are short term, often paid on an hourly basis, and may not receive other benefits such as medical insurance, or leave benefits. However, because of language in the PERS statute (AS 39.35) the Legislature does not have the same ability as other State of Alaska Agencies to hire temporary employees during a legislative session unless the employee participates in the retirement system. Mr. Hornaday noted that for short-term temporary employment this requirement results in a needless cost to the Legislature and a tax disadvantage to the employee. For example, the summer tour guides in the Capitol, most of who are students earning money for school must be placed in the retirement system. Money is deducted from their paychecks for retirement which they may withdraw after leaving employment, but because it was tax deferred, they must not only pay the tax, but they also must pay a penalty for early withdrawal. This is a waste of time and money. This same situation applies to the laborers who work to load and unload the moving vans, and these people generally only work a few days at a time. Mr. Hornaday pointed out that the same retirement issue caused an even more significant problem when the Legislative Affairs Agency needed to fill the Chief of Security position for the 1998 session. In this case, the stringent qualifications for the position almost dictate that the only qualified applicants be former Alaska law enforcement officers who are retired under PERS. Individuals who are retired under PERS cannot accept a position covered by the retirement system without terminating their retirement. Because of the short-term nature of the position, terminating retirement is generally an unacceptable option. Mr. Hornaday observed that in the past "professional services" contracts have been utilized to hire individuals for certain jobs to avoid the retirement problem. However, this solution has become less and less of an option because of IRS rules on contractor versus employee relationships. Under the IRS guidelines the duties and responsibilities of the Chief of Security, as well as the tour guides and laborers, make them clearly an employee. Using a "personal services" contract clearly classifies the individuals as an employee in order to satisfy IRS requirements and this bill eliminates the conflict with PERS requirements. Mr. Hornaday observed that the bill does not adversely affect any current employees. The current PERS law protects the rights of legislative staff and employees by recognizing that they work in a different environment than most state employees. This bill will not change that language. House Bill 467 only adds an additional option in those cases when participation in the retirement plan is too restrictive or not appropriate. It gives the Legislature the same flexibility afforded to other State Agencies. PAM VARNI, EXECUTIVE DIRECTOR, LEGISLATIVE AFFAIRS AGENCY spoke in support of HB 467. She observed that the legislation would provide the Agency flexibility to hire temporary or non-permanent employees. She explained that the problem dates to the 1970's when the Legislature had daily paid employees. At that time, the Legislature began to provide retirement and health benefits. There were inequities between daily paid and monthly paid employees. Retirement legislation was passed to end these inequities. The way the legislation was written removed the flexibility to hire temporary employees. She observed that professional contracts have been used, but have created problems regarding worker's compensation and the employee/employer relationship. She pointed out that the legislation would save money. No current legislative employees would be affected. GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION spoke in support of the legislation. He stated that there would be no impact to the Public Employees Retirement System. Representative Foster MOVED to report HB 467 out of Committee with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HB 467 was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Legislative Affairs Agency and a zero fiscal note by the Department of Administration.