CS FOR SENATE BILL NO. 185(EDC) "An Act relating to reemployment of persons who retire under the teachers' retirement system." 9:11:04 AM Co-Chair Foster noted that the bill was companion to HB 224 by Representative Jennifer Johnston. SENATOR PETER MICCICHE, thanked the committee for hearing the teacher retire/rehire bill. He spoke to the nationwide shortage of teachers and educators. Historically Alaska had relied on the recruitment of teachers from the Lower 48, but the pool in the Lower 48 had shrunken, which had exacerbated the teacher shortage in Alaska. He reported in 2015 there were 3.3 million teachers in the U.S.; 344,000 new teachers had graduated in 2017 and 531,000 teachers left the profession. He shared that the turnover rate in poverty schools was much higher; it was a nationwide problem. He detailed that teacher job fairs in Alaska had seen a steady decline in prospective teachers. In 2017 there had been only 211 registrants, 172 from in-state and 39 from out of state. He detailed that typically the numbers were more balanced. He elaborated that 36 districts had been represented. In 2018 the number of registrants had dropped to 179 and only 31 were from out of state. In some schools there were high school graduates supervising certain classrooms. Senator Micciche explained that the bill returned to the retire/rehire provisions in place from 2001 to 2010. He explained that to be eligible [for re-employment] a person 62 years of age or older had to be retired for 60 days and a person younger than 62 had to be retired for six months. There were no salary deductions, retirement and benefits could still be received, there was no credited service, and there was no hit to the Teachers' Retirement System (TRS) system. He commented that the department would speak to the fiscal note later in the meeting. The districts would continue to pay the 12.56 percent TRS requirement. Benefits and pay would depend on the bargaining unit, some would be union represented and some would not. Sick leave was required by current state law and there would be a 12-month contract just like any other teacher. He detailed that from 2001 to 2010 there had been only 325 teachers rehired. The average reemployment time had been 18.7 months and the shortest had been 3 months. He specified the number equated to 32 teachers on average per year. He believed the number would be higher if the bill passed. 9:15:11 AM Senator Micciche expounded that the bill would put Alaska retired teachers on equal footing with retired teachers from other states. Currently any retired teacher from another state could be rehired in Alaska; however, Alaska could not rehire its own retired teachers. He believed an experienced teacher was better for the students until a school could fill a position with a new full-time teacher. Additionally, he believed there were mentorship opportunities for younger teachers. The bill enabled districts to take advantage of a lifetime of experience at the same or lower cost of a new teacher until the position could be filled with a recent graduate. He pointed to a handout specifying that rural remote schools had the lowest retention among principals and teachers (copy on file). He detailed that urban schools included Juneau, Anchorage, and Fairbanks; the urban/rural fringe included Palmer, Sitka, Seward, Kenai; the rural hub category included places like Bethel, Healy, and Unalaska; and the rural remote category included places like Adak, Arctic Village, and Yakutat. The rural remote schools only retained 61 percent of their principals and 64 percent of their teachers in 2017 to 2018, whereas urban schools had retained 88 percent of their principals and 80 percent of their teachers. He reiterated there was a problem facing the state, which the bill would help to manage temporarily with qualified teachers. 9:17:17 AM RACHEL HANKE, STAFF, SENATOR PETER MICCICHE, reviewed the sectional analysis (copy on file): Section 1 Adds new section to AS 14.20: AS 14.20.136(a) allows school districts to rehire educators that have retired under the defined benefit plan or the defined contribution plan when; AS 14.20.136(b)(1) the retired member certifies that there was no prearrangement of reemployment made prior to retirement; AS 14.20.136(b)(2) the member has been retired at least 60 days if they are 62 years of age or older or six months if the member is younger than 62 years of age; AS 14.20.136(c) the school district has adopted a rehire policy by resolution and has publicly advertised the position for 10 business days and is actively recruiting to fill the position with a person other than a retired member. AS 14.20.136(d) reemployment contracts may not exceed 12 consecutive months. AS 14.20.136(e) the school district that hires a retiree must provide the administrator with a copy of the resolution and policy required by (e) as well as a report stating the retiree's name, description of circumstances, and actions taken to comply with the policy. The school district is also required to make contributions to AS 14.25.070. AS 14.20.136(f) certain requirements of the section don't apply to a rehire member that's eligible for restoration of tenure rights. Section 2 Allows retirees who are rehired, as permitted by section 1, to continue to receive retirement benefits during the period of reemployment unless they become an active member. Section 3 Makes retirees who are reemployed, as permitted by section 1, ineligible to receive additional retirement benefits based on their service and salary during the period of reemployment. Section 4 Clarifies that a member who is reemployed does not become an active member, the member will continue to receive retirement benefits, deductions under TRS will not be made to their salary and reemployed educators will not receive credited time for service during reemployment. This section also ensures that a retired and rehired teacher will be eligible to receive the group health plan coverage that is provided to active members employed by the school district if they so choose. Section 5 Inserts reference to section 1 which will require the employer to make TRS contribution for reemployed retirees at a rate of 12.56%. Section 6 Applies the bill's provisions to contracts made on or after the effective date. 9:19:31 AM Co-Chair Foster listed individuals available for questions. Representative Grenn asked why the tool had previously been removed in 2010. Senator Micciche replied that he could not answer the question. He explained that as he had worked on the bill someone had suggested using a short sunset window in order to drive educators to find a long-term solution to the shortage. He remarked that if educators elsewhere in the U.S. could not solve the problem, he did not believe the idea was realistic. He thought the situation was a frequent challenge in the past. He spoke to the difficulty of getting a piece of legislation passed. He did not know why it sunset in the past. He thought they had probably believed a solution should be achieved, but he did not know that it was realistic. He believed the challenge was frequent in Alaska depending on the status of the economy and other issues. LISA SKILES PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL ADMINISTRATORS, responded that the school system had missed that the law had sunset; they now needed it back. Representative Wilson pointed to Section 2 of the legislation that read "...continue to receive retirement and benefits during the period of reemployment unless they become an active member." She noted the language appeared in two places in the bill. She wondered if a person could be retired and receiving retirement and benefits and also become an active member. Senator Micciche replied that a person could always be rehired and become an active member. He elaborated that a retired person could decide they would no longer be retired and go back to the profession of teaching. He stated that a person could not be both. The bill would enable a person to be a temporary teacher after retirement. He continued that if a person decided to return to being an active member they would come out of retirement and would no longer receive their retirement benefits. Representative Wilson observed that many teachers were not coming out of retirement, otherwise the bill would not be needed. She surmised that a retired teacher could decide to come back [temporarily] under contract, while retaining their benefits. She believed the benefit to the [TRS] retirement plan was that 12.5 percent was put into the system and no additional money would go to the retiree because they were already in a plan. Senator Micciche replied in the affirmative. He believed people had not chosen to become active employees because when people were ready to retire they were ready to retire. He remarked that the bill would very likely bring a significant savings for the state. He underscored that people did not retire to go back to work. However, sometimes a teacher retired and was amenable to coming back for a temporary period. He believed there were many more teachers in the queue in that scenario versus retired teachers wanting to come back to work full-time. 9:24:44 AM Representative Kawasaki referenced a one-page document from the Division of Retirement and Benefits (copy on file) that listed the Lower Kuskokwim School District as the employer employing the largest number of individuals under the retire/rehire program ["Retiree Rehire Program Experience Summary 2001-2010 School Years (copy on file)]. He asked if there were statistics available on other employers particularly related to rural and remote Alaska. Ms. Parady believed Representative Kawasaki was referring to a summary of statistics in members' bill packets. The document specified that the employer employing the largest number of individuals under the retire/rehire program was the Lower Kuskokwim School District. The information was broken down by position. For example, there had been 149 teachers, 45 special education teachers, 18 superintendents. She explained it was possible to obtain who used what by district if necessary. She remarked that the program had been used more historically in rural areas, the urban areas desperately needed it for specific positions like special education. She believed every district would use the tool provided under the bill if possible. Representative Kawasaki noted that the law had been in effect from 2001 to 2010. The committee had heard repeatedly in testimony that the reason so many individuals were retained in school districts, trooper ranks, and other places was primarily related to the retirement system currently in place. He asked Ms. Parady for comment. Ms. Parady answered that Alaska was reflective of the national shortage, but it was having greater struggles due to its remoteness combined with its loss of competitiveness. She noted that teachers had testified throughout session that the state had lost ground with its retirement system and wages for the cost of living in Alaska. The state no longer drew [new teachers] from the Lower 48 as it had in the past. She noted that many recalled when there had been lines out the door to work in Alaska, whereas, currently the state was down to less than 200 and the majority were rotating between districts - not from the Lower 48. 9:27:46 AM Senator Micciche elaborated that there were currently shortages in some areas that had some of the most lucrative defined benefit plans in the nation. He remarked that it was largely a social issue - the primary reason teachers were leaving was dissatisfaction. The social norms where teachers had been revered by parents and students had changed. He stressed the need to turn the situation around. He believed it was a national problem and that teachers were tired of being abused and not being valued. The non- monetary problems seemed to be more pervasive than whether there was a lucrative defined benefit plan in a district. Representative Kawasaki remarked that one of the criticisms he had heard about a retire/rehire program (e.g. for city police and teachers) was rather than hiring new teachers it was a way to keep individuals who had retired previously. He had heard the issue was a negative aspect of the program. Ms. Parady countered that the districts were unable to fill vacant positions. She underscored it was not a situation where jobs were taken away from new teachers. The legislation was designed to require school districts to advertise and try to recruit a permanent teacher into the position. If the position was not filled, districts could hire a retired individual to fill the position. She understood that it may be a concern in times when the districts were able to attract teachers, but it was not applicable in the current situation. Currently there were many districts patch-working substitutes or para-educators. She believed the students would be much better served if districts had the ability to rehire retired teachers who were familiar with the Alaska content and was a proven resource for students. She concluded that patchworking substitutes and others to teach the class or to put additional load on teachers by double-hatting or merging classes was not good for students. 9:30:41 AM Vice-Chair Gara stated the bill was easy for him to support for the reasons mentioned by Ms. Parady. He believed the bill had passed the other body unanimously because people with different views on education funding saw a common ground with the legislation. He recalled testimony that several years ago the job fairs had been filled with individuals looking to move to Alaska, whereas, currently the state was having difficulty attracting qualified teachers to come to Alaska. He believed the bill helped fill the gap. Ms. Parady answered that Alaska was seeing a crisis that was unparalleled to anything in the past. She characterized the situation as the perfect storm. There were not enough new teachers being produced nationally. She referenced research out of Penn from 2015 reporting there were 3.3 million teachers in the U.S.; 343,000 new teachers had been prepared that year, but over 500,000 teachers left the profession. The deficit in the country's teacher pool was exaggerated in Alaska because of its reliance on recruiting teachers from the Lower 48. She emphasized that education was hard; teachers were asked to do much more than in the past. She believed there were many reasons for the severe shortage. She asked members to think about the education system as a business. Ms. Parady explained that education was the largest business in most of the state's communities. She equated superintendents to business CEOs and stressed there had been a 60 percent turnover rate over a four-year period. Additionally, districts had a 26 percent principal turnover rate. She referenced the handout provided by Senator Micciche about teacher turnover. She elaborated that the picture worsened with time in schools that needed the most stability. The bill was not a silver bullet, but it was one strategy to help fill vacancies. She communicated that educators understood that the proposal of additional strategies was needed, and she believed legislators would be seeing more proposals in the coming years. 9:34:53 AM Senator Micciche spoke about retirement and believed money had much to do with the issue nationwide. He thought that the legislature was considering early funding for education because he and Co-Chair Seaton had attended a meeting with educators and administrators in Seward earlier in the year. He hoped the effort was successful. He believed flat funding had a dramatic impact on teaching. He agreed it was a discussion that needed to continue. There was struggle for many reasons and the bill offered a simple solution to part of the problem. Vice-Chair Gara stated that more experienced teachers had a stabilizing effect. He believed mentors worked in numerous ways and that experienced teachers were also beneficial for other teachers. He remarked on a separate effort to get more mentors in the child protection system. Representative Pruitt referred to financial impacts of the bill. He asked if retired teachers would come back to work at a new teacher salary or other. Ms. Parady answered that it would depend based on the school district. She explained that a teacher was not locked into the salary they received at their previous district. She explained that if a person had been a master teacher at a higher level before retirement, the rehire negotiation would be between the school district and the retired individual. She guessed that depending how long a position had been vacant, the more leverage the retired individual would have. There was no locked in amount or prescribed way an individual would come back to work. The individual could only be hired after the district had tried to fill the position in the normal process. 9:38:42 AM Representative Pruitt pointed to Section 1(d) and observed that contracted reemployment could not exceed more than 12 months. He asked for verification that the rehired teachers would not fall under a normal bargaining contract where they would move into [payroll] steps and tiers annually. He surmised it would be a year-by-year discussion and negotiation. Ms. Parady answered that depending on the collective bargaining agreement of the district and the definition of teacher, the individual would or would not fall under that category. She confirmed that the contracts were negotiated year-by-year (as with every teacher) and a retired person would only be able to contract for one year at a time or less depending on the needs of the district. Representative Pruitt noted that rehired teachers would be eligible for insurance under the current plan. He thought healthcare insurance would be secondary from the retirement system. Senator Micciche read from page 2, paragraph 3 of the fiscal note [OMB Component Number 64]: Current retired members covered under the AlaskaCare Retiree Health Plan who return to employment under this bill will generate a cost savings as their retiree health insurance will become secondary to the active insurance received upon reemployment... Representative Pruitt wanted to understand the fiscal impacts of the bill. He stated there was always cost concern about double dipping when there were discussions about retiree rehire in teaching or other systems. He recognized the need had been established due to the lack of teachers. He asked how to ensure people were comfortable that the legislature was not providing an opportunity for an individual to potentially benefit off the system. He stated that double dipping had cost some communities substantially. Senator Micciche answered that the bill would implement some things that had not been in place under the prior program. He noted there had also been some Internal Revenue Service (IRS) changes. He elaborated that the bill required bona fide separation with no prearrangement allowed. He detailed that prearrangement had some significant consequences, which increased the likelihood that retirement systems would not be impacted. He explained that the fiscal note provided a set of facts. He detailed that if 100 percent were rehired from the retired population there would be a savings. He reported there would be a fiscal impact if people retired to take advantage of the program earlier. He stated that if 50 percent of the participants were retired over three years there would be a savings to the program, which he expected to be the case. He found it highly unlikely someone would retire to go back to work for the incremental increase they would receive with the program. Senator Micciche did not view the bill as a retirement incentive. He anticipated the bill would result in savings. The fiscal note was indeterminate because it covered a set of facts specifying there would be a savings at certain percentages of people already being retired it would be a savings, whereas, there could be a cost with lower percentages and "x" number of people retiring to take advantage of the program. He thought the probability was unrealistic [that a cost would result]. 9:43:30 AM Representative Pruitt thought it was appropriate to mention the individuals would not be adding into their retirement when doing the work. Individuals would step away from retirement and would be coming in under typical one-year contract. He underscored that individuals would not be adding to the retirement system or increasing the future retirement liability. Senator Micciche replied he believed it was a disincentive to add to the program. He stated that if the situation became desperate enough he could see districts hiring back retired teachers to reenter as regular employees and then adding to their retirement benefits. The bill discouraged that situation and would allow districts to hire retired teachers temporarily while remaining on their regular retirement and not adding to their benefits. He concluded that hopefully a savings would result because the individuals were retired and there would be a savings in healthcare to the system. He stated that if a Tier I teacher was brought back they would begin adding to their benefits again. He saw the bill as discouraging additional cost in the retirement system. Co-Chair Seaton clarified that the bill was different than the prior retirement incentive program that covered all state employees who would retire and be rehired at the same rate. It meant there had not been an upward mobility path for lower level employees. He appreciated that the bill required a teacher to be separated from the system for a minimum of 60 days or 6 months [depending on the person's age]. He also appreciated that Section 5 required districts to continue to put the 12.5 percent of salary into the retirement system. He believed it would keep the retirement system whole and would solve the problem of not being able to fill positions. He thought one of the reasons the past program had gone away was it had been combined with other state employees. 9:47:02 AM Representative Guttenberg asked about attracting teachers. He remarked on the nationwide teacher shortage. He asked if Ms. Parady had thought about other ways to attract teachers to Alaska. Ms. Parady replied that educators were actively thinking about ways to shift the terrain because the situation was not healthy for students or anyone. She remarked that the situation had been dwindling downward and it was necessary to figure out how to stop the cycle and move forward. She referenced the organization's joint position statement she had previously provided to members; all its members focus and vote on the positions. One of the organization's highest priorities was preparing, attracting, and retaining qualified educators. She continued it would include innovative, alternative pathways to attract teaching. She spoke to the need to create education career pathways for current students. The organization was working with the University - she referenced University President Jim Johnson's goal of 90 percent by 2025, which the organization was supportive of. Many different strategies were being considered. She believed they would bring additional ideas about ways to attract teachers to Alaska in coming sessions. She listed the need for reciprocity with other states allowing certification in one state to transfer to another state. She referenced alternative certification. For example, making it possible for an engineer to teach math if they were willing. She shared there were many strategies used in other states that deserved consideration and possible implementation. Representative Guttenberg shared that he had a friend who had started a dog mushing magazine and a local hospital had said it was the biggest recruiting tool it had ever had for doctors. He recalled a doctor in Juneau telling him he had been recruited to Alaska and his son had discovered hockey, which kept them in Alaska. There were many things outside the norm that anchored people to Alaska. He believed the state had a significant amount to offer. Representative Kawasaki noted that the last sentence of the fiscal note specified a complete analysis by the plan actuary, Conduent Human Resources Services would be submitted with the fiscal note. He remarked that the analysis was not included in members' bill packets. 9:51:03 AM Senator Micciche replied that he would have copies made and distributed to members. Co-Chair Foster OPENED public testimony. MARK MILLER, SUPERINTENDENT, JUNEAU SCHOOL DISTRICT, JUNEAU, testified in support of the bill. He shared that he had previously been a physics and chemistry teacher for 12 years. He provided details about his past career as a teacher. He had a passion for teaching. He provided a scenario where he decided to give up his job as superintendent. He provided an option where he could choose to work for ACE Hardware [he brought examples of items he could teach people to use]; however, he would be forbidden to return to teaching in Alaska if he worked part time. He believed it was wrong. He stressed it was not a finance issue, but a resource issue. He stated that whatever the fiscal note was, it would be budget dust in comparison to the overall state budget. Whether the bill passed or not, no one looking at the budget in the next year would know whether the bill passed. He detailed he and other individuals at a time in their lives where they no longer wanted a full-time job were the resource. He stated that teaching came from the heart and soul. He believed great teachers were born, not made. He wondered why a retired teacher in Alaska had to move out of state if they wanted to teach, yet a retired teacher from out of state could teach in Alaska. Mr. Miller stressed that some of the state's most valuable resources (veteran teachers) were being wasted. He characterized the program under the bill as a win-win for teachers and school districts. The bill meant districts could stop rotating substitutes with no teacher training through classrooms and would allow retired teachers to work part-time. He believed committee members had become legislators because they wanted to contribute. He shared his favorite quote from Horace Mann "be ashamed to die until you have won some victory for humanity." He believed the bill would mean a win for humanity and the kids of Alaska. He did not believe the fiscal note would hurt the state and the bill would provide a powerful option for education in Alaska. 9:57:00 AM MATT MOSER, NATIONAL EDUCATION ASSOCIATION-ALASKA, JUNEAU, testified in support of the bill. He read from a prepared statement: NEA-Alaska supports having a qualified educator in front of every Alaska student at the beginning of the school year. We believe this legislation is one tool to help make that a reality. NEA-Alaska is supportive of efforts to return our veteran educators to the classroom. NEA-Alaska's understanding is that Senate Bill 185 will not affect existing collective bargaining units of certificated educators. Collective Bargaining Agreements in districts that cover all "certificated educators" would continue to cover all "certificated educators", including retired- rehired educators and that the terms and conditions of employment would continue to be subject to collective bargaining agreements with the exception of continued employment. NEA-Alaska believes this is a band aid for ensuring that students have a certified educator in every classroom. We strongly believe that the state legislature and governor will need to take a hard look at how to actually attract and retain quality educators. We believe that will happen by returning to a defined benefit, looking at salaries keeping up with inflation, and strong mentorship and professional development programs. 9:59:06 AM JENNIFER HALDANE, DIRECTOR, CONTRACT ADMINISTRATION, LABOR RELATIONS and BENEFITS, ANCHORAGE SCHOOL DISTRICT, ANCHORAGE (via teleconference), spoke in favor of the bill with a prepared statement on behalf of superintendent Deena Bishop: The district appreciates the opportunity to speak today in support of SB 185. As has already been discussed, teacher recruitment in Alaska is very challenging. The Anchorage School District hires approximately 250 teachers a year. We are always recruiting for qualified applicants and we consistently have vacancies, especially in hard to fill areas such as special education, CTE, and some of our language emersion programs. SB 185 provides an opportunity to utilize experienced retired teachers to fill gaps in these areas and our students benefit from that added flexibility. We believe this legislation would have a positive impact on school districts across the state. Thanks for your time today. 10:00:22 AM SCOTT MCMANUS, SUPERINTENDENT, ALASKA GATEWAY SCHOOL DISTRICT, TOK (via teleconference), testified in support of the bill. He read from a statement: You've heard today over and over how recruitment of teachers in today's environment is becoming more and more difficult. When I was a kid in the village being a teacher meant something and it meant doing something that was respected. Both my mother and father were teachers in Ambler where I grew up and it was something that I aspired to be. When I was going to college I went to an apprenticeship as a cement mason at a local 867 there and that was 35 years ago; 35 years ago, a journeyman mason made $30 an hour, which is more than a starting teacher makes today. When I went to the job fair this year as the superintendent, I went down there looking to hire five teachers. There were 180 teachers at the job fair and we were fortunate to be able to hire three of them. For those of you who know my district, we're on the road system, which gives us a little bit of an edge over some school districts that aren't. I was pleased with that outcome. I went down to the Portland job fair and there were 22 school districts in the room and less than 30 teachers looking for positions. I only interviewed one person and didn't hire them. I guess the point is that it's becoming more and more difficult, as you've been hearing. Teachers were leaving their jobs because they find themselves in an unappreciated profession where they don't think they're making a difference. They're beat up by parents, they're beat up by politicians, they're beat up by the press. They leave because it's one of the lowest paying professions that require a college degree, they leave because they don't feel they have the support of the administration or the community, they leave because they don't feel they are making a difference. That is really the key. People want to do something with their lives that has meaning, they want to make a difference, they want to be a part of that solution. I did a project a few years ago for a post graduate study and I surveyed 360 rural teachers in Alaska. I was interested in a study about why teachers stayed. It was really a profound learning experience. The reason they stay and the reason they leave are the same. Teachers stay where they feel like they're being appreciated and where they're making a difference. Teachers don't become teachers because they want to get rich, they just want to make a good living, which I think it's incumbent upon us socially that we do that. They've got to feel like their lives have meaning and if they're constantly getting beat up they want to leave. The long-term solution to the teacher shortage was like most things, it was really simple, but it was very difficult to do. What we need to do is effect social change that attracts quality teachers in order to improve the public perception of schools and in order to improve the quality of teachers we have to change that perception. It was an egg/chicken argument. Personally, my feeling is that the long-term solution - and I think this bill is a short-term, stop-gap solution - but the long-term solution is counter- intuitive. I think it needs to become more difficult to become a teacher, not less. That's how you make it mean something. There's a long waiting list of people trying to get into military academies, there's no shortage of people trying to get into ranger school or getting into these special military schools, there's no shortage of people trying to get into upper end, elite ivy league schools because that means something and they're willing to work really hard to do it. The Finnish model of education really did that, they closed a number of teacher preparation programs, made it far more difficult to get in, as difficult to become a teacher in Finland as it is to become a doctor. I think we know what the end result of that was. It wasn't because they pay them more, it's because of their social status - they have some meaning in their lives and because they're respected by their community. Mr. McManus concluded that the bill was a stop-gap solution, but it would help. There were teachers in his community he would hire if the bill passed. Co-Chair Foster CLOSED public testimony. 10:05:46 AM Vice-Chair Gara reviewed the indeterminate fiscal note from the Department of Administration. He detailed that teachers retiring after the bill's effective date may add some costs and teachers retiring prior to the effective date would save some costs. There was no way to know what mix of teachers would utilize the system. Representative Wilson asked about page 2 of the fiscal note pertaining to the different percentages listed of teachers rehired from the current retired population (100 percent, 67 percent, 50 percent, etcetera). She did not understand why the information was shown for 200 and 400 rehired retirees. KATHY LEA, DEPUTY DIRECTOR AND CHIEF PENSION OFFICER, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, answered the goal had been to look at a band of numbers to demonstrate the potential impacts. She detailed there had been 325 participants in the previous program, but the department did not know whether more or fewer individuals would participate in the new program. Therefore, the department chose to show what would happen if there were 200 participants and what would happen if there were 400. Representative Wilson asked about the 100 percent, 67 percent, 50 percent, and 33 percent [listed on the left of page 2 of the fiscal note]. She asked if the information indicated how a teacher retired with benefits or something else. Ms. Lea replied that the percentages represented the number of retirees rehired under the program. She detailed that there would be a savings to the retirement plans if 100 percent of the rehired teachers had been retired because of the shift of cost from the retiree health plan to the active health plan. Representative Wilson asked for verification it had nothing to do with how an individual retired, only the percentage of retired individuals who would take advantage of the bill. Ms. Lea answered in the affirmative. Representative Kawasaki stated that when the first retire/rehire program was done in 2001 the participants had been in either Tier I or II. He wondered if Tier III, implemented after 2004, had been taken into account. Ms. Lea replied that the numbers in the fiscal note were limited to the Defined Benefit (DB) population because once a Defined Contribution (DC) employee could either leave their contributions in the fund or take them out once they retired. She explained the individuals were not accruing a DB-type benefit; therefore, they could come back into reemployment with no penalty. 10:10:02 AM Representative Pruitt asked about a scenario where 50 percent of the people came back to the system. He was trying to understand why there was a cost increase to the retirement system for fewer people coming back in. Ms. Lea answered that the information indicated that 50 percent were coming from the retired population and the other 50 percent came from the active teacher population who would retire and come into the program. Representative Pruitt asked for verification the information was split between retirement timeframes prior to the bill and after the bill. He asked for the accuracy of his explanation. Ms. Lea answered in the affirmative. She detailed that the chart looked at the utilization of the program between individuals who were currently retired and individuals who may come back in after retiring. She explained teachers retiring after the program's effective date may retire earlier than anticipated, which represented a cost. Representative Pruitt surmised there was an expectation the bill may encourage people to retire early, meaning there would potentially be a cost to the system. He detailed that a memo [Conduent memorandum addressed to Ms. Lea dated March 19, 2018 (copy on file)] indicated that there was a potential for people to retire sooner, meaning there would be a cost to the system. He asked if he was understanding the actuarial analysis correctly. Ms. Lea answered that because the TRS DB plan was closed, its value was based on its precise experience when the valuations were done on what the future costs may be - in order to not overstate the unfunded liability. Under the current TRS system, most individuals retired within four years past their normal retirement date - their benefit was not 100 percent funded until that time. There was a table used showing the likelihood a person would retire every year after that person's normal retirement date. Anything that may incentivize a person to retire on their retirement date meant their benefit was not 100 percent funded at that time, which was the reason for the cost. 10:13:32 AM Representative Guttenberg surmised that if a person's benefits were not 100 percent funded at a given point, they would only receive the benefits they were eligible for at that point. He provided a scenario where a person retired at 18 years instead of 20 years and wondered if the person's retirement benefit was diminished. He referenced a retirement plan he had been a part of, where a person received 90 percent or less if they retired early (depending on how early they retired), similar to the social security process. Ms. Lea replied that Representative Guttenberg had mentioned two different terms. She explained that early retirement (before a person's normal retirement date) was a reduced benefit. In the case of the bill, the information looked at a person's age or service requirement (20 years). History had shown that teachers generally may retire after 24 years or at age 64 instead of age 60. Anything that incentivized teachers to retire earlier than the two assumptions the actuary made in order to determine funding for the plan, meant all of the funding was not there for them. She clarified that it did not impact the member's benefit. The member received the full benefit because they reached normal retirement age. She explained that it meant in the following valuation the state "on behalf" may be affected. She elaborated that the employer contribution could not be raised; therefore, the only place to get any shortfall would be from state assistance. The memo provided by the actuary and the department's fiscal note showed what the affects on state assistance may be. Representative Guttenberg surmised that for every year a person did not retire they continued to pay benefits into the retirement program, but their benefits did not increase. Ms. Lea clarified that an individual would earn additional benefits as they continued to work. Co-Chair Seaton MOVED to REPORT CSSB 185(EDC) out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 185(EDC) was REPORTED out of committee with a "do pass" recommendation and with one previously published indeterminate fiscal note: FN2 (ADM). 10:17:30 AM AT EASE 10:18:22 AM RECONVENED