Good afternoon. I would like to call this meeting of the Senate Labor and Commerce Committee to order. The time is 1.34 p.m.
We are in belts.
Room 105 of The Thomas Stewart Building in the nation's most beautiful capital city of Juneau, Alaska.
I think the Sun is almost poking through the clouds, maybe.
Today is Monday, February 9th. It's my son Blake Bjorkman's 11th birthday today. So happy birthday Blake.
Members present today are Senator Dunbar, Senator Yunt, and myself,
Senator Bjorkman. Senator Merrick is in Senate Finance right now,
and Senator Ray Jackson is excused for today. Let the record reflect that we have a quorum
to conduct business. Welcome everyone to Senate Labor and Commerce. I'd like everyone
to please turn off or silence your cell phones and join me in extending a warm
Senate labor and commerce welcome to our recording secretary Kerry Tupoe and our LAO
We have one item on our agenda today.
It is Senate Bill 81, public employer pension contributions.
Senate bill 121 has been removed from our
agenda at the request of the sponsor.
The last time we heard Senate, bill 81.
We adopted a conceptual amendment number one, which deleted section one of
the bill.
We then heard some public testimony and held the
bill over.
in order to get some answers from ledge legal, as well as others who may have those answers.
Today, it is my intention to bring Senate Bill 81 back before the committee for some
answers to committee questions. We will then take additional public testimony, if there is,
have some committee discussion and look to the will of the Committee.
We have here with us to provide a brief recap of The Bill, Ms. Margot Youngberg from Senator
And we have to answer some of Senator Dunbar's questions.
Mr. Dan Wayne from Legislative Legal Services.
Ms. Youngberg, if you could join us at the table.
Please state your name and provide a, just the briefest recap of the bill if he would, please.
Thank you. Good afternoon. My name is Margot Youngberg, and I am staff to Senator Stedman
SB 81 in essence would remove the existing 22% cap and
therefore
Allow the flexibility for the arm board to set a rate that would better match the actuarial rate
That they currently set
but thank you for that succinct and tight recap.
I appreciate it.
Okay, Senator Dunbar, you had some questions
and I believe Mr. Wayne is here and he can answer them.
Thank you, Mr Chair.
I had a fairly straightforward question
which I think I have learned the answer to
in the interim but between the two meetings
but perhaps it's worth putting on the public record.
Eliminating a 22% cap then why is there no that exists in our statute then?
Why are there?
No repealers in the bill?
They're done by the chair.
It's not eliminating the cap.
It allows the candidates.
It just says not withstanding any of the section as the capping it.
The annual employer contribution rate may not be less than the rate sufficient to allow
any of the employer normal cost.
And then we've added in an amount of calculated and the rates certified under 3710-220A will
liquidating path furthest liability of a plan.
$3.70 and $39.35, $7.50.
We have a follow-up, Mr. Chair.
Yes, sir.
So that is my understanding now is the notwithstanding language
and combined with number two on page two, that new insert
basically creates an exception, an notwithstanding,
almost a contradiction in the law, sufficient to make the 22% dead letter in a lot of circumstances.
I guess my follow-up question is, why do that rather than just repeal the twenty-two percent?
Are there other circumstances where the 20% is still in effect?
the requirement that is under this kind of complicated population under 393525A, which has,
you know, a couple different rates, you could result in that calculation depending on
facts. It's just adding in a safeguard saying that no matter what rate you end up with,
It has to be at least enough to pay these three things with a list that I'm
page two of the bill.
For all, Mr. Chair. Yes
So but these 3 things that we list here isn't that just how the rates are generally calculated?
That is to say are there other things other than these things
That that otherwise could go into the rate
that would hypothetically push the price above 22%
but be disallowed, does that make sense?
So what I'm saying is if these three things
are now covering most rates
and are the most important things to calculate the rates
and they take precedent over the 22%,
why is a 22 percent around?
Again, what examples are there where the 22% cap could still be in effect?
I don't know the answer to that question.
I mean, I think it still is, in fact.
And these things are just like this whole suspect in D is a backstop to make sure that those three things get paid that are listed in the D.
But yeah one last follow-up mr. Chair. Yes
I guess I'll just say again like the three things now listed are the employers normal cost, but then also
the past cost for the pass service liability plan and
then these other
requirements and and I just struggled to think of what else is in the rates besides that and if that's
what's in their rates and
Then then if it's under 22 percent
than the 22% doesn't come into effect.
But if it pushes it over 22%, then the 20%
doesn' t matter.
So it just seems to me that the 21% is dead letter.
Again, unless there are some things that typically
go into rates that aren't captured by these three.
I think that's the same question, and I would give the
same answer, but I mean you would add to it that, you know,
perhaps somebody from,
you now,
the administration,
division of retirement benefits,
and speak to whether or not,
you we need to.
The policy still needs to have.
Yeah. So, thank you for your testimony. I'll just make a comment, Mr. Chair.
Yes.
Rather than a question.
I think the presentation that Senator Seidman and staff have given says this basically gets
rid of the 22% cap. And I'd think that is probably what it does.
like, why let's leave a little drafted it this way?
Because rather than actually repeal a 22% cap,
they created a exception so broad that a 20%
cap can never be in effect.
And that just seems to me like a not even inelegant,
but almost like confusing way.
It is a confusing, if I was a member of the public
and I looked at our statutes as written,
I would start at A and go, it was 22 percent cap.
sections later when I realized and only if I really understood what this meant that the 22% cap doesn't actually do anything and
and
It's almost like we said there's a 45 mile per hour speed limit, but only for your driving
You know doesn' apply if you're driving
So, I don't know, it's,
I suppose it accomplishes what it
accomplices and it is a policy call for us
and the way it has drafted while I think
confusing accomplice that.
And so, yeah, that's all I'll say, Mr. Chair.
I'm not going to hold up the bill because I
think it maybe is in elegantly drafted.
Because maybe it isn't, yes, the other thing.
This might be the only way you can do this
Have the the in-depth knowledge of how else to craft this
That's all mister
Okay
Thank you, mr. Wayne for your answers and miss Youngberg for being here as well. We are going to now
Continue on with some public testimony public testimonies remains open from our last hearing
Do we have any one online or in the room wishing to testify to Senate Bill 81?
We have one person online, Mr. Chris Knoll.
Please state your name and affiliation for the record and begin your testimony.
All right. Thank you, mr. Chair and members of the committee for
the records. My name is Chris Nolan. I serve as mayor of Denali bro.
Thank you for the opportunity to testify on Senate Bill 81.
This denial of burial understands the state's revenue shortfall and the pressure it creates.
And you really feel like this is one, you know, it's one of many tools to address that.
Senate bill 81 will allow the states to increase or decrease the employer contribution for
This is at a time when costs continue to arise and state support has remained flat or declined depending on the program or department.
The borough has regularly advocated for maintaining the 22% employer contribution cap and appreciate the committee's consideration of the municipal impact of breaking away from the cap.
and pose additional complexity and shift the unfunded liability on to municipalities.
And I just wanted to add a little more context, you know, my understanding,
the rate for municipalities is currently set at 28.33.
That was the arm board set rate.
And so at a cap of 22%, the state was picking up the bill for the de noiro of 6.3% of our
You know that additional liability and so for us that equates to about 30 between 30 and $50,000 per year
So I just wanted to add that to the context for the borough specifically
Thank you chair and members of the committee
Thank You mr. Knowle are there any one else who is there anyone else? Who wishes to testify on this item?
Hearing and seeing no one
I'll now close public testimony
That brings the Senate bill 81 back before the committee under committee discussion is there any committee?
discussion of this item
I have a couple of comments
So yep, Senate Bill 81 as discussed between
Senator Dunbar
and Mr. Wayne does exactly what it purports to do as we look at the sectional and the
fiscal notes and I'll just read the fiscal note into the record here for clarity.
So the physical note from the Department of Retirement and Benefits for
public employee retirement system is states this.
This bill increases the annual employer contribution rate by requiring an additional employer
contribution amount to be calculated at the rate certified under AS37.10.220A8 for
both the public employees retirement system and the teachers retirement
system. Of course we took out the section of the teacher's retirement
system because they're not subject to the 22% cap.
will cause employers who participate in the retirement plans to pay more toward liquidating
past service costs of the plans. This bill will take effect immediately.
Okay, so what we're talking about here is essentially cost shifting just as Mr. Knowles
said from the state under local governments in a way that I think is not mindful of why
because, through actuarial problems that the state had from a company like Mercer,
as well as funding of retirement plans through the 1990s when people sought to
save money simply by not paying for these retirement plan.
Similarly to how one would try to save
money by paying your mortgage, if you have a bill in the future,
for an ongoing asset, which is your employees in this case.
If you choose to not pay that bill now,
you will have to pay much more in the future.
That's what happened in 90s.
Under, we had a situation where a Democrat governor
made a deal with the Republican legislature
to cut the budget, and how they chose to
cut to budget was to, not fund retirements.
And so it's no wonder that we have a problem,
because we chose it to have it.
So it's fascinating as we kind of look at how
Some people get in really big financial trouble
Because they put a bunch of money on their credit card and then say oh future me can pay for that. That's a future. Me problem
That what the state did to balance our budget in the 90s and we made that worse by hiring bad actuaries and the early 2000s
What this bill would do is
it would
Say forget the deal we made with the municipalities for us the states screw up
The state told many municipalities you don't have to pay in
Many municipalities became very behind in how much they had paid for their employees while some were less behind
Some had played more into their retirement plans to keep up with their past service cost
this I think would would blow that agreement out of the water and
and last the state is willing to go in and kind of really do a deep dive into what communities
paid what for what employees. I think this bill would do
a lot to really erode the public trust in what we said the State of Alaska did when we moved on
from a defined benefit to a define contribution plan in 2006. So it's a fascinating idea and I
how past service cost works.
However, the alternative to a past
service costs is way more cash going out the door
now than the state of Alaska has.
No one, zero people, have put forward a plan
to provide much more
cash in a higher level of government spend
to pay employees as much as needed
for the employees that we need to run our state effectively.
I haven't heard one bill introduced.
I have not seen one idea to provide that revenue.
I know of no one bringing those plans forward,
whether it is to put teachers on Social Security
or give teachers SPS or to
provide for any number of things that would help attract or
train state employees.
No one is suggesting that.
So, we have left what we
have, left, and what our options are.
What can we do?
Well,
we likely should not push
costs on municipalities and have
municipalities pay more.
That means those taxes go up.
Property taxes, sales taxes.
If the state doesn't pick up their
responsibility, local governments
have to raise taxes or provide
less service.
We have less plowed rows.
We
have dumps that work inefficiently.
Our options are limited, but they're not impossible.
I'm not sure that this bill works to solve any problems.
I think it's meant to highlight the problems we already have.
But this is the process and we'll move this
bill onto the next committee so that they can discuss it further.
With that, what are the wishes of the committee?
Mr. Chairman, despite my personal preferences, I moved to report Senate Bill 81 version 34-LS0110
backslash alpha as amended from committee with individual recommendations and attached
zero fiscal note, and further move to the committee grant legislative legal the authority
to make technical and conforming changes to bill when drafting the final version of the
bill.
Senate Bill 81 version 34 dash LS 0110 backslash a as in any act as amended
moves from committee with individual recommendations and attached zero
fiscal note I further move that well legislative legal be granted the
authority to make technical and conforming changes please stick around
to sign the committee paperwork.
The Senate Labor and Commerce Committee will meet again on Wednesday of this week,
February 11th, when we will hear a lot about Alaska's agricultural industry.
We have invited representatives from the Alaska Farm Bureau,
the Laska Farm Land Trust, and the Division of Mining Land and Water.
As there is no further business to come before the Committee today, we are adjourned at 1.54 pm.