SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE April 28, 1997 1:33 p.m. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Gary Wilken, Vice Chairman Senator Dave Donley Senator Randy Phillips Senator Lyman Hoffman MEMBERS ABSENT All members present COMMITTEE CALENDAR SENATE BILL NO. 130 "An Act amending the retirement incentive programs for municipalities and school districts; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 130 - No previous action to record. WITNESS REGISTER Senator Jim Duncan State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Prime Sponsor of SB 130 Roxanne Stewart, Staff to Senator Duncan State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Offered information on SB 130 Ms. Lucy Hope, President Mat-Su Education Association P.O. Box 870887 Wasilla, AK 99687 POSITION STATEMENT: Testified in support of SB 130 John Cyr, President NEA-Alaska 114 Second St. Juneau, AK 99801 POSITION STATEMENT: Testifed in support of SB 130 Jack Kreinheder, Senior Policy Analyst Office of Management & Budget Office of the Governor P.O. Box 110020 Juneau, AK 99811-0020 POSITION STATEMENT: Testified in support of SB 130 Bill Church, Retirement Supervisor Division of Retirement & Benefits Department of Administration P.O. Box 110203 Juneau, AK 99811-0203 POSITION STATEMENT: Present to respond to questions ACTION NARRATIVE TAPE 97-17, SIDE A Number 001  SB 130 RIP FOR SCHOOL DISTRICTS AND MUNICIPALITY CHAIRMAN MACKIE called the Senate Community & Regional Affairs Committee meeting to order at 1:33 p.m., and noted all committee members were present. SB 130 was before the committee as the only order of business. SENATOR JIM DUNCAN , prime sponsor of SB 130, explained the legislation will amend the retirement incentive program passed in 1996 to allow school districts and municipalities to request one or more window periods before June 30, 1999 so that their employees may participate in the program. Under the terms of the retirement incentive legislation which passed in 1995, the window period for school districts expired on December 31, 1996, with retirement required on or before August 30, 1997. The application period for municipalities is open until June 30, 1997 with retirement required on or before February 1, 1998. Senator Duncan said there were varying windows with the school districts having the shortest window. Senator Duncan said SB 130 will allow school districts and municipalities to request one or more window periods up until June 30, 1999, with retirement required within six months of the end of the application period. This gives school districts and municipalities more flexibility to address declining revenues over the same period as is available under the retirement incentive program that applies to state employees. Senator Duncan related that updated figures from the Division of Retirement & Benefits show that currently there are 37 of 61 school districts participating in the retirement incentive program. These districts have designated almost 1,800 employees to participate with an estimated savings over three years of almost $80 million if all choose to participate. To date, 125 school employees have actually retired with the rest expected to retire this summer after summer vacation begins. Senator Duncan said he thinks it is in the best interest of the state's municipalities and school districts to allow them maximum flexibility to address declining state revenues and increasing demands for public service. He urged the committee's favorable consideration of the legislation. Number 080 SENATOR PHILLIPS inquired if Senator Duncan had been contacted by the Anchorage School District, although he noted that the district did not offer the RIP last year. SENATOR DUNCAN responded that he had not be contacted by them, and he pointed out that the legislation would not mandate the district to offer the program, but it would give them another opportunity. CHAIRMAN MACKIE said he didn't have a problem with the change being proposed by Senator Duncan, and in authoring the legislation last year, it actually was an oversight on his part that there wasn't a little better window period. He then asked what level of savings the Juneau School District was able to generate by participating in the program. ROXANNE STEWART , staff to Senator Duncan, said she was informed by the business manager of the Juneau School District that they won't know what the savings will be until the retirements actually occur this summer, but they believe it will be a substantial number. Number 115 LUCY HOPE , President, Mat-Su Education Association, testifying from the Mat-Su Legislative Information Office, related the Mat-Su School District participated in last year's retirement incentive program and many of the teachers who will be retiring in June are at or near the top of the salary schedule. Extending the window for the program could allow more teachers to retire early. She noted the newly hired teachers in the district do not bring in any years of experience and so they are placed at the beginning of the salary schedule, therefore, when a teacher at the top retires, there is a guaranteed savings to the school district. She said the Mat-Su School District will see the affect of this program next year. Ms. Hope advised she would be written testimony from 50 teachers in support of SB 130, and she urged passage of the legislation. Number 150 SENATOR DONLEY commented that he objects to any testimony that says passage of this legislation is for the benefit of individual people rather than whether it is a good public policy call. MS. HOPE assured Senator Donley that the people who did write in support of SB 130 are speaking because it saves the state and the school district money and not because it personally benefits them. Number 170 JOHN CYR , President, NEA-Alaska, voiced NEA's support for SB 130 because it clear to them that the savings for districts will be considerable, especially considering the shrinking purchasing power the districts have had over the last 10 years. Number 180 SENATOR PHILLIPS asked if NEA is concerned about the "brain drain" that will occur with the retirement of teachers with many years of experience and expertise. MR. CYR acknowledged that it is a consideration, but he said the thing that comes into play is that no one is being forced into retirement. The people who are looking to retire are those people who wish to seek either another career or wish to be out of the classroom. Number 200 CHAIRMAN MACKIE asked Mr. Cyr is he feels that this type of system is forcing good teachers to retire when they don't necessarily want to retire. MR. CYR responded that he has been teaching for many years and he is not ready to retire and he wouldn't take the RIP. He added that every circumstance is an individual one, but the program allows an option for those people who want to do something else. It has made a difference in school districts when they lose that many senior people. He advised that during the interim they will be looking at a universal mentoring program to build some kind of system to make sure that there is some continuity when these teachers retire and they are replaced by younger, inexperienced teachers. Number 260 JACK KREINHEDER , Senior Policy Analyst, Office of Management & Budget, voiced the Administration's support for SB 130. He said when the retirement incentive program passed last year, they weren't sure whether the local governments necessarily wanted a three-year window at that time because there was some concern that if they did a three-year window people might wait hoping there might be a later one. He said that while this program doesn't affect the state directly, to the extent that school districts and local governments receive a lot of state funds, we all have an interest in helping them save money and make the state dollars that they do get go farther. CHAIRMAN MACKIE noted the presence of Bill Church, Retirement Supervisor, Division of Retirement & Benefits, Department of Administration. Number 295 There being no further testimony on SB 130, CHAIRMAN MACKIE asked for the pleasure of the committee. SENATOR WILKEN moved SB 130 and the accompanying zero fiscal note be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. There being no further business to come before the committee, the meeting was adjourned at 1:52 p.m.