HOUSE BILL NO. 55 "An Act relating to participation of certain peace officers and firefighters in the defined benefit and defined contribution plans of the Public Employees' Retirement System of Alaska; relating to eligibility of peace officers and firefighters for medical, disability, and death benefits; relating to liability of the Public Employees' Retirement System of Alaska; and providing for an effective date." 11:24:53 AM Co-Chair Merrick OPENED public testimony. 11:25:19 AM JEFF JONES, SELF, KETCHIKAN (via teleconference), testified in support of the legislation. He shared that he was a fire medic and had been with the Ketchikan Fire Department since 2007. He stated a return to a DB [defined benefit] plan could help the state and municipalities mitigate the cost the associated with training and turnover with existing DB plans. He provided information about the various positions he had held with the [fire] department. He stated he was not irreplaceable; however, it would be a long time before someone new could receive the numerous certifications he had obtained. He did not want to relocate his family to another state with a DB program. He remarked it was well known that firefighters working after the age of 55 put them in greater risk of dying. He wanted to be able to hold his grandchildren and enjoy his retirement. He started his career when he was 28 years old and at 58, he would have 30 years with the department, but not enough to retire. He emphasized that responding to a fire at that age put the employee, coworkers, and the public at greater risk. He believed the relatively small increase for the DB program would be money well spent when considering the value of retaining employees throughout their career. He encouraged the committee to pass the bill. 11:27:24 AM GERARD ASSELIN, CAPTAIN, ANCHORAGE POLICE DEPARTMENT, ANCHORAGE (via teleconference), shared that he is a lifelong Alaska resident. He supported the legislation. He had been honored to serve his friends and neighbors for the past 23 years with the department. He provided information about his job duties. He worked with over 200 officers providing critical service around the clock. Additionally, he oversaw the field training program. He saw the direct impacts of the recruitment and retention challenges that existed within the profession in Alaska. He highlighted that the department was fundamentally and increasingly in search of qualified, educated professionals to work in the career. He stressed that demands on the policing profession had increased, making it more difficult to recruit people into the profession and causing officers to reevaluate their desire to stay. He detailed that after officers received training, they became a valuable commodity. Mr. Asselin shared that recruitment had become more competitive and challenging than ever before. The department saw officers leave on a monthly basis for departments in other states. He spoke to the loss of productivity that occurred with academy and field training and the proficiency that came with experience. He witnessed the loss of productivity daily with the department's training programs. He reported that over the past month he had interviewed 20 patrol sergeants and almost all had vocalized the number one problem was young officers and recruitment and retention. The situation led to inexperience and a loss of productivity. He appreciated any tools that could be given to improve recruitment and retention for the department. He stated that the bill provided an opportunity to put Alaska in a competitive position to maintain the best public safety professionals. He urged support of the bill. 11:31:14 AM JODIE HETTRICK, FIRE CHIEF, ANCHORAGE FIRE DEPARTMENT, ANCHORAGE (via teleconference), spoke in support of the bill. She detailed that the Anchorage Fire Department was the largest in the state with about 400 employees. She shared that one of the department's biggest stumbling blocks for recruitment and retention of members was the retirement system. The situation was compounded by members' ineligibility for social security. She explained that the department was trying to get people to spend 20 to 25 years serving the community and when they left, they only had a 401k. She explained it had significantly contributed to a reduction in recruitment opportunities. She reported that the department's application numbers were approximately 25 percent of what they had been pre-Tier IV. Additionally, employees were leaving typically within their first five to seven years. She shared that an employee had reached his benchmark for his 401k under the Tier IV system, so he retired at the age of 34 after working with the department just under 10 years. She explained it was an investment of close to $2 million the municipality had put into the individual for training and other and it had gone right out the door. She detailed that the department was not only losing employees to other states, but to retirement because they were comfortable living at a fairly low wage without having to deal with the negative effects of a career in emergency services. Ms. Hettrick stated that without an adequate retirement system in place, it would be even more difficult to recruit and retain valuable employees to serve the community. She believed the bill went in the right direction and she strongly urged support for its passage. Representative LeBon referenced the retirement of the young individual in Ms. Hettrick's example. He asked if the individual had left the profession to seek other employment. He remarked that retiring and drawing on a 401k at the age of 34 would be very unusual. He wondered if the individual had moved to another employer within the profession or left the profession completely. Ms. Hettrick answered that the specific individual had left the profession entirely. The person had moved to a community in the Lower 48 where he could live for much less stable income. The individual had another career field in woodworking and photography and would supplement his income with retirement income. The department had never experienced someone leaving that early for an official retirement. 11:36:10 AM ANGIE FRAIZE, OFFICER, COMMUNICATIONS OFFICER, ANCHORAGE POLICE DEPARTMENT EMPLOYEES' ASSOCIATION, ANCHORAGE (via teleconference), spoke in favor of the legislation. She shared that the organization represented over 570 police employees. She stated that the committee's support of the legislation would directly and indirectly impact the department's employees and the greater Anchorage area. She shared it was her 20th year and she was eligible to retire with a pension. Additionally, she loved the department and was born and raised in Alaska. She emphasized that the department was seeing its employees leave in droves after their first five years. She relayed that the department recruited a high number of military employees leaving the military. She noted that the individuals were not from Alaska and did not have extended family in the state, but they were starting their families with the department. She detailed that after about five years the officers started having young children and were pulled away by family in the Lower 48 and by lucrative offers from lateral departments out-of-state offering more money and pensions. She emphasized that the department was spending a substantial amount on the employees. She added that the loss of employees had resulted in a very young department. She explained that it would have a huge impact on the community. Additionally, due to the national narrative that police were facing, professional, experienced, and educated officers were needed. She shared that there were only two officers left in the department from her 2007 academy. She emphasized that the department was hurting for experienced and professional police officers. She hoped the committee considered supporting the legislation. Representative Rasmussen asked Ms. Fraize to speak to the benefit a more experienced officer could bring in situational awareness. Ms. Fraize replied that there were many studies showing the more education experience, the less force an officer used. She noted it was a topic nationwide and fortunately the department had not experienced the situation. She shared that the department had a very junior patrol division and over 80 percent had been there for three to five years. She shared that when she had worked as an officer downtown, it had taken her about five years to feel completely confident in her handling of all situations. She explained that the junior officers did not have the experience, through no fault of their own. She stressed the need to continue a highly educated and experienced department in order to avoid seeing the community suffer like Ferguson and Minneapolis. Representative Rasmussen stated she found it astounding there was only 20 percent of the department that had over five years of experience. She observed that incoming officers likely were not receiving the training they could if there were more experienced officers serving as mentors. 11:41:18 AM JUSTIN MACK, ALASKA PROFESSIONAL FIREFIGHTERS' ASSOCIATION, ANCHORAGE (via teleconference), supported the legislation. He shared that he had worked for the Anchorage Fire Department for 10 years and currently served as a captain for Fire Station 3. He relayed there was widespread support for the bill within the organization of over 500 professional fire fighters and EMS personnel throughout the state. The association had been advocating for a shared risk solution where employees, employers, and the State of Alaska shared a responsibility in addressing recruiting and retention. He detailed that since the change to Tier IV, there had been many unintended consequences. He stated that perhaps the clearest consequence was the competitive disadvantage Alaska faced in recruitment and retention. He reported that the problem was widespread throughout the state's fire departments. He pointed out that Alaska was one of the only states to offer a mandatory defined contribution (DC) for public safety employees. Mr. Mack relayed other states had switched back from a DC plan to a DB plan specifically to address the problems currently happening in Alaska. The bill aimed to make Alaska competitive in the hiring and retaining of public safety employees. He stated it was a conservative plan built by incorporating best practices of some of the most successful plans in the country, including establishing a minimum retirement age, removing DB medical, and using a five-year average rather than a three-year average. He remarked that the changes drastically reduced the state's liability. He detailed that the plan also offered mechanisms to address any adverse experience the plan may have, including increasing employee and employer contributions and withholding inflation proofing. Mr. Mack stressed there was a significant cost of doing nothing. He highlighted that too many public safety employees had left the state who cited lack of retirement as a primary cause. He stated that departments across the state were hiring police, fire, and corrections officers who would receive excellent training, yet had no long-term plans to remain in Alaska. He informed the committee it was becoming well known that Alaska employees were ripe for the picking; the department received emails and flyers from other states attempting to recruit its employees. Employers were having to reinvest recruitment and retention dollars several times over, which was wreaking havoc on public safety budgets. He pointed out that the most talented public safety officers were leaving the state. The organization strongly supported the bill. 11:44:35 AM NICK DAVIS, SENIOR CAPTAIN, ANCHORAGE FIRE DEPARTMENT, ANCHORAGE (via teleconference), shared that he had about 17 years with the Anchorage Fire Department and was one of the lead recruiters and testers for the department. He added that he was in the Tier III retirement system. He detailed that he had left for commercial fishing but had returned for the Tier III defined benefits. He relayed it was one of the only reasons he was in Alaska. He stated that his retirement benefits kept him with the department. He stressed it was very challenging to work in a fire station where half the employees had retirement and half did not. He underscored that the job was dangerous. He supported the bill and plead with the committee to pass the legislation. 11:46:47 AM JACOB WILSON, BUSINESS AGENT, ALASKA CORRECTION OFFICERS ASSOCIATION, ANCHORAGE (via teleconference), spoke in support of the legislation. He detailed that the organization represented over 900 correctional officers across the state. He shared that throughout his 10 years in the job he had spoken with thousands of correctional officers concerning their retirement and the reason they came and left the profession. He emphasized that correctional officers put their lives on the line every day. He stressed that there was currently a recruitment and retention crisis. He shared that one of the root causes was the state's DC retirement system, which was not competitive with other law enforcement retirement systems around the country. He detailed that between January 2015 and January 2021, 650 correctional officers or just under 70 percent of the total workforce had left the bargaining unit. Mr. Wilson emphasized the high turnover had serious and negative safety, security, and financial impacts on the state. Every time an experienced officer left, the position was backfilled with an inexperienced new officer. He stressed there was significant cost to the state for recruitment and training. He emphasized that hiring over 100 new recruits per year compromised safety and security in the institutions. The DOC was not currently able to keep up with demand for new officers. He reported that a study published five years earlier found the institutions were currently operating with insufficient staffing levels to meet basic security operational requirements. The legislation would help with recruitment and retention problems. He stated the bill was a step in the right direction. He reported that the Tier IV retirement system did not offer enough incentive for officers to stay past their five year mark. The association fully supported the legislation. 11:49:36 AM Co-Chair Merrick asked how the problems with recruitment and retention lead to overtime. Mr. Wilson replied there had been a substantial uptick in overtime over the past five or so years. He explained that the amount of mandatory overtime could result in 16 hour days. He detailed officers serving 12 hour shifts could be instructed to stay for four additional hours. Additionally, officers being ordered to come in for work on their off week had significantly increased over the last year. He highlighted that COVID-19 illustrated the department's understaffing. Co-Chair Merrick asked Mr. Wilson to share the [written] data with the committee. 11:50:48 AM NICK CLARK, PARAMEDIC AND FIRE FIGHTER, FAIRBANKS FIRE DEPARTMENT, FAIRBANKS (via teleconference), shared that he is a Tier IV member and had been with the Fairbanks Fire Department for almost 10 years. He reported that currently 34 out of 45 of the department's members were Tier IV. He detailed that within nine years, the last seven Tier IV members would be eligible to retire with their 25 years. He elaborated that five of the Tier IV members were currently in or moving into officer positions. He pointed out that the top leadership of the department was about to be under Tier IV. He shared that the academy had six new recruits the past year, which was the largest group since the 1990s. He shared that the department had hired four new members and was on track to hire a total of eight in the current year. He reported the department was running at least two academies per year. Prior to Tier IV, the department ran one academy every two years. He stated that Tier IV employees who had left the department had lasted an average of 2.3 years. The current Tier IV employees averaged 2.8 years with the department. He stressed the situation left a large knowledge gap in the department. Additionally, it cost the department approximately $120,000 in the first year of bringing on a new recruit. Mr. Clark explained that seeing so many people leave was a morale killer. He reported that the candidate pool was shrinking as people left the state. He relayed there was no security with the Tier IV retirement, with no social security, supplemental benefits system, and no chance of successful retirement income. He shared that he had worked with the department for nearly 10 years because he loved Fairbanks and Alaska. Additionally, he was confident there would be a return to a modified DB system. He wanted to move away from Tier IV and improve things for future generations. He urged the committee to pass the bill. 11:55:26 AM Representative LeBon thanked Mr. Clark for calling in. He referenced Mr. Clark's testimony that 38 members of the Fairbanks Fire Department were in Tier IV. He asked if the members were waiting for the legislation to pass to commit to working for the department long-term. He asked if there was a sense of what the response would be if the bill passed. Mr. Clark answered that the department had several employees currently testing for jobs out-of-state. He reported that many members were asking whether the bill would pass and wanted to stay but were thinking about their future. He believed the bill would help retain members. He was confident the passage of the bill would give him more security and help him feel more comfortable staying. He stressed the turnover was hard on morale. He believed members would stay. Representative Thompson thanked Mr. Clark for calling in. He asked how the large turnover within the department impacted having experienced people move up the ranks in the department. He asked if the department had enough experienced members to move up to leadership positions. Mr. Clark replied that there would be a big impact. He reported there was currently one Tier IV employee in a captain position and likely there would be a couple more in the coming months. He explained that about half the captain positions would be held by Tier IV members in the current year. He noted that those four members had been with the department the longest. He explained that beyond those members, the experience gap dropped off substantially. The knowledge the department was losing due to retirement and the departure of employees was substantial. He stated the situation would continue if turnover persisted. Co-Chair Merrick CLOSED public testimony. She thanked the testifiers for their service and testimony. 12:00:08 PM Co-Chair Merrick asked to hear the Division of Retirement and Benefits' perspective on the bill. JIM PUCKETT, DEPUTY DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION (via teleconference), shared that he did not have any prepared remarks. He was available for questions. Representative LeBon stated that the shared upside risk in a DB program was capped at 10 percent for participants. He noted the initial employee contribution rate was at 8 percent. He asked what the financial impact would be if the ceiling was raised to 12 percent. Mr. Puckett replied that the question should go to the division's chief financial officer. He would follow up with the answer. Representative Josephson remarked that Buck, the state's actuary, had stated the plan was around 99.3 percent solvent in the past year. He asked if there was anything that would change the number. Mr. Puckett was not aware of anything that would change the number. The division would hear an updated analysis the following day and he would provide the information to the committee. HB 55 was HEARD and HELD in committee for further consideration. Co-Chair Foster announced that the Legislative Finance Division could help members with amendments. Co-Chair Merrick reviewed the schedule for the following meeting.