SB 6-RIP FOR PUBLIC EMPLOYEES/TEACHERS  9:29:45 AM CHAIR HOLLAND reconvened the meeting and announced the consideration of SENATE BILL NO. 6 "An Act relating to retirement incentives for members of the defined benefit retirement plan of the teachers' retirement system and the defined benefit retirement plan of the Public Employees' Retirement System of Alaska; and providing for an effective date." He noted that there was a work draft committee substitute (CS) and solicited a motion. 9:30:07 AM SENATOR HUGHES moved to adopt the work draft CS for SB 6, work order 32-LS0028\B, as the working document. 9:30:20 AM CHAIR HOLLAND objected for purposes of discussion. 9:30:24 AM ED KING, Staff, Senator Roger Holland, Alaska State Legislature, noted two changes in the committee substitute. Change #1:  To address the concern regarding losing teachers in districts already facing teacher shortages, language was added to direct the commissioner of administration to deny an application by a teacher if doing so would create undue hardship for the school district. The change is in section 2, subsection (b), which appears on page 2, lines 14-15 of version B. Change #2:  To acknowledge the fact that there may be financial benefits even in situations that do not result is a permanent reduction to positions, the last line of the intent language was deleted. MR. KING noted that Senator Micciche expressed concern that allowing teachers to retire in school districts that already have recruitment and retention problems might be problematic, so language was added to attempt to address that. 9:31:26 AM CHAIR HOLLAND removed his objection. There being no further objection, version B was adopted. He invited bill sponsor Senator Kawasaki to address the committee. 9:31:41 AM SENATOR SCOTT KAWASAKI, Alaska State Legislature, Juneau, Alaska, sponsor of SB 6, thanked the committee for bringing the bill forward. He said retirement incentive programs have been used since the '80s in both the private and public sectors. In Alaska, RIP bills were used in '86, '89, and '96. A bill in 2004 did something similar to what SB 6 proposes. The cost savings are tremendous. In '86 the estimated savings was over $25 million in year one. According to Legislative Audit, the '89 retirement incentive program demonstrated $23 million in savings, representing 1,700 employees. In '96, the fiscal note for an identical bill showed a $41 million savings in year one. He said this is a time to find savings and prevent layoffs, and SB 6 does that. SENATOR HOLLAND invited John Holst, the Sitka superintendent, to testify. 9:33:40 AM JOHN HOLST, Superintendent, Sitka School District, Sitka, Alaska, said that he has read through the bill several times. It is similar to bills in the past, but it seems unduly complicated. Sitka is in the middle of a reduction and is offering a bonus of $10,000 that is not connected to the Teacher Retirement System (TRS). Four teachers are going to take advantage of that. It is a simple and straightforward thing for Sitka. The bill could allow for more local control if the legislature instructed TRS to count any bonuses as earned income. Right now, a bonus the district offers is outside of TRS and does not qualify as earned income. That one change would help Sitka immensely. People always want to know if a bonus will count for retirement. The intent of this bill is aimed at the right target. In the past these bills were related to a significant downturn in population and as such allowed removal of positions in an orderly fashion. The current situation is the need for pruning budgets and making reductions in positions. In most situations, the people taking the bonus will have to be replaced. Inside the bill, in at least once case, it says the position cannot be filled and must remain vacant. CHAIR HOLLAND clarified that Mr. Holst is invited testimony. 9:37:43 AM SENATOR BEGICH pointed out that the bill says the retirement incentive program is not mandated, it is a "may." Sitka has the wherewithal to go beyond this retirement program, so it is doing so. The bill is provided as a tool to give guidance to districts that cannot offer a substantial bonus. The bill will have no material effect on Sitka if it chooses not to enter this particular state retirement incentive program. SENATOR BEGICH described the following as a critical component of the bill: "RETIREMENT INCENTIVE PROGRAM (a) An employer including a state agency, a political subdivision of the state, a public organization, and the University of Alaska may elect to adopt a retirement incentive program under this Act." It is not designed to negatively impact the Sitka School District. It is designed to provide a tool for those districts that don't have the tax base or wherewithal that Sitka enjoys. There are "shall" retirement incentive programs that are dangerous for local jurisdictions that he would never support. This is not one of those. 9:39:35 AM MR. HOLST said he understands this is voluntary. Whenever teachers want to tack on three years to their service in order to retire and get a larger benefit, the pressure will be on the district to participate. If it is a year of negotiation with the teacher union, it will be on the table for discussion and may be part of the agreement. There are significant financial impacts on districts. The intent is wonderful, but it is unduly complicated and going to create problems for local districts. He understands it is a choice to participate, but the pressure will come from teachers and their unions to force districts to participate. SENATOR HUGHES questioned the need for the bill if a district can choose to participate and structure the program in a way that works for the particular district. 9:41:33 AM SENATOR KAWASAKI answered that it seems that Sitka is offering a one-time $10,000 payment to retire. By contrast, the school district in Fairbanks has a $25 million deficit next year and there may be 200 layoffs throughout the system, from custodial staff to certified teachers. Fairbanks does not have the cash to pay an incentive to retire. SENATOR HUGHES asked, should become law, if the Sitka superintendent could continue to offer a monetary incentive to retire or if that district would have to follow the process structured in the bill. SENATOR KAWASAKI answered that nothing prevents a school district from offering a signing bonus or retirement incentive. SB 6 codifies the retirement incentive program for school districts, the university, and state service. It includes everyone in the TRS or PERS (Public Employee Retirement System). SENATOR HUGHES recalled that either last year or the year before, Senator Micciche introduced a bill to rehire retired teachers. She asked how that law would mesh with SB 6 and if it had a two-year wait period like SB 6. SENATOR KAWASAKI responded that the retiree rehire bill, which was Senate Bill 185, passed the Senate 19-1. Its conditions are different from SB 6. A retired educator can be rehired if they have been retired for at least six months and are 62 years of age or younger. If older than age 62, they have to wait for 60 days. If people want to retire with the retirement incentive program in SB 6, they would be under a different part of law than the retire rehire system. He deferred to Mr. Hayes to discuss the particulars. 9:45:02 AM JOE HAYES, Staff, Senator Scott Kawasaki, Alaska State Legislature, explained that under SB 6, the district can bring educators back under contract or as substitute teachers, but they cannot come back under TRS. SENATOR HUGHES recalled that under Senator Micciche's bill, retired educators cannot return under TRS. She noted the different waiting periods for the two bills and asked, since there is a teacher shortage, if it would make more sense to bring the early retired teachers back in six months rather than two years. SENATOR KAWASAKI advised that under Senator Micciche's bill, retirees have to come back under TRS and school districts will be required to pay 12.56 percent of base salary to TRS. CHAIR HOLLAND noted that the next committee of referral is Labor and Commerce and then Finance. The committee has resolved the education aspect of the bill. There will be time for additional discussion. SENATOR HUGHES asked the sponsor to entertain the idea of shortening the waiting period for teachers because the problem is not going to go away, especially in rural communities. 9:47:56 AM CHAIR HOLLAND opened public testimony on SB 6; finding none, he public testimony. He solicited a motion. 9:48:22 AM SENATOR HUGHES moved to report the work draft CS for SB 6, work order 32-LS0028\B, from committee with individual recommendations and attached fiscal note(s). CHAIR HOLLAND found no objection and CSSB 6(EDC) was reported from the Senate Education Standing Committee.