SB 88-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS  4:30:06 PM CHAIR BISHOP called the committee back to order and announced the consideration of SB 88. 4:31:16 PM SENATOR EGAN, as the sponsor, introduced SB 88 as follows: SB 88 let's teachers, police, firefighters, and other public employees choose one of two state retirement systems: an individual defined contribution retirement account, or earning a new defined benefit pension. A defined benefit pension takes time to earn, but it rewards public servants by letting them earn a guaranteed monthly benefit when they retire. For long- term employees, they can earn help paying for healthcare, they can stay in Alaska and pay property taxes to their local municipality. Alaska's teachers and public employees don't earn the private sector's defined benefit of Social Security and many even lose Social Security benefits they earned in their past jobs. For most, a defined benefit pension makes sense, but many will still choose defined contribution; as an example, some have a military or private sector pension or some have a spouse employed in Alaska and only plan to stay a few years. Others want to control their investments or take their savings to their next job, they could choose defined contribution. SB 88 creates a new, more stable and more predictable defined benefit pension tier. A few years ago, Alaska beefed up oversight of the pension system; SB 88 keeps those smart safeguards, making Alaska's retirement system stronger than ever. Analysis of a previous version of this bill showed it saved the state about $70 million in 5 years and it is cost neutral in the long term, it shares the risk of rising health costs between employees and employers, and it adds nothing, not one red-cent to the unfunded liabilities from the past. To make the new system cost neutral, employees will share the risk of health costs rising in the future, that's a risk worth taking, I think, and is fair to Alaskans. 4:33:55 PM JESSE KIEHL, Staff, Senator Dennis Egan, Alaska State Legislature, Juneau, Alaska, noted that testimony from the previous bill pointed out some of the difficulties in the very complex question of teacher retention. He stated that he would focus on the economic impact of pensions as follows: The total economic impact of just the PERS and TRS pensions to Alaska, according to an independent research group, is about $1.4 billion in our economy. More than 70 percent of Alaska's PERS and TRS retirees stay in-state and that's by design, the pension system has a cost of living increase if you retire in Alaska. The PERS and TRS trust together paid more than $1 billion in fiscal year 2014 in pension payments, roughly 90 percent of those dollars stayed in state. So that really will show you how effective that is in helping Alaska's public servants to retire here in Alaska, and as Senator Egan said, have homes in their communities and contribute to their local economies. In that sense, the pension system has been one of the shock-absorbers for our economy through the national downturn, there have been a number of them, certainly healthy capital budgets were a major piece; but, through the coming years, that more than $1 billion in functionally payroll, retirement payroll, and an additional $500 million in medical benefits, will be a huge element in keeping our local economies healthy. 4:36:35 PM MR. KIEHL stated that SB 88 addresses turnover as follows: SB 88 also addresses a major cost for the State of Alaska from municipalities and school districts of turnover. The cost of training new employees is very high and when you can retain good employees, not lose them to other places and other folks, you save a lot of public dollars, you make a much more efficient use of the public treasury, that is of course vital to municipalities and school districts using local property taxes. Just to give you a couple of, frankly fairly dated estimates, ten years ago the Department of Fish and Game estimated the cost of training a new biologist was $16,000 in their first couple of years, the Department of Public Safety estimated that a new state trooper through the academy, equipment, and training was $150,000. For those who wish to earn a pension, those who choose to make that choice, at present, that is not available to them in Alaska, and so we are beginning to see in exit interviews an increasing number of folks who elect to begin their careers here, get significant training, and then take their portable retirement benefit south. Now for those who want to do that, that's the ideal choice and SB 88 retains that choice for them, but for those who would prefer to stay in Alaska throughout their lives, stay local as we grow our own, the opportunity to earn a pension comes back into existence with SB 88. 4:38:19 PM CHAIR BISHOP noted that there was no need for a sectional analysis, because the bill does not have a fiscal note at the present time. He stated that he looks forward to ultimately reviewing the bill's numbers in Senate Finance. MR. KIEHL summarized as follows: Employees will pay more of their paychecks into this new defined benefit tiers than any of the old defined benefit tier. Employees will contribute more cash and will always pay a share of their healthcare in retirement; in the old defined benefit tiers, that was not the case. In this tier, depending on how long you serve, you will pay anywhere from 10 percent to 30 percent or more of your retiree health insurance; that saves a great deal of money, it shares a great deal of risk with the employees, and there is an adjuster in the bill that ensures that the pre-funding cost, the amount we put away each pay period, pre-fund these benefits as they are earned, doesn't exceed the defined contribution. So our pre-funding systems will be equal no matter which system our employees choose. Mr. Chairman, you alluded to the forth coming analysis, the department has worked very closely with our office, we understand that they are beginning work on analysis and will work with us on the bill and we appreciate their willingness to get that rolling and work with the sponsor. CHAIR BISHOP expressed that he looks forward to reviewing the numbers to see if the state really can save money because the Legislature needs to look at all ways to save revenue regardless of economic conditions due to oil prices. 4:41:10 PM AARON DANIELSON, President, Public Safety Employees Association, Fairbanks, Alaska, remarked that the value of experience is what Alaska is losing with having the current Tier IV plan. He disclosed that many police and fire officers have left Alaska because the state cannot keep up with Lower 48 offerings. 4:43:10 PM JACOB BERA, member, Region VI Board of Directors, National Education Association-Alaska, Chugiak, Alaska, said SB 88 would greatly improve the current public employee retirement plan, improve teacher quality and retention, and save the State of Alaska money. He noted that according to statistics from Buck Consultants, Alaska has hired 3,037 teachers since 2006, by 2012 only 632 of those teachers have stayed in Alaska more than 5 years; this has led to more cost in recruitment and training, leading to the revolving door in the classroom that does not contribute positively to educational outcomes for students. He set forth that SB 88 creates a choice-pension system that helps attract and retain quality and effective teachers for the long haul, especially in specialized, high need areas in education and for rural Alaska. He disclosed that according to state actuaries, new healthcare costs safeguards and smaller employer contributions, SB 88 would save $70 million over 10 years. 4:46:40 PM PEGGY COWAN, Superintendent, North Slope Borough School District, Barrow, Alaska, stated that she supports SB 88 for the same reasons that she supports SB 79. She noted that SB 88 gives options, especially in recruiting the "millennial" aged workforce. She summarized that defined benefits do make a difference for attracting long term teachers and asserted that retention is good for Alaska's students. 4:47:46 PM CHAIR BISHOP announced that public testimony is closed. He said SB 88 will be held in committee.