SENATE LABOR AND COMMERCE COMMITTEE  March 21, 2000 1:37 p.m. MEMBERS PRESENT  Senator Jerry Mackie, Chairman Senator Tim Kelly, Vice Chairman Senator Dave Donley Senator Loren Leman Senator Lyman Hoffman MEMBERS ABSENT  All Members Present COMMITTEE CALENDAR  SENATE BILL NO. 272 "An Act eliminating certain taxes under AS 21.09 on premiums from the sale of workers' compensation insurance; relating to the establishment, assessment, collection, and accounting for service fees for state administration of workers' compensation and worker safety programs; establishing civil penalties and sanctions for late payment or nonpayment of the service fee; and providing for an effective date." -HEARD AND HELD CS FOR HOUSE BILL NO. 230(FIN) "An Act permitting certain dispatchers in police or fire departments or for the state troopers to convert their credited service under the public employees' retirement system to credited service as peace officers; and providing for an effective date." -MOVED SCS FOR CS FOR HB 230(L&C) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION    HB 230 - No previous Senate action SB 272 - See Community & Regional Affairs minutes dated 3/1/00. See Labor and Commerce minutes dated 3/7/00. WITNESS REGISTER  Mr. Paul Grossi Director, Division of Workers' Compensation Department of Labor & Workforce Development P.O. Box 25512 Juneau, AK 99802-5512 POSITION STATEMENT: Commented on SB 272. Mr. Michael Hinchen General Manager Alaska Timber Insurance Exchange 2555 First Ave. Ketchikan, AK 99901 POSITION STATEMENT: Opposed to SB 272. Mr. Don Shannon Alaska Safety Advisory Council 232 Bentley Dr. Fairbanks, AK 99701 POSITION STATEMENT: Support for SB 272. Mr. Dwight Perkins Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, AK 99802-1149 POSITION STATEMENT: Commented on SB 272. Mr. Patrick Harman Legislative staff for Representative Pete Kott Alaska State Capitol Juneau, AK 99802 POSITION STATEMENT: Commented on HB 230. Mr. Al Tamagni Jr. Dispatcher, Anchorage Fire Department 6940 Burlwood Anchorage, AK 99507 POSITION STATEMENT: Supports HB 230. Ms. Tonya Kurtz Dispatcher for the Juneau Police Department P.O. Box 32146 Juneau, AK 99803 POSITION STATEMENT: Supports HB 230. Mr. Bill Church Retirement Supervisor Division of Retirement & Benefits Department of Administration P.O. Box 110203 Juneau, AK 99811-0203 POSITION STATEMENT: Commented on HB 230. Mr. Pablo Paiz Police Officer Anchorage Police Department 6600 Donna Drive Anchorage, AK 99504 POSITION STATEMENT: Supports HB 230. Ms. Karen Childers Communications Supervisor Juneau Police Department 4103 Blackerby St. Juneau, AK 99801 POSITION STATEMENT: Supports HB 230. Mr. Duane Udland Chief of the Anchorage Police Department 4501 S. Bragaw Anchorage, AK 99504 POSITION STATEMENT: Supports HB 230. Mr. Del Smith Deputy Commissioner P.O. Box 111200 Juneau, AK 99811-1200 POSITION STATEMENT: Supports HB 230. ACTION NARRATIVE  TAPE 00-10, SIDE A  Number 001 CHAIRMAN MACKIE called the Senate Labor and Commerce Committee meeting to order at 1:37 p.m. Present were Senators Mackie, Leman, Donley, Hoffman, and T. Kelly. The first order of business to come before the committee was SB 272. SB 272-WORKERS COMP AND WORKER SAFETY  MR. PAUL GROSSI, Director of the Division of Workers' Compensation, stated changes have been made to address concerns of the industry. CHAIRMAN MACKIE stated the intent was not to move SB 272 out of committee, but to have a hearing and let the House version come over to the Senate. Chairman Mackie expressed concerns about municipalities and timber industry self-insured groups. MR. GROSSI said SB 272 will eliminate the premium tax on workers' compensation insurance, enact the user fee, and establish a special account for funding workers' compensation and Occupational Safety & Health Administration (OSHA). Employers must cover workers with workers' compensation in three ways; purchase a workers' compensation insurance policy, certify they are self-insured, or become a member of the Joint Insurance Association (JIA). SB 272 is an attempt to establish that all employers pay the same rate based on the number of claims filed. The more claims submitted, the more employers will pay, and less claims will mean lower payments. SB 272 will promote safer working environments, allow all employers to pay at the same rate, and will eventually eliminate reliance on the general fund. Mr. Grossi stated 16 states use an approach similar to that in SB 272. OSHA needs to be ruled by the State and not be taken over by the federal government. CHAIRMAN MACKIE asked if Mr. Grossi had seen correspondence from the Alaska Forest Association and Sealaska regarding self-insured agencies that are concerned about SB 272. MR. GROSSI said no. MR. MICHAEL HINCHEN, General Manager of the Alaska Timber Insurance Exchange (ATIE), stated ATIE was founded in 1980 by members of the Alaska Loggers Association and is owned by its policy holders. Workers' compensation insurance costs have been reduced and improved workplace safety has resulted for workers. ATIE has concerns about SB 272 and HB 378, the companion bill to SB 272. The new user fee results in double taxation. Workers' compensation insurance premiums pay for losses, claims administration costs, and other administrative expenses. Lost payments make up 50-70 percent of the premiums that are collected for any given policy year. ATIE and other insurers would be taxed on lost payments that have already been subject to a premium tax. Mr. Hinchen referred to AS 21.09.210. The double taxation will have an adverse financial impact on ATIE and other insurance companies. If SB 272 does pass, ATIE will need to accrue an expense and a liability for future user fee payments that are based on lost reserves that relate to 1999 and prior policy lost reserves. ATIE policy holder surplus will be reduced by $417,000. The policy holder surplus is the owners' equity portion that these employers in the State and the timber companies have put up to fund the exchange. This would reduce the surplus by eight percent. The projected net income for the year 2000 would be reduced by 13 percent, and the substitution of user fees for premium taxes for claims occurring during 2000 would reduce the projected net income by 15 percent. SB 272 is bad public policy because the control of the funding for OSHA and the Division of Workers' Compensation will be taken away from the legislature. Funding for the Division of Workers' Compensation (DWC) would be spent on workers' compensation and benefit payments. Pressure for the Alaska Workers' Compensation Board to rule against an employer when a claim is heard before the board would increase. Number 844 MR. DWIGHT PERKINS, Deputy Commissioner of the Department of Labor (DOL), stated the legislature does have power over appropriations, and that will not change. No input about double taxation has been received from companies. MR. DON SHANNON, Alaska Safety Advisory Council, stated if SB 272 will force companies to "beef up" safety programs, that is a good thing. Mr. Shannon stated support for SB 272. HB 230-PERS BENEFITS FOR POLICE/FIRE DISPATCHERS    Number 1053 MR. PATRICK HARMAN, staff for Representative Pete Kott, explained the proposed amendment for HB 230. The amendment will calculate the retirement of dispatchers as peace officers and not in another category. On page 1, line 1, following "dispatchers," the phrase "and certain emergency medical personnel" would be inserted. On page 1, line 7, following "dispatcher," the words "or as an emergency medical service officer or an emergency medical technician" would be inserted. SENATOR LEMAN moved amendment number 1. Without objection, the motion carried. SENATOR LEMAN moved to adopt SCSCSHB 230 (1-LS0958\I) as the working version of the Labor & Commerce committee. Without objection, the motion carried. MR. HARMAN stated SCS CSHB 230(L&C) recognizes the stress and burn- out the dispatchers experience from the job. SCS CSHB 230 (L&C) allows dispatchers to convert the normal 30 year retirement plan to a 20 year retirement plan. Because the legislation will only impact the dispatchers, no fiscal note is required. CHAIRMAN MACKIE asked if Mr. Harman had received the letter from David Hull in Ketchikan asking to include Emergency Medical Technicians (EMT's) in the amendment. MR. HARMAN stated the purpose of the amendment is not for other people to use this as a Christmas tree vehicle. It would not harm dispatchers if EMT's were expanded in the legislation. CHAIRMAN MACKIE stated support for HB 230 and for expanding it to cover EMT's. SENATOR HOFFMAN asked how the change in statute would affect a person just entering the profession as a dispatcher, and whether the new people have to pay the difference also. MR. HARMAN stated the people just starting would pay at the same rate as a 30 year retirement plan. The 20 year option is only available at retirement. SENATOR HOFFMAN asked how these people were going to pay a difference of $100,000 at the end of 20 years. MR. HARMAN stated they could consider a mutual fund, annuity plan, or bank loan. SENATOR KELLY asked if those people could have the money taken out of retirement proceeds as they are received, to pay for the lump sum difference. CHAIRMAN MACKIE stated including EMT's would take a title amendment. At this time the committee did not offer that amendment. SENATOR LEMAN stated there would be no impact on the PERS system because there is no impact to the general fund. MR. HARMAN stated that was correct. SENATOR LEMAN stated people that leave before the 30 year retirement still receive a retirement. It might benefit people to have a separate retirement account available. The State should research a defining contribution system. It would be an investment system and at retirement people can draw from investments they have made. MR. HARMAN stated there is a more mobile workforce now, and people generally don't stay in a position for 30 years. Number 1732 MR. AL TAMAGNI JR., Dispatcher for the Anchorage Fire Department, stated support for SCS CSHB 230 (L&C). A dispatcher's job is to direct and coordinate a constant streak of activity, while remaining seated at a radio console. Dispatchers are a life saving link between the community and the public safety responders. Overwhelming stress falls on dispatchers, as well as officers and firemen. Dispatchers must serve an additional 10 years past their peers before being eligible to retire, and surpass their peers in turnover rate. Critical decision making requires dispatchers to be in control of their emotions. SCS CSHB 230 (L&C) will shorten the unrealistic time period required for public safety dispatchers to serve prior to being eligible for retirement. MS. TONYA KURTZ, Dispatcher for the Juneau Police Department, stated the Juneau Police Department has ongoing problems keeping dispatchers and it is currently understaffed. 22 people have been hired in the past five years. Only five of the 22 are still employed as dispatchers. The demands are high and very few people can meet those demands; a 30 year retirement is unrealistic. Ms. Kurtz stated support for SCS CSHB 230(L&C), but is concerned about the financial burden on the dispatcher at the end of 20 years. SENATOR LEMAN stated he would like to see what the financial burden will be at the end of 20 years. Maybe an investment portfolio can be started so the terms aren't unrealistic. Dispatchers never make the 30 year requirement for retirement, but maybe those people could ask for a lateral move and go to another position under the PERS system. MS. KURTZ stated the lump sum is a concern. Something should be in place to make the contributions ongoing so it is not such a burden at the end of the 20 years. CHAIRMAN MACKIE asked what the requirements were for early retirement. MR. BILL CHURCH, Retirement Supervisor for the Division of Retirement & Benefits, stated normal retirement can be achieved by age or service. If you were hired before July 1, 1986 the normal retirement age is 55. If you were hired after July 1, 1986 the normal retirement age is 60. At any age, someone who is in the all other system and works 30 years can begin receiving a retirement benefit. SENATOR KELLY asked, if a person serves as a peace officer for 20 years and starts at age 20, at what age they start receiving benefits. MR. CHURCH replied at age 40 if they started before July 1, 1986. Those benefits also include free major medical and health coverage. SENATOR KELLY asked, if SCS CSHB 230(L&C) passes, whether there is a way to increase deductions for retirement for people already in the system. MR. CHURCH answered no. There is no mechanism for a person to have extra money taken out for retirement. Maybe they could be advised to set money aside and have it invested. SENATOR KELLY asked what percentage peace officers pay out to retirement. MR. CHURCH replied 7.5 percent v. 6.75 percent for all other positions. SENATOR KELLY asked once SCS CSHB 230(L&C) passes, why dispatchers can't start paying out at 7.5 percent. MR. CHURCH stated that would still not cover the costs, but it would lessen the lump sum at the end of 20 years. CHAIRMAN MACKIE used Ms. Kurtz as an example, and asked if a person who had been employed for four years started paying at the higher rate, whether at retirement the lump sum would consist of the original four years that person did not pay the higher rate. TAPE 00-10, SIDE B  MR. CHURCH stated no. The system only pays 4.5 percent interest on money held in the system. Retirement benefits are based on contributions from the employer and employee, and investment returns. The retirement benefits people claim are paid out in the first three years of retirement. Money after that comes from employer income, and investment income those funds have earned. SENATOR KELLY asked what will happen if a person retires at 20 years but does not have the money to pay the lump sum. MR. CHURCH replied SCS CSHB 230(L&C) would allow the employee to take a lifetime actuarial reduction to those benefits. SENATOR KELLY asked if that was a gamble to the system. MR. CHURCH replied yes. SENATOR KELLY stated the system estimates how long the person will live, and if they die the following year the system gains that money. MR. CHURCH answered yes. The factors are based on interest assumptions of the fund and mortality factors used in the insurance industry. SENATOR HOFFMAN asked if military time counted toward the 20 year retirement. MR. CHURCH replied no. The 20 years needs to be in membership service, 20 years as a dispatcher or peace officer. SENATOR KELLY asked if the employee is required to front a lump sum of money at the end of 20 years, whether the employer is required to do the same. MR. CHURCH replied no. Mr. Church referred to an example submitted by the system's actuary. Number 2191 SENATOR LEMAN asked, after a person has invested 20 years, whether it is factored into adverse selection with regards to poor health and other possibilities. MR. CHURCH replied he didn't recall discussing that issue with the actuary. Normally an adverse selection would be factored into the equation. SENATOR LEMAN asked Mr. Church for statistics on typical employees that work 20 years and 30 years, and how the retirement would be calculated. MR. CHURCH answered the calculations were made on 20 years of service for an employee with an average salary of $50,000. SENATOR LEMAN asked if it would change other benefits like medical, dental, etc. MR. CHURCH replied no. Other benefits are driven by when the person is first employed in the retirement system. Number 2045 MR. PABLO PAIZ, Police Officer with the Anchorage Police Department, stated he has been employed by the Anchorage Police Department for 10 years; four years of that time was as a police dispatcher. The most stressful job he has encountered was dispatching. Dispatchers monitor the lives of the people on the phone and the police officers they send out on calls along with firemen and EMT's. A major reason Mr. Paiz became a police officer was because he knew he could not put in the 30 year requirement for retirement. Mr. Paiz stated support for SCS CSHB 230(L&C). MS. KAREN CHILDERS, Communication Supervisor for the Juneau Police Department, stated public safety dispatching is a job like no other. The nature of the job requires technical communications, multi-tasking, and inter-personal skills. What separates the job from others requiring the same skills is that a dispatcher must have the ability to disengage their emotions in order to get the job done. MS. CHILDERS gave examples of horrifying 911 calls. On a daily basis dispatchers deal with the worst of life's realities. The possibility of a dispatcher dealing with an emergency involving friends and family is highly probable in Alaska. 20 years of cumulative stress is long enough, yet 20 years is short enough to make it attractive as a career choice and rewarding to those who have already dedicated many years of service. Ms. Childers stated support for SCS CSHB 230(L&C). MR. DUANE UDLAND, Chief of the Anchorage Police Department, stated support for SCS CSHB 230(L&C). He will be encouraging people who are hired, and are already employed to start saving toward their retirement. CHAIRMAN MACKIE asked if he knew of any dispatchers that had made it to the 20 year mark or 30 year mark. MR. UDLAND answered some make it to 20 years, not many make it past that point, and no one has made it to 30 years. CHAIRMAN MACKIE asked if the people that left their position could have made the 20 year mark if the law had been in place. MR. UDLAND replied yes. SENATOR LEMAN stated people do have options available for investing, and they could do better than the PERS system through the investments they make. MR. UDLAND agreed, and anyone could beat the PERS system if they invested wisely. CHAIRMAN MACKIE asked Mr. Udland if he would come up with a formula for new hires and existing hires for them to start saving for retirement. MR. UDLAND stated yes, they would work on that formula. MR. DEL SMITH, Deputy Commissioner of the Department of Public Safety, stated support for SCS CSHB 230(L&C). No dispatcher has ever made it to a 30 year retirement. A light at the end of the tunnel is extremely important, dispatching is a high-stress job. Number 1519 CHAIRMAN MACKIE spoke with Mr. David Hull, Ketchikan Fire Department, and explained the sponsor of SCS CSHB 230(L&C) did not want to pursue a title change at this time. Chairman Mackie offered to work with him on another avenue to include EMT's for a 20 year retirement. SENATOR DONLEY moved SCS CSHB 230(L&C) out of committee with do pass recommendations. Without objection, the motion carried. There being no further business to come before the committee CHAIRMAN MACKIE adjourned the meeting at 2:52 p.m.