HOUSE FINANCE COMMITTEE MAY 7, 1996 1:05 P.M. TAPE HFC 96 - 169, Side 1, #000 - #515. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:05 P.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Alison Elgee, Deputy Commissioner, Department of Administration; Robert Stalnaker, Director, Division of Retirement and Benefits, Department of Administration. SUMMARY SB 152 An Act relating to geographic differentials for the salaries of certain state employees who are not members of a collective bargaining unit; relating to periodic salary surveys and preparation of an annual pay schedule regarding certain state employees; relating to certain state aid calculations based on geographic differentials for state employee salaries; and providing for an effective date. HCS CS SB 152 (FIN) was reported out of Committee with an "amended" recommendation and with fiscal notes by the Office of the Governor dated 3/29/96 and two by the Department of Administration. SENATE BILL 152 "An Act relating to geographic differentials for the salaries of certain state employees who are not members of a collective bargaining unit; relating to periodic salary surveys and preparation of an annual pay schedule regarding certain state employees; relating to certain state aid calculations based on geographic 1 differentials for state employee salaries; and providing for an effective date." ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION, provided a sectional analysis of the legislation. Section #1, the purpose statement, relates to Section #7. This is the language establishing the differential criteria for the cost-of-living differential (COLD) for the marine units. Sections #2 - #6 deal with the Court System, implementing a salary increase for judges in the amount of 5.2%. Ms. Elgee continued, Sections #8 - #10 keep the revenue sharing provisions of the statute identical to the current status, tied to the geographic differential schedule contained in AS 39.27. Section #11 provides a technical amendment which would allow the State to pay terminal leave in a lump sum payment upon termination. Section #12 would amend the exempt statute to include the employees of the Division of Labor Relations. Representative Martin asked the reason for including Section appeared in a work draft proposed and adopted by the Senate in their version of SB 152. It was not introduced by the Governor. Representative Martin recommended that Section Representative Martin's suggestion. Ms. Elgee noted that Section #13 would amend the salary schedule in statute which covers legislative and executive branch non-covered employees, so as, to incorporate an increase which would become effective July 1st of the next three years. Section #14 begins the geographic differential amendments, which are similar to legislation introduced at the request of the Governor. Section #15 amends the statutory language requiring development of the cost-of- living and salary schedule survey on an annual basis, every five years subject to appropriation. ROBERT STALNAKER, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, spoke to the retirement provisions. Section #17 addresses the contribution rates for employers. Section #18 changes the service requirement benefit for Peace Officers placing an age requirement of 50 years old in order to exercise the twenty year out option. Representative Martin felt that employers should be concerned with the retirement of an employee because of the current status of our social security system. He recommended that the contribution stay at the same level or 2 more, rather than being reduced. Mr. Stalnaker remarked that the intent of implementing Tier III would be to lower future costs by reducing retirement and benefits. He added, the Governor did not introduce a Tier III program, but rather introduced a Retirement Incentive Program (RIP). Representative Martin inquired if private and public employers should be more alarmed regarding the employees retirement system. Mr. Stalnaker agreed, reiterating the weakness in the current social security system. Mr. Stalnaker continued, Section #19 defines the early retirement reduction. Currently, the law allows for an actuarial reduction of which 1/2 of 1% per month is mixed with the number. Section #20 establishes in statute what the early retirement reductions are. This would not detrimentally impact current employees. Section #20 addresses the benefit multiplier. Section #21 would remove a portion of the joint survivor options. The option would reduce a retirees benefit if their survivor pre-deceased them, amounting to a technical change. Section #22 prefaces Section #23 which addresses the automatic post retirement pension adjustment. Mr. Stalnaker explained that section would clarify that the post retirement pension adjustment would be paid at 50% of the increase to the cost-of-living once that retiree reaches the age of sixty (60) years old. He continued, Section #24 provides a conforming technical amendment. Section #25 deals with insurance, providing health insurance for the retiree only, while the family would have to pay for spousal coverage independently. Section #26 would change the definition of "average monthly compensation" for calculating retirement and benefits from three to five consecutive years. Ms. Elgee stated that Section #27 was a conforming amendment to the duties of the Department of Labor. It would include the differential sections being moved into the revenue sharing statutes. Section #28 includes repealers that would remove the requirements for salary survey on behalf of the University. Mr. Stalnaker commented that it would repeal the level income option. Mr. Stalnaker pointed out that Sections #29 - #43 address the retirement incentive program, substantially the same as provided in SB 148; the same as introduced by the Governor in the Retirement Incentive Program. Ms. Elgee spoke to the one exception in which the Governor introduced separate incentive program, no longer reflective in the legislation. 3 Representative Brown asked which employees would be covered. Ms. Elgee replied that everyone would be covered except school district employees. They are covered in HB 354, which currently is in the Senate Rules Committee. Representative Brown asked if that concern should be incorporated into SB 152. Co-Chair Hanley noted that it "could" fit into the title of the proposed legislation. Ms. Elgee continued, Section #44 relates to increased salaries for non-covered employees. This section clarifies that similar adjustments would be made to exempt employees as well as the non-exempt. Section #45 permits the University of Alaska to be entitled to compensation increases based on the Board of Regent's policy. Section wage increase. That section would exclude judges salaries, who would be covered as the "non-covered" employees. Section #49 would be direction relative to legislative employees, who are already covered in the statutory salary schedule. Section #50 provides approval for the monetary terms for all the contracts before the Legislature. She added, Section #51 clarifies the transition language for implementation of the geographic differential. Ms. Elgee continued, Section #52 indicates that nothing in the proposed act would modify or terminate the collective bargaining agreement in effect on the day of the act. Section #53 repeals the transition language for the implementation of the geographical differential, July 1, 1998. Section #54 & #55 are repealers for the RIP provisions. She concluded, Section #58 specifies the effective date clause. Co-Chair Hanley spoke to Amendment #1, 9-GS0049\M.4, Cramer, 5/7/96. [Copy on file]. He explained that Amendment #1 would amend Section #49 setting legislators salaries. Representative Mulder MOVED to adopt Amendment #1. There being NO OBJECTION, it was adopted. Representative Mulder MOVED to delete Section #12 of the bill. There being NO OBJECTION, it was deleted. Representative Mulder MOVED to report HCS CS SB 152 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HCS CS SB 152 (FIN) was reported out of Committee with an "amended" recommendation and fiscal notes (2) by the 4 Department of Administration and (1) by the Office of the Governor dated 3/29/96. # ADJOURNMENT The meeting adjourned at 1:40 P.M. 5