HOUSE FINANCE COMMITTEE February 15, 2000 1:45 P.M. TAPE HFC 00 - 33, Side 1. TAPE HFC 00 - 33, Side 2. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder Representative Phillips Representative Austerman Representative G. Davis Representative J. Davies Representative Williams participated via teleconference. Vice Chair Bunde, Representative Moses, and Representative Grussendorf were not present for the meeting. ALSO PRESENT Representative Pete Kott; Patti Swenson, Staff, Representative Con Bunde; Guy Bell, Director, Division of Retirement and Benefits, Department of Administration; Dave Stout, Retirement and Benefits Specialist, Department of Administration; Karen Childers, Communications Supervisor, Juneau Police Department, Juneau; Del Smith, Deputy Commissioner, Department of Public Safety; John Cyr, Alaska President, National Education Association (NEA), Juneau; SUMMARY HB 230 An Act granting certain dispatchers in police or fire departments or for the state troopers status as peace officers under the public employees' retirement system; and providing for an effective date. CS HB 230 (FIN) was reported out of Committee with a "do pass" recommendation and with an indeterminent fiscal note by the Department of Administration dated 2/4/00. HB 236 An Act relating to credited service in the teachers' retirement system for part- time employment. HB 236 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration dated 2/9/00. HOUSE BILL NO. 236 An Act relating to credited service in the teachers' retirement system for part- time employment. PATTI SWENSON, STAFF, REPRESENTATIVE CON BUNDE, explained that the purpose of HB 236 was to correct an inequity in the Teachers Retirement System (TERS). Under the current system, teachers working more than 50% of the time, but less than full time, receive only one-half service credit for time worked. In other words, teachers in this group contribute more retirement dollars, but do not get a retirement benefit consistent with their contribution. Ms. Swenson stated that HB 236 would correct the inequity in the teacher retirement system by giving teachers, who work more than 50% of the time, but less than full time, retirement service based on time worked. Representative G. Davis inquired if the entire fund would increase the calculated contribution rate by approximately .06% and if all members of the group would pay that. Ms. Swenson replied that teachers are currently paying that rate. She requested that Guy Bell answer the question in more depth. GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, explained that there is a calculated cost of .06% of covered payroll. He noted that since the employee calculation rate is fixed, 8.65% would go to the employers. The employees are effectively paying in based on the time that they put in. The legislation would create a small additional liability to employers, because it is an adjustment to the benefit. However, this will not have an affect on the 12% contribution rate. The .06% rate will be absorbed by the system's current rate of 12% for employers. Representative Phillips commented that several years ago, the Legislature passed a similar bill for the non-certified employees. She asked if the nurses would be classified the same as the teachers. Mr. Bell advised that school nurses are generally classified as teachers. Representative Phillips asked if it was the intent of Representative Bunde that nurses be covered under this legislation. Ms. Swenson replied that it was. Mr. Bell pointed out that decision would be each district's discretion. Co-Chair Mulder pointed out that Section #2, the retroactive portion, was "troubling". That section would allow employees that have worked in excess of ½ time in the past, to come back and make application to the portion of the time that they worked. Mr. Bell explained that had been included in the calculation as well as the future costs to the State. Co-Chair Mulder suggested that would be an administrative nightmare. Mr. Bell requested the retirement specialist from his Division testify regarding that concern. DAVID STOUT, RETIREMENT AND BENEFITS SPECIALIST, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, noted that his job required administering the functions as prescribed in HB 230. He commented that with the computerization of the system, it would not be difficult to accomplish a change in the service from 50% to a prorated base. Representative J. Davies noted that this would not be totally retroactive, but rather, would address those coming up for retirement. Representative J. Davies added that this calculation would have to be determined regardless. Co-Chair Mulder asked the number of people eligible in this category. Mr. Stout replied that there is a small amount of teachers that teacher part time. He guessed that only 15% - 20% of all active teachers has some part-time service in their careers. Co-Chair Mulder interjected that was a significant number. Co-Chair Therriault inquired if the total cost would be absorbed. Mr. Bell replied that he had been advised that the costs could be absorbed. Co-Chair Mulder voiced concern with adding something to the benefit. He commented that there has been a determination made without the proper calculation used. He foresaw a large fiscal note "down the road". Representative G. Davis noted that the bill only related to the TERS budget. He pointed out that the State budget would not be directly affected, however, costs would be "passed through" to the school districts. The problem down the line exists with the employee and the employer. Representative G. Davis noted that his concern was having an unfunded mandate. Co-Chair Therriault interjected that staff just informed him that 20% far surpassed the "real" number. JOHN CYR, ALASKA PRESIDENT, NATIONAL EDUCATION ASSOCIATION (NEA), JUNEAU, responded that last year, it was determined that there are about 250 people statewide that would be affected through the proposed legislation. The problem exists because those people are already paying into the system. He noted that if a person works ¾ time, they are paying into the system for the ¾ time rate, however, when they retire, they only receive ½ time rate payment. He emphasized that the system is currently making money from those employees. When those employees leave the system, the money is not retroactive. Representative Foster understood that a net zero would benefit the system and would relate to those employees working 25% and getting 25% rather than 50%. He thought this would be a "wash". Co-Chair Therriault explained that the employee would be required to work a minimum of a certain percentage before they would be eligible. Mr. Bell replied that you would have to work a minimum of half time (50%) to be a member of the system. Mr. Cyr added that each local district decides who is part of either the TERS or PERS system. Representative G. Davis asked what state employees would be affected by the legislation. Mr. Bell stated that there are only 230 employees within that system. He did not know how many of those were part-time. Representative Foster asked where most of the part-time teachers were located in the State. Mr. Cyr replied that the majority of these teachers are located in Anchorage. He acknowledged that there are very few part-time teachers in the Bush area. Co-Chair Mulder noted that he had a conflict of interest as one of his past employees was on the list. [Copy on File]. Co-Chair Therriault objected to Co-Chair Mulder abstaining from voting. Representative J. Davies declared a conflict because his wife could have been a part-time schoolteacher. Co-Chair Therriault objected to Representative J. Davies abstaining from voting. Representative Foster MOVED to report HB 236 out of Committee with individual recommendation and with the attached fiscal note. There being NO OBJECTION, it was so ordered. HB 236 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration dated 2/9/00. HOUSE BILL NO. 230 An Act granting certain dispatchers in police or fire departments or for the state troopers status as peace officers under the public employees' retirement system; and providing for an effective date. Representative J. Davies MOVED that work draft #1-LS0958\H, Cramer, 2/15/00, be the version before the Committee. There being NO OBJECTION, the work draft was adopted. REPRESENTATIVE PETE KOTT stated that HB 230 will require all dispatchers under the Public Employees Retirement System (PERS), who elect to change from a thirty year retirement to a twenty year retirement, to pay the employees and the employers contribution of the costs of that twenty year retirement conversion. Representative Kott noted that approximately 263 PERS employees would be affected by the legislation and of that number, approximately 65 are state employees. The cost to each employee for the employee contribution would be approximately $450 dollars per year of service under the PERS system. Representative Kott advised that would be a total cost of approximately $900 dollars per year for years of service under the PERS system for each employee that elects to change his or her retirement terms. Under the proposed legislation, there would be no cost to the employer and the employee would pay all costs when they voluntarily elect to make the change in their retirement system. Representative Kott noted that dispatchers are in training for a year, which, he pointed out was a major financial commitment. He believed that training would help to prevent burnout and retain personnel. There is zero cost associated with the legislation and participants would be able opt for a longer period than the 20 years. Co-Chair Therriault pointed out that the original fiscal note accompanying the bill had been indeterminate. He explained that in the original legislation, there was an unknown cost, whereas, the language contained in the committee substitute changed that status. Representative G. Davis asked if a person had worked for ten years and then decided to work for a total of twenty years, would they then be able to begin payments at that time. Representative Kott explained that the bill does not provide for that option. He pointed out that in the previous version of the bill, the employee would be required to buy it up front. He added, in the proposed legislation, there exists an unknown quantity, which would be fairly close to how much that person would be responsible to pay for the 20- year period. He suggested that the employee could set aside money on a monthly basis in order to make a bulk payment. Co-Chair Therriault did not believe that it would be good to place an employee into a situation where they would be responsible for making an additional contribution. He suggested that the best way to address this would be for the employee to have the option to either increase their deferred compensation to set money aside or establish an annuity to make contributions. The Division of Retirement and Benefits could help those employees determine a realistic number to target at the end of the 20 years. KAREN CHILDERS, COMMUNICATION SUPERVISOR, JUNEAU POLICE DEPARTMENT, JUNEAU, stated that public safety dispatching is like no other job. The nature of the job requires technical, communication, multitasking and interpersonal skills. What separates the job from others is that a dispatcher must have the ability to disengage their emotions in order to do what needs to be done. She advised that dispatchers deal with the worst of life's realities. They talk with people that are angry, scared, intoxicated, suicidal, mentally ill, victims of domestic violence and child abuse. She stated that true dispatchers are capable of doing the job because it satisfies something inside them. They do it for reasons that are difficult to understand. Ms. Childers concluded that with HB 230, the State of Alaska would have the opportunity to do the just and equal thing. Not to discount dispatchers as clerical help, but instead to recognize dispatchers as in integral member of the public safety and law enforcement team. She urged passage of the legislation, noting that Alaska now has the opportunity to show their support for these front-line workers. DELL SMITH, DEPUTY COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY, commented that he has supervised dispatchers for the past 30 years. He emphasized that it is a very stressful job. The opportunity to get out of a stressful job and maintain a good attitude is extremely important. The proposed legislation provides an opportunity to retain and keep good dispatchers who can see "a light at the end of the tunnel". Mr. Smith reiterated how important it is to maintain and keep good dispatchers. Mr. Smith pointed out that the Alaska Association Chief's of Police strongly supports this legislation. GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, in response to Representative Foster, explained that the retirement determination was based on your three to five high year average salary, multiplied by the number of years worked. He explained that the multiplier for the first ten years is 2% per year. As the bill is written, the PERS other benefit applies, which only would go to the Peace Officers service, not the Peace Officer benefit. After 20 years, a persons retirement benefit would be 42.5%, 20% for the first ten years and 22.5% for the second ten years equaling the final average salary and including the actuarial adjustment for the cost of the benefit. Mr. Bell continued that another portion of the question was "Is one worth more than the other". The answer is yes, one does cost more than the other. The additional 10 years of benefits has a net present cost of a lot more than waiting until 30 years. He did not know if it would be a livable income. Co-Chair Therriault noted that there were age restrictions on the 30 year retirement plan, whereas, on the 20 year plan there were none. Mr. Bell noted that the Tier I normal retirement age is 55 years old, whether or not, there is a 20 or 30 year retirement. Many Peace Officers get to retire before that age. Another consideration is the medical benefit liability which applies to the Tier I employees that were hired before July 1, 1986. Co-Chair Mulder asked if people could receive retirement with pay before 55 years old. Mr. Bell replied that they could if. He stated that if you were a Peace Officer and had 20 years of service, you could take a normal retirement benefit. If you are a PERS "other" you would work 30 years before you could take a normal retirement benefit. Co-Chair Mulder clarified that a regular state employee would have to wait until the age 55 or work for 30 years. Representative Austerman advised that there is more than the dollar amount being considered. He spoke to the amount of stress related to this work. Mr. Bell noted that the Department had not yet had an opportunity to prepare a fiscal note to accompany the current work draft version before the Committee. He stated that the Department will show a zero fiscal note with this legislation at this time. Representative G. Davis noted that HB 159 had been included with member's packets for review. He commented that it is similar to HB 230 and that there would be no costs incurred to the State or the municipalities. (TAPE CHANGE, HFC 00 - 33, Side 2).  Representative G. Davis stated that the mechanism contained in HB 159 speaks to the same stress level featured in HB 230. He invited Committee members to consider HB 159 as an amendment to roll into HB 236. Co-Chair Therriault noted that he had intended that HB 159 be heard at the Committee meeting but because of scheduling complications, it had not been listed. He pointed out that HB 159 has a $375 thousand dollar fiscal note. He noted that he was not aware of the employee turnover and "burnout" as exists in HB 230. Representative G. Davis noted that he had not had time to work on the concept of an amendment for HB 159. Representative Austerman spoke in support of HB 236 acknowledging the stress associated with that work. Representative G. Davis asked that the Committee consider holding the bill until an amendment could be formalized. Chair Therriault inquired regarding the fiscal for HB 159. Mr. Bell stated that if HB 159 was included in HB 230, it would have a similar non-fiscal impact. Effectively, the burden would be carried totally by the employees. Co-Chair Therriault stated that he had not heard that there was a problem with the rate of turnover as associated with HB 230. He noted that he supported HB 230 because of the problem with retention of those employees. Representative Austerman spoke against holding HB 159 for further consolidation of the two bills. Co-Chair Therriault agreed. He added that the Committee would need to hold HB 230 while waiting for the revised fiscal note, however that should not take too long. He suggested that HB 159 could be added as a possible floor amendment if Representative Kott would support that consideration. Representative Foster MOVED to report CS HB 230 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative J. Davies pointed out that at this time, there is no fiscal note. Co-Chair Therriault commented that the bill could be moved, expecting the zero fiscal note to come forthright to Committee. Representative Williams interjected that he believed that HB 159 would fit into HB 230. Co-Chair Therriault noted that he would schedule the HB 159 for the House Finance Committee calendar next week. Representative Williams reiterated that HB 159 could be amended to fit into HB 230. Co-Chair Mulder suggested that incorporating HB 159 into HB 230 would slow the passage of HB 230. Representative J. Davies OBJECTED to moving HB 230 from Committee and then waiting for the fiscal note. He advised that he objected to that procedural process. He recommended moving the bill when the fiscal note arrives. Co-Chair Mulder agreed that in most situations the bill and fiscal note should be moved together whenever there is a substantive change, however, he noted that there have been no important changes to this bill. The Department has informed the Committee that the fiscal note will be net zero. Representative J. Davies WITHDREW his OBJECTION. There being NO further OBJECTION, it was so ordered and the bill passed from Committee. CS HB 236 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration. ADJOURNMENT The meeting adjourned at 2:40 P.M.