SENATE BILL NO. 220                                                                                                           
                                                                                                                                
     "An Act  relating to additional state  contributions to                                                                    
     the teachers'  defined benefit retirement plan  and the                                                                    
     public employees' defined  benefit retirement plan; and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
2:17:39 PM                                                                                                                    
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
discussed  some  slides dated  4/16/14  (copy  on file).  He                                                                    
stated  that  there  was  a   presentation  of  the  Teacher                                                                    
Retirement System (TRS)  on the previous day,  but there was                                                                    
some  additional information  received in  the meantime.  He                                                                    
drafted a  graph based on  some of the information  from the                                                                    
actuaries. He stated that the  chart was very similar to the                                                                    
graph that was  presented on the previous day.  He looked at                                                                    
the slide titled, "Cumulative Costs  of Options to Eliminate                                                                    
PERS  and TRS  Unfunded Liability  ($ millions)".  He stated                                                                    
that the graph  was a combination of TRS and  PERS. He noted                                                                    
that  the base  case showed  the  lowest cost  in the  early                                                                    
years  and  the  highest  total cost.  The  dark  blue  line                                                                    
represented  the  governor's  proposal, which  deposited  $3                                                                    
billion total  cash infusion, and  ended up costing  less in                                                                    
the long run. He stated  that the graph showed two scenarios                                                                    
for PERS.  He stressed that  the graph would be  too muddied                                                                    
if he  addressed level-dollar and level-percent  for each of                                                                    
the options.  He remarked that  the graph was only  a sample                                                                    
of an  outcome. He  shared that a  $4 billion  cash infusion                                                                    
would be expensive initially, but  would become the cheapest                                                                    
over time.  He stated  that a $3  billion cash  infusion, as                                                                    
requested  by the  governor, but  went  to level-percent  of                                                                    
pay-amortization, it would be cheaper  than the base case by                                                                    
approximately  $500 million  per year.  He stressed  that it                                                                    
would pass the level dollar,  and would end up slightly more                                                                    
expensive than a $4 billion  cash infusion. He remarked that                                                                    
there  was  always  an  opportunity  to  increase  the  cash                                                                    
infusion,  or make  other changes  to the  system. He  noted                                                                    
that  the lines  in  the  future were  far  from a  reliable                                                                    
prediction or projection.                                                                                                       
                                                                                                                                
Mr.  Teal  looked  at  the   slide  titled,  "PERS  and  TRS                                                                    
Combined."  He   stated  that  the  slide   represented  the                                                                    
previous graph, but in number-form.                                                                                             
                                                                                                                                
Mr. Teal highlighted the slide  titled, "Cumulative Costs of                                                                    
Options to Eliminate PERS  Unfunded Liability ($ millions)."                                                                    
He  stated that  the  graph showed  some  changes that  were                                                                    
caused  by  the  differential  between  the  rate  that  was                                                                    
charged to employers,  which was 12.56 percent  in PERS, but                                                                    
the normal cost  was 12 percent. He stressed  that there was                                                                    
very little  difference between  the full-employer  rate and                                                                    
the normal cost of the program.  He stated that the rate cap                                                                    
in   TRS  was   22  percent,   and  the   normal  cost   was                                                                    
approximately   10  percent,   so   there   was  a   drastic                                                                    
difference.  He stated  that there  was  more money  flowing                                                                    
from  employers,  as  the  defined  benefit  employees  were                                                                    
replaced  with  defined  contribution employees.  He  stated                                                                    
that a  $3 billion cash  infusion into PERS would  mean that                                                                    
the debt would  be paid off in five years.  He felt that the                                                                    
option  may not  be wise,  because the  rates would  drop to                                                                    
zero.                                                                                                                           
                                                                                                                                
2:23:19 PM                                                                                                                    
                                                                                                                                
Mr.  Teal looked  at the  slide titled,  "PERS options."  He                                                                    
stated  that the  numbers showed  the same  outcomes as  the                                                                    
graphs.  He  felt  like the  numbers  showed  an  unreliable                                                                    
degree  of   accuracy.  He  felt  that   the  graphs  helped                                                                    
determine the overall spread between the different options.                                                                     
                                                                                                                                
SB  220  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:24:18 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:30:37 PM                                                                                                                    
RECONVENED