HB 354 - RIP FOR SCHOOL DISTRICT EMPLOYEES Number 740 REPRESENTATIVE JERRY MACKIE, Sponsor, said he didn't have much to add to his previous testimony in the last hearing, but in response to the committee's request regarding what kind of savings would be involved with the school districts, Representative Mackie provided committee members with a copy of the estimated cost or savings audit that was done by the Division of Legislative Audit in late 1991 and released in early 1992 which was the last time there was a Retirement Incentive Plan (RIP). The audit indicates the number of school districts, the number of retirees they expected would take advantage of it, and the estimated savings. Representative Mackie noted this is 1992 information and things are different now, but he believes this gives a ballpark idea of the savings that could be generated through a RIP of this nature. He said collectively, with all the school districts listed in the report, this generated nearly $23 million in savings to school districts around the state. He recognized that probably not all the districts listed would take advantage of a RIP, but he knew there where some districts not listed that would take advantage of it. He stated at that time, Anchorage suggested they could possibly save $2.6 million, and he understood it would still be in that ballpark. The Kenai Peninsula School District testified in the last hearing they could possibly realize somewhere in the neighborhood of a $2 million savings. A letter dated January 22, 1996, from the Juneau School District indicates a savings of as much as $3 million through a RIP program. The Hoonah School District, which is a small district, estimated they could probably save somewhere around $340,000 in the first three years. That is a huge savings for a district that size. He cautioned these were estimated savings and added this is clearly an optional program that each school district would need to look at and decide if they wanted to do it. He advised that school districts are currently working on getting accurate projections for this year. Number 890 DEBRA GERRISH testified as a parent who has been sitting through the budget crisis for the last two years and looking at different approaches to filling in the gaps in support of HB 354. She expressed concern over the increase in pupil/teacher ratio; it's about 30 in the elementary schools. She said passage of this legislation would allow more teachers to be hired. The advantage of this bill, as opposed to a local RIP, is that it allows the school district several years to pay that retirement; whereas, with a local RIP, the district has to come up with the money at the very beginning. Most of the districts don't have that money up front. She urged committee members to pass HB 354 and to give the districts a tool that can be used to lower the classroom sizes. CO-CHAIR TOOHEY asked if there was any guarantee that the cost of the teacher coming in would be quite a bit lower. REPRESENTATIVE MACKIE said he didn't know how a guarantee could actually be written in to the bill, but noted the districts are going to have to certify that a cost savings will be realized. He commented that most of the higher end teachers are in the $57,000 to $58,000 a year range, and most school districts' starting range for a teacher is in the $30,000 to $32,000 a year range. That figures to be a $20,000 to $25,000 savings if a high end teacher is retired and a new teacher is hired; that's where the savings would be achieved. REPRESENTATIVE DAVIS said that Co-Chair Toohey's question was addressed on page 2, line 4 which states, "(b) The organizational units of a plan must be selected so that implementation of the plan results in maximum savings to the school district..." SALLY RUE, Vice President, Juneau Board of Education, testified the Juneau School District is probably different from some districts, but not terribly unique in that many of the teachers are at the high end of the salary schedule. More than half of the teachers are at the top. She said the Juneau School District is under tremendous pressure with the operating budget. The budget currently being worked on for next year indicates a $675,000 budget gap; the following year is projected to be over $1 million. She remarked that a couple of years ago, all the nontenured teachers were laid off because it was the only way the district could afford to keep the schools going. As Ms. Gerrish mentioned, that did increase the pupil/teacher ratio. MS. RUE concluded there are over 60 teachers that could take advantage of this RIP and that does not include the three years extra. They have calculated it would save the district $100,000 per teacher over five years. That would mean a huge difference for the Juneau School District in being able to run the programs. Instead of increasing the class size each year, that money could be used for more teachers so they can continue operating the programs. CO-CHAIR BUNDE asked if there was further public testimony on HB 354. Hearing none, he closed public testimony. Number 1135 REPRESENTATIVE DAVIS moved to pass HB 354 out of committee with individual recommendations and attached fiscal notes. Hearing no objection, it was so ordered.