SB 79-REEMPLOYMENT OF RETIRED TEACHERS & ADMIN  3:33:42 PM CHAIR DUNLEAVY announced the consideration of SB 79. The bill will allow school districts to hire retired educators. He said this is the third hearing and a committee substitute (CS), labeled 29-LS0444\E was adopted on 3/31/15. SENATOR HUGGINS moved to adopt Amendment 1, labeled 29- LS0444\E.1: AMENDMENT 1  Page 1, following line 13: Insert a new subsection to read: "(c) A school district that reemploys a member under this section who is retired under the defined benefit retirement plan established in AS 14.25.009 - 14.25.220 is required to make contributions under AS 14.25.070." Page 3, following line 2: Insert a new bill section to read:  "* Sec. 5. AS 14.25.070(a) is amended to read: (a) Each employer shall contribute to the system every payroll period an amount calculated by applying a rate of 12.56 percent to the total of all base salaries paid by the employer to active members of the system and to members who are retired from the plan  and reemployed under AS 14.20.136, including any adjustments to contributions required by AS 14.25.173(a)." Renumber the following bill section accordingly. Page 3, line 6: Delete "and" Page 3, line 7, following "Act,": Insert "and AS 14.25.070(a), as amended by sec. 5 of this Act," CHAIR DUNLEAVY objected for discussion. SHEILA PETERSON, Staff, Senator Mike Dunleavy, Alaska State Legislature, explained that Amendment 1 came as a result of a discussion between the sponsor and the Department of Administration. It requires school districts, when they hire a retired educator, to continue to pay the 12.56 rate toward the teacher retirement system, as if the educator was an active employee. This will prevent a drain on the Teacher Retirement System funds. She noted that Amendment 1 is found in two sections in the bill: Page 1, following line 13: Insert a new subsection to read: • Requires a school district that reemploys a retired educator to contribute to the Teacher Retirement System at a rate of 12.56 percent of the educator's salary. Page 3, following line 2: Insert a new bill section to read: • Adds to current statutory language that an employer shall contribute to the Teacher Retirement System an amount of 12.56 percent of a retired and re-employed educator's salary. • The contribution rate is the same as applied to active members of the system. Page 3, line 6 and Page 3, line 7: • Conforming language 3:37:12 PM CHAIR DUNLEAVY explained that the bill adds tools for school districts to expand a pool of educators and save costs. The discussion was about who pays into retirement. There was concern about the number of teachers who might want to retire and then get rehired under a special contract. JOHN BOUCHER, Deputy Commissioner, Office of the Commissioner, Department of Administration, answered questions related to SB 79. He explained that the concern was that when there is a new large pool of retired workers who are not subject to regular contributions, the overall contributions to the retirement system would go down proportionately. It would end up shifting costs to the state. He said having the districts pay 12.56 percent into retirement is a solution. 3:39:48 PM SENATOR STEVENS requested clarification. He gave an example of a person who retires and goes back to teaching and is no longer drawing more from the retirement system. He suggested that having the district pay the 12.56 percent into the retirement fund is an additional burden for the district. MR. BOUCHER clarified that educators who would have had covered wages are being replaced by educators with uncovered wages. The overall pool of retirement contributions is diminished and could shift costs to the unfunded liability. SENATOR STEVENS understood the situation, but saw it as unfair to districts. SENATOR GARDNER summarized that there is no direct impact to the employee, nor department, nor student, but there is a cost to the district in order to help with the underfunded liability of the retirement system. MR. BOUCHER agreed and added that the districts save by not having to pay insurance benefits. SENATOR GARDNER concluded that it also reduces the eagerness of the district to look for retirees that they can rehire, but it keeps open the option of hiring a qualified, experienced retired educator at some savings. CHAIR DUNLEAVY added that the savings is less than 12.56 percent. 3:43:12 PM SENATOR HUGGINS spoke of the various retirement tiers that may retire soon. MR. BOUCHER said when you remove long-time teachers, there is more of an impact on payroll savings. SENATOR HUGGINS what is true today is less true every year due to fewer Tier I and Tier II retirees. He asked if a retiree receives any longevity benefits from being rehired. MR. BOUCHER said no. SENATOR HUGGINS asked if the retirement benefits remain the same for rehirees. MR. BOUCHER said yes. SENATOR HUGGINS mentioned retirement incentives and this new program. CHAIR DUNLEAVY provided an example of a teacher who retired and then was offered a contract by Department of Education and Early Development (DEED). There have been district incentives in the past that have been offered, but there are no incentives under SB 79. 3:48:13 PM MR. BOUCHER confirmed that it is not a factor in this bill. CHAIR DUNLEAVY stated that the state gets a 12.5 percent cut to go along with this plan. It is much less expensive for districts to hire a retiree. SENATOR GARDNER asked if the teacher continues to receive retirement benefits during the time they are on contract. She asked if it makes for a larger imbalance in the unfunded liability if they have retired sooner than planned, had the contract not been an option. MR. BOUCHER said it would if that becomes a trend. He opined that the 12.5 percent will offset that situation. He said you are replacing wages with benefits, with wages that do not receive benefits. 3:51:58 PM SENATOR STEVENS liked the idea behind the bill. He did not see the plan as someone working as a full-time teacher retiring and then working full time. He provided as an example one of his favorite professors. He saw the plan as part-time or short-term teaching positions. He opined that school boards lose under the 12.56 percent scenario and the "system" wins; he did not see the equity there. CHAIR DUNLEAVY provided an extreme example. He restated the intent to provide a tool that does work for the district to provide economic relief. He said the bill is a result of his experience with the mentor project where experienced teachers give back to education. SENATOR GARDNER said that is a new way of looking at the bill. She thought it was a tool to provide teachers for hard-to-fill positions, not a cost savings measure. CHAIR DUNLEAVY said it is for both. SENATOR GARDNER asked if the wage scale would be the same in a rehire contract as it would be in a regular teaching contract. CHAIR DUNLEAVY said the mentor program had a set amount of pay that had no relationship to a district's pay scale. 3:57:01 PM SENATOR GARDNER asked if districts are taking up 12.5 percent of the costs, whether they are coming out even. CHAIR DUNLEAVY provided an example to show that a district would save money and get the benefit of a teacher's experience, and teachers would also benefit by teaching in a place they want to teach. SENATOR GARDNER asked if school districts would be commenting on Amendment 1 to SB 79. She gave an example of a teacher who currently teaches, retires, and continues to teach in the same district. CHAIR DUNLEAVY said the bill would not prohibit that. SENATOR STEVENS stated if there was a sound retirement system, Alaska would not have this problem. If the retirement system would have been well-managed, this bill would not be needed. MR. BOUCHER thought it was a reasonable statement. He said the department is doing its best not to add to the unfunded liability. 4:00:29 PM SENATOR HUGGINS recalled a .49 limitation for rehires. CHAIR DUNLEAVY explained that currently, an individual that retires can come back and work at a .49 position and collect retirement benefits. They can work full time on contract without benefits. SENATOR HUGGINS commented on the advantages proposed in SB 79. CHAIR DUNLEAVY agreed. CHAIR DUNLEAVY removed his objection and Amendment 1 was adopted. He opened public testimony. 4:02:16 PM LISA SKILES PARADY, Executive Director, Alaska Council of School Administrators and Alaska Superintendents Association, testified in support of SB 79, but not Amendment 1. She commented on the staggering shortage of teachers and administrators in Alaska. She maintained that it would be better to have the bill with the amendment than for the bill to not pass at all. SENATOR GARDNER asked whether the amendment provides any cost savings to districts. She also asked if there is any concern about unanticipated consequences from people retiring early, when they otherwise wouldn't have, to take advantage of this option. MS. SKILES PARADY said the concern for unanticipated consequences was part of the discussion with the Department of Administration. It is educators' perspective that retirement is a very serious decision. Also, there is a one-year break requirement before rehiring takes place. Regarding cost savings, she noted that each district will be different and have different needs. She termed the retirees "at will employees" that do not take from, or add to, the retirement system. She opined that the amendment would reduce cost savings to districts. 4:08:08 PM SENATOR STEVENS understood that the bill is a tool that appears to be a great way for districts to save. JACK WALSH, Superintendent, Craig School District, testified in support of SB 79. He believed that the bill has many positive benefits, however, he suggested that the bill would eliminate some of the savings allowed for the .49 employees. The cost savings for teachers would be good for districts and there are advantages to hiring retirees. He spoke of hiring educators who have expertise to fill gaps in the district. 4:11:54 PM CHRIS REITAN, Superintendent, Galena City School District, testified in support of SB 79, but not of the amendment. He concurred with the comments by Ms. Skiles Parady. He said he would like to see retired educators with Alaskan experience working in schools during these challenged economic times. He said he would rather not see the amendment, but approves the bill as a whole. 4:14:01 PM PATRICK MAYER, Superintendent, Wrangell Public School District, testified in support of SB 79. He concurred with the two previous testifiers that they would rather have the amended version of SB 79 than no bill at all. He saw the need for the bill due to the shortage of teachers in Alaska, especially in rural Alaska. He said hiring from a pool of experienced staff will be important to his district. He also saw the incentive for the retiree to be able to continue to work. SENATOR STEVENS referred to the disadvantages from the .49 provision previously mentioned. He asked if Wrangell has any experience with that. MR. MAYER said there was only one instance of that in his district. He said he wants to encourage new teachers to come to Wrangell. He didn't see it as being a huge deterrent, noting it's a case by case situation. 4:18:07 PM LINCOLN SAITO, Chief Operating Officer, North Slope Borough School District, testified in support of SB 79. He said the bill is less attractive with the amendment, but still attractive. Not having to pay health insurance would save the district 25 percent of a person's salary. He said they want a larger pool to select from because they are having trouble filling 9 positions after going to 5 job fairs. He stressed the need for good teachers for their students. CHAIR DUNLEAVY closed public testimony. He noted a fiscal note is forthcoming. He wished to move the bill. SENATOR HUGGINS commented that the bill has more merits than negatives and will provide a pool of educators for Alaska. 4:21:59 PM SENATOR HUGGINS moved to report CS for SB 79, as amended, from committee with individual recommendations and a forthcoming fiscal note. CHAIR DUNLEAVY announced that without objection, CSSB 79(EDC) is reported from the Senate Education Standing Committee.