SENATE BILL NO. 55 "An Act relating to employer contributions to the Public Employees' Retirement System of Alaska; and providing for an effective date." 9:37:39 AM Co-Chair Bishop recounted that it was the third hearing of SB 55, and the committee had heard public testimony on March 11, 2021. He intended to cover the fiscal notes and look to the will of the committee. 9:38:29 AM CAROLINE SCHULTZ, POLICY ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, spoke to SB 55. She detailed that the bill would change the way the state contributed to the Public Employees' Retirement System (PERS) system. The bill would allow the state to make the contribution from payroll, which would spread the funding across multiple fund sources, rather than having it be entirely funded entirely by Unrestricted General Funds (UGF) as part of the state's on-behalf payment or "state assistance payment." Ms. Schultz addressed a new fiscal note from various departments, OMB Component number 0. She pointed out that the fiscal note represented the increase to all state departments' payroll. She pointed out that the total cost in FY 22 was $103.4 million. The fund source line showed that the increase was spread across multiple fund sources, the largest of which was UGF for $70 million. There was $11.6 million in federal receipts, $17.7 million in other funds and $3.9 million in Designated General Funds (DGF). Ms. Schultz addressed a new fiscal note OMB Component 2866. The fiscal note showed the decrease in the state assistance payment by $95.8 million UGF. The fiscal note, combined with the previous note, provided the overall fiscal impact of about $25.7 million in UGF savings. Ms. Schultz addressed a new fiscal note from the Department of Administration Centralized Administrative Services, OMB Component 64. The fiscal note represented the actuarial cost to the PERS system fund caused by making the state on- behalf payment every month through payroll rather than having that portion of the payment occur at the beginning of the fiscal year. Because the funding would not be earning money in the PERS system throughout the year, there was a small cost to the PERS system in foregone earnings. She noted that the cost was estimated to be $200,000 in FY 23, increasing to $1.3 million in the out years. The costs would ultimately be borne by spreading out the state assistance payments through payroll. She pointed out an attached letter from the state's actuarial consultant, which indicated the opportunity cost of making the payment later rather than earlier in the fiscal year. 9:42:10 AM Senator Hoffman considered the fiscal note with OMB Component Number 0, with $103 million under personnel services, the vast majority of which was general funds of $70 million. He noted that there was no delineation under the position count over various departments. He asked if there were any positions involved with the $103 million. Ms. Schultz stated that the bill would not add any positions, and customary the line in the positions count on the fiscal note was for addition or subtraction of positions. The legislation would impact every PERS employee in state government and would impact payroll line for the vast majority of state employees. Senator Hoffman asked for the total position count of employees being affected. Ms. Schultz stated there were approximately 14,000 employees that would be affected. Co-Chair Bishop looked at the penultimate paragraph on page 2 of the fiscal note and noted that the calculations went through 2027. He asked about the cost that started at $200,000 and grew to $1.3 million in the out years. Ms. Schultz affirmed the starting cost of $200,000. She acknowledged that the amount would slowly grow over time given the lost earning value of the funds that were not deposited at the beginning of the year. She conveyed that the administration saw the lost earning value as a small cost when compared with the savings obtained from the bill. Senator Wilson MOVED to report SB 55 out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SB 55 was REPORTED out of committee with a "do pass" recommendation and with two new fiscal impact notes from the Office of the Governor, and one new fiscal impact note from the Department of Administration. Co-Chair Bishop discussed the agenda for the following day.