HOUSE STATE AFFAIRS STANDING COMMITTEE February 9, 1993 8:00 a.m. MEMBERS PRESENT Representative Al Vezey, Chairman Representative Pete Kott, Vice Chairman Representative Harley Olberg Representative Gary Davis Representative Fran Ulmer Representative Bettye Davis Representative Jerry Sanders MEMBERS ABSENT None OTHER HOUSE MEMBERS PRESENT Representative Terry Martin COMMITTEE CALENDAR *HCR 5: Relating to the twenty-fifth annual Girls' State. MOVED OUT OF COMMITTEE WITH A DO PASS RECOMMENDATION HJR 3: Proposing amendments to the Constitution of the State of Alaska limiting tenure in the legislature. HELD IN COMMITTEE FOR FURTHER CONSIDERATION HB 35: "An Act relating to deposits to the budget reserve fund." HELD IN COMMITTEE FOR FURTHER CONSIDERATION *HB 48: "An Act relating to delayed payment of legislators' salaries, and to state agency operating and capital budgets; and providing for an effective date." MOVED OUT OF COMMITTEE WITH A DO PASS RECOMMENDATION HB 36: "An Act relating to retirement incentive programs for the public employees' retirement system, the teachers' retirement system, and certain persons under the judicial retirement system; and providing for an effective date." HELD IN COMMITTEE FOR FURTHER CONSIDERATION (* first public hearing) WITNESS REGISTER Jon Peterson, Legislative Aide to Representative Gail Phillips State Capitol, Room 216 Juneau, AK 99811-1182 465-3718 Position Statement: Testified on behalf of the sponsor in support of HCR 5 Representative Terry Martin State Capitol, Room 411 Juneau, AK 99811-1182 465-3783 Position Statement: Prime Sponsor, HB 35 Representative Fran Ulmer State Capitol, Room 601 Court Juneau, Alaska 99811-1182 465-4947 Position Statement: Prime Sponsor, SSHB 48 Vernon Marshall, Executive Director NEA, Alaska 114 2nd Street Juneau, AK 99811 586-3080 Position Statement: Supported HB 36 Robert Stalnaker, Director Division of Retirement and Benefits Department of Administration P.O. Box 110203 Juneau, AK 99811-0203 465-4470 Position Statement: Provided information on HB 36 PREVIOUS ACTION BILL: HCR 5 SHORT TITLE: TWENTY-FIFTH ANNUAL GIRLS STATE BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) PHILLIPS,James,Toohey,Ulmer, Therriault, Grussendorf TITLE: Relating to the twenty-fifth annual Girls' State. JRN-DATE JRN-PG ACTION 01/22/93 126 (H) READ THE FIRST TIME/REFERRAL(S) 01/22/93 126 (H) STATE AFFAIRS 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 BILL: HJR 3 SHORT TITLE: LIMITING TERMS OF LEGISLATORS BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MARTIN,Kott TITLE: Proposing amendments to the Constitution of the State of Alaska limiting tenure in the legislature. JRN-DATE JRN-PG ACTION 01/04/93 22 (H) PREFILE RELEASED 01/11/93 22 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/93 22 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/26/93 (H) STA AT 08:00 AM CAPITOL 102 01/26/93 (H) MINUTE(STA) 01/26/93 (H) MINUTE(STA) 01/26/93 (H) MINUTE(STA) 01/26/93 (H) MINUTE(STA) 01/30/93 (H) STA AT 08:00 AM CAPITOL 102 01/30/93 (H) MINUTE(STA) 02/06/93 (H) STA AT 08:00 AM CAPITOL 102 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 35 SHORT TITLE: DEPOSITS TO THE BUDGET RESERVE FUND BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MARTIN,Therriault TITLE: "An Act relating to deposits to the budget reserve fund." JRN-DATE JRN-PG ACTION 01/04/93 33 (H) PREFILE RELEASED 01/11/93 33 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/93 33 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/26/93 (H) STA AT 08:00 AM CAPITOL 102 01/26/93 (H) MINUTE(STA) 01/30/93 (H) STA AT 08:00 AM CAPITOL 102 01/30/93 (H) MINUTE(STA) 02/06/93 (H) STA AT 08:00 AM CAPITOL 102 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 48 SHORT TITLE: DELAYED PAYMENT OF LEGISLATORS' SALARIES BILL VERSION: SSHB 48 SPONSOR(S): REPRESENTATIVE(S) ULMER,Navarre,B.Davis,Carney, Nordlund TITLE: "An Act relating to delayed payment of legislators' salaries, and to state agency operating and capital budgets; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/13/93 52 (H) READ THE FIRST TIME/REFERRAL(S) 01/13/93 52 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/14/93 62 (H) COSPONSOR(S): B.DAVIS 01/20/93 117 (H) COSPONSOR(S): CARNEY 01/25/93 151 (H) SPONSOR SUBSTITUTE INTRODUCED- REFERRALS 01/25/93 152 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/27/93 168 (H) COSPONSOR(S): NORDLUND 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 36 SHORT TITLE: RETIREMENT INCENTIVE PROGRAM BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MACKIE,Hudson,Ulmer,B.Davis, Brice TITLE: "An Act relating to retirement incentive programs for the public employees' retirement system, the teachers' retirement system, and certain persons under the judicial retirement system; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/08/93 33 (H) PREFILE RELEASED 01/11/93 33 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/93 33 (H) STATE AFFAIRS, LABOR & COMMERCE, FINANCE 01/28/93 (H) STA AT 08:00 AM CAPITOL 102 01/28/93 (H) MINUTE(STA) 01/28/93 (H) MINUTE(STA) 01/29/93 182 (H) COSPONSOR(S): HUDSON- FIRST COSPONSOR 01/29/93 182 (H) COSPONSOR(S): B.DAVIS, BRICE 01/30/93 (H) STA AT 08:00 AM CAPITOL 102 01/30/93 (H) MINUTE(STA) 01/30/93 (H) MINUTE(STA) 02/04/93 (H) STA AT 08:00 AM CAPITOL 102 02/06/93 (H) STA AT 08:00 AM CAPITOL 102 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 ACTION NARRATIVE TAPE 93-15, SIDE A Number 000 The ninth meeting of the House State Affairs Committee was called to order at 8:01 a.m. on Tuesday, February 9, 1993, by Chairman Vezey. He noted a quorum was present. HCR 5: TWENTY-FIFTH ANNUAL GIRLS STATE CHAIRMAN AL VEZEY read the title of HCR 5 and asked if Jon Peterson would like to discuss the resolution on behalf of Representative Gail Phillips, its prime sponsor. Number 045 JON PETERSON, LEGISLATIVE AIDE FOR REPRESENTATIVE GAIL PHILLIPS spoke in support of HCR 5 for the prime sponsor. Number 072 REPRESENTATIVE GARY DAVIS MOVED to pass out HCR 5. Roll call was taken with five yeas and two absent legislators not voting. HJR 3: LIMITING TERMS OF LEGISLATORS HB 35: DEPOSITS TO THE BUDGET RESERVE FUND Number 090 CHAIRMAN VEZEY said the committee substitute for HJR 3 was not accurate, so he moved on to HB 35. Number 117 REPRESENTATIVE TERRY MARTIN, PRIME SPONSOR of HB 35, discussed the budget reserve fund. He asked the date be amended to December 16. Number 156 CHAIRMAN VEZEY stated for the record that Representative Fran Ulmer joined the meeting at 8:09 a.m. He asked for a roll call vote to adopt the HB 35 amendment. Roll call was taken with five yeas, one abstained, and one absent. HJR 3: LIMITING TERMS OF LEGISLATORS Number 190 REPRESENTATIVE PETE KOTT suggested the committee should wait to discuss HJR 3 until the committee substitute was accurate. SSHB 48: DELAYED PAYMENT OF LEGISLATORS' SALARIES Number 200 REPRESENTATIVE FRAN ULMER, PRIME SPONSOR of SSHB 48, stated the purpose of the bill was to create an incentive for the legislature to complete the operating budget in a more timely manner. Until the budget passed no legislators would be paid. She shared her frustration with the bottleneck in the finance committee toward the end of session which interfered with the process of getting a bill to pass each year. She believed SSHB 48 would help the operating budget bill to pass more quickly. Number 257 CHAIRMAN VEZEY asked if SSHB 48 would confiscate or just delay the payment to each legislator. REPRESENTATIVE ULMER responded it would be a legal problem if the legislator's income was confiscated, so SSHB 48 would be to delay payment only. Number 269 CHAIRMAN VEZEY asked if delaying a check of $400.00 per week would really be an incentive. Number 274 REPRESENTATIVE ULMER said any incentive would be helpful because rules and guidelines were being ignored. Maybe the public would give more attention if, by the 90th day, the capital budget was not done, she added. (Chairman Vezey stated Representative Bettye Davis joined the committee at 8:15 a.m.) Number 292 REPRESENTATIVE ULMER discussed the changes in SSHB 48 on line 12 page 2. The Governor must submit the budget to the legislature by the 45th day instead of the 60th day, she noted. Number 306 REPRESENTATIVE KOTT did not believe the $400 would be a strong enough incentive, but felt the limitation might pressure the budget to be done in an untimely manner. This incentive affected the $400 salary only and no other funds, he pointed out. Number 324 REPRESENTATIVE HARLEY OLBERG asked why withholding the salary was not limited to members of the Finance Committee only. Number 329 REPRESENTATIVE ULMER said the influence on members of the committee from peer pressure would also be an incentive. Number 340 CHAIRMAN VEZEY asked about the intent of 30 days being set aside for non-budget attention. Number 344 REPRESENTATIVE ULMER said bills with fiscal notes and the operating budget would get crunched together. There would be better decision making if the operating budget was completed first, and less leverage against legislators and their bills would streamline the process, she added. Number 364 REPRESENTATIVE KOTT asked if the change to a 90 day session from a 120 day session would automatically change this problem. Number 370 REPRESENTATIVE ULMER said there would still be a crunch in the Finance Committee. By pacing legislators to break up the duties early in the session, things would be better organized, she believed. Number 381 REPRESENTATIVE GARY DAVIS applauded any effort to improve the system. To delay salary payment might not be effective but the message was good and might help the legislative image, he believed. He had thought of ways to improve the legislative process but wanted to wait a while to introduce his ideas. He wanted to see the response of other legislators to SSHB 48. Number 412 REPRESENTATIVE OLBERG said the money was symbolic, but the media could hold the legislature's "feet to the fire." He shared his frustration with the system and hoped to see SSHB 48 move out of committee. Number 424 CHAIRMAN VEZEY discussed the interest paid for withholding legislative salaries for 30 days would total less than $600 for all legislators as compared to $8 million spent annually on lobbying. Number 431 REPRESENTATIVE KOTT asked the committee to MOVE SSHB 48. Roll call was taken with a unanimous yes vote. HB 36: RETIREMENT INCENTIVE PROGRAM Number 443 CHAIRMAN VEZEY spoke on the following handouts: "State of Alaska, Department of Revenue, Division of Treasury, Teachers Retirement Trust Fund, Financial Statements, October 31, 1992;" "State of Alaska, Department of Revenue, Division of Treasury, Public Employees Retirement Trust Fund, Financial Statements, October 31, 1992;" "State of Alaska Judicial Retirement System, Financial Statements and Supplemental Schedules, June 30, 1992 and 1991, with independent auditors' report thereon by KPMG Peat Marwick;" "State of Alaska Teachers' Retirement System, Financial Statements and Supplemental Schedules, June 30, 1992 and 1991, with independent auditors' report thereon by KPMG Peat Marwick;" "State of Alaska Public Employees' Retirement System, Financial Statements and Supplemental Schedules, June 30, 1992 and 1991, with independent auditors' report thereon by KPMG Peat Marwick;" and, "ALASKA, Public Employees' Retirement System, Teachers' Retirement System, Component Unit, Annual Financial Report, Fiscal Year Ended June 30, 1992, Walter J. Hickel, Governor." These handouts were in the committee packet regarding financial statements and actuarial reports within the retirement funds. Number 605 VERNON MARSHALL, EXECUTIVE DIRECTOR, NEA ALASKA, spoke in support of HB 36 because of reduced personnel costs. His written statement was included in the packet. TAPE 93-15, SIDE B Number 000 CHAIRMAN VEZEY responded to Mr. Marshall's statements regarding the savings based on teacher contribution. MR. MARSHALL discussed the net savings of the first and second Retirement Incentive Program (RIP), for the Anchorage School District. Number 067 CHAIRMAN VEZEY discussed the total cost of the pension system funds being a one time cost over a three year period. Number 075 MR. MARSHALL said the cost to employers was $6.3 million. References were made to the handout by Mr. Marshall. Number 110 CHAIRMAN VEZEY talked about the employer having total discretion to calculate savings. The estimate to be saved and actual payment had a disparity in numbers. MR. MARSHALL discussed the disparity and costs for the school district which utilized the RIP. Number 182 CHAIRMAN VEZEY said a lot of dollars were at stake and the program would continue to be looked into. Number 190 ROBERT STALNAKER, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, discussed the two past RIP costs to employees and the formula used. The employer cost fluctuates, and the burden of utilizing the program was on the employer, he said. Number 228 REPRESENTATIVE G. DAVIS asked what the unfunded balance meant. MR. STALNAKER discussed the unfunded liability and funded liability. The balance was calculated over 25 years and the assumptions of savings and costs were on the employer, he said. References were made to reports within the committee. Number 282 REPRESENTATIVE G. DAVIS asked if the system had been changed over time. MR. STALNAKER explained the history of the changes within the system relating to cost of living increases. He also discussed cost containment. Number 351 CHAIRMAN VEZEY discussed the differences in the unfunded and funded actual amounts found within the financial reports of the teachers and public employees. MR. STALNAKER discussed the components of the 1992 report titled "Alaska." Discussion continued regarding all the reports found in the committee members packets. The topics of discussion included fluctuations, assumptions, contribution rates, financial projections of debt, unfunded liabilities, and funding ratios. TAPE 93-16, SIDE A Number 191 REPRESENTATIVE G. DAVIS asked if the RIP imposed employee turn over. MR. STALNAKER replied in the affirmative. Number 217 REPRESENTATIVE G. DAVIS asked what effects economy changes would make to RIP. MR. STALNAKER said any fluctuation would change the projected liability. Number 231 CHAIRMAN VEZEY asked if "what if" projections could be created, analyzed and reported back to the committee. Number 243 MR. STALNAKER replied in the affirmative. ADJOURNMENT Number 245 CHAIRMAN VEZEY adjourned the meeting at 9:55 a.m., and HB 36 was held over for further consideration.