Legislature(1995 - 1996)

05/06/1995 01:42 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  SENATE BILL NO. 148                                                          
                                                                               
                                1                                              
                                                                               
                                                                               
       "An  Act relating to  a defined contribution retirement                 
       plan for state employees."                                              
                                                                               
  BOB  STALNAKER,   DIRECTOR,  DIVISION   OF  RETIREMENT   AND                 
  BENEFITS,                                                                    
  DEPARTMENT OF  ADMINISTRATION observed  that the  Department                 
  had reviewed the  impact of  CSSB 148 (RLS)  am(efd fld)  in                 
  regards  to the soundness of the state retirement system, as                 
  required by AS  24.08.036.  He noted that he was informed by                 
  the  actuaries that  CSSB 148  (RLS) am(efd  fld) would  not                 
  adversely impact the retirement system.  He  stated that the                 
  actuaries  estimated that  the employer contribution  if all                 
  employees were  at the Tier III level would be approximately                 
  5.5 percent of pay.   The 5.5 percent contribution  would be                 
  reached  over  time as  Tier  I  and Tier  II  employees are                 
  retired and replaced by Tier III employees.                                  
                                                                               
  Representative Martin questioned the  employee contribution.                 
  Mr. Stalnaker noted that the  employee contribution would be                 
  set in statute  at 5.5 percent for  PERS and TRS.   He added                 
  that  police  officers would  contribute  6.0 percent.   The                 
  current employee contribution  is 6.75 percent for  PERS and                 
  8.61 percent  for TRS.   He  summarized that  while employer                 
  contributions  would  be  reduced,  benefits  would  also be                 
  substantially less.                                                          
                                                                               
  ANNALEE MCCONNEL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,                 
  OFFICE  OF THE  GOVERNOR  gave a  brief  overview of  events                 
  leading to the  introduction of SB  148.  She  noted that  a                 
  Retirement Incentive Program (RIP)  for state workers, local                 
  government  workers   and  school  district   employees  was                 
  introduced by request of the Governor  in HB 270.  She noted                 
  that  Senator  Rieger  combined  the  RIP provision  with  a                 
  defined contribution program,  which was offered in  SB 148.                 
  She observed that  the plan  adopted in CSSB  148 (FIN)  was                 
  based on a proposal  by the Administration.  She  noted that                 
  the Administration is developing  a defined benefit proposal                 
  with the  intention  of bringing  it forth  during the  1996                 
  legislative session.  She stressed that the proposal has not                 
  had full review  within the Administration.   She emphasized                 
  that  the  legislation  has  not   been  reviewed  by  local                 
  governments, school districts, the Retirement Board or labor                 
  unions.  She expressed concern  that questions regarding the                 
  proposal  have not  been reviewed.    She emphasized  that a                 
  significant change to the retirement system, as  represented                 
  by CSSB 148 (RLS) am(efd fld),  should only be adopted after                 
  all aspects  of  the proposal  have  been considered.    She                 
  cautioned that additional tiers could be required to correct                 
  problems in the  Tier III plan  if sufficient review is  not                 
  given to the  proposal.  She recommended  that work continue                 
  during the interim  and a proposal  be brought forth at  the                 
                                                                               
                                2                                              
                                                                               
                                                                               
  beginning of the  next legislative  session.  She  suggested                 
  that the  RIP provision could  be used only  where positions                 
  would  be eliminated so  that new  employees could  be hired                 
  with a revised  proposal at  a later date.   She  reiterated                 
  that the impacts of CSSB 148 (RLS) am(efd fld) have not been                 
  sufficiently addressed.                                                      
                                                                               
  MARILYN  ROSENE,  TEACHER,  DILLINGHAM  testified  via   the                 
  teleconference network.  She testified in opposition to CSSB                 
  148 (RLS) am(efd fld).  She expressed concern that qualified                 
  teachers will not be encouraged to  return to teaching.  She                 
  maintained  that  TRS  and  PERS are  two  of  the strongest                 
  systems  created  by  the Legislature.    She  observed that                 
  teacher turnover in  rural Alaska is  high.  She noted  that                 
  individuals with  experience and  training would be  retired                 
  under RIP.   She  emphasized that  teacher turnover  impacts                 
  students and programs.                                                       
                                                                               
  JOHN  MONHAN,  SUPERINTENDENT,  IDITAROD   SCHOOL  DISTRICT,                 
  MCGRATH  testified  via  the  teleconference  network.    He                 
  testified in opposition to  CSSB 148 (RLS) am(efd fld).   He                 
  emphasized  that the  State's  retirement  system  helps  to                 
  attract qualified teachers  and state  employees.  He  urged                 
  caution and recommended further review of the legislation.                   
                                                                               
  KAREN MAHURIN, PRESIDENT, KENAI PENINSULA EDUCATION  SUPPORT                 
  ASSOCIATION testified via  the teleconference network.   She                 
  spoke against CSSB  148 (RLS) am(efd  fld).  She noted  that                 
  Kenai Peninsula employees,  who only work 10  months a year,                 
  will have  to work 35 years to  receive a 30 year retirement                 
  credit.  She stated that retirement equity is a top priority                 
  for  education  support  employees around  the  State.   She                 
  maintained that the legislation is regressive.  She asserted                 
  that the elimination of spousal health benefits is punitive.                 
  She urged the Committee to hold the legislation  for further                 
  review.                                                                      
                                                                               
  JUDY  MURPHY,   BARROW  testified  via   the  teleconference                 
  network.   She spoke in support  of the RIP provision.   She                 
  emphasized  that RIP  is a necessary  management tool.   She                 
  recognized that retirement benefits provided by the state of                 
  Alaska  should  be   reviewed  in  order  to   reduce  state                 
  expenditures.                                                                
                                                                               
  CHRISTINA  BARRON, BARROW  testified via  the teleconference                 
  network.   She spoke in  support of the RIP  provision.  She                 
  stressed that schools are revitalized by the introduction of                 
  younger and more enthusiastic personnel.                                     
                                                                               
  Representative  Martin  expressed  concern  that  the  State                 
  realize its investment in its teachers.                                      
                                                                               
                                                                               
                                3                                              
                                                                               
                                                                               
  Ms. Murphy maintained that retired teachers continue to work                 
  with children in summer and  other programs.  She emphasized                 
  that retired teachers continue to work with younger teachers                 
  during in services.                                                          
                                                                               
  FRANK  SMITH,   BARROW  testified  via   the  teleconference                 
  network.  He expressed concern that the fiscal ramifications                 
  of the plan have not been adequately reviewed.                               
                                                                               
  DOROTHY WELLS,  NEA-ALASKA testified against CSSB  148 (RLS)                 
  am(efd fld).  She stressed that  the state of Alaska has one                 
  of the best retirement  systems in the country.   She stated                 
  that she would "hate  to see us go from having  the best one                 
  (teachers  retirement  system) to  probably the  worst one."                 
  She noted that other states that  have a 1.5 multiplier also                 
  offer their  teachers social  security.   She stressed  that                 
  teachers in Alaska do not participate in social  security or                 
  the Supplemental  Benefits System  (SBS).   She stated  that                 
  teachers  cannot retire with more  than 100 percent of their                 
  salary.  She estimated that a teacher would have to teach 40                 
  to  50  years of  service to  receive  100 percent  of their                 
  salary.                                                                      
                                                                               
  Ms. Wells observed  that the retirement system  was begun in                 
  1955 before oil was discovered in the state of Alaska.   She                 
  stressed that TRS is  89 percent funded.  She  observed that                 
  the purpose  of  the retirement  system  is to  recruit  and                 
  retain competent, good teachers.   She acknowledged that the                 
  legislation  may not  inhibit recruitment  of  new teachers.                 
  She  maintained  that  the  retention  of teachers  will  be                 
  affected.                                                                    
                                                                               
  Ms.  Wells  observed  that under  current  law  teachers can                 
  retire after 20 years  of teaching in the State or  after 25                 
  years  of teaching  in  total.   Benefits are  calculated by                 
  multiplying 2 percent times the number of years taught times                 
  the three highest year salaries.  Years taught after 1990 in                 
  excess of 20 years can use  a multiplier of 2.5 percent.   A                 
  teacher can retire  after 20 years  at 40 percent of  salary                 
  and after 25  years at approximately  50 percent of  salary.                 
  The legislation would  drop the  multiplier to 1.5  percent.                 
  Teachers  would be required to meet the 85 rule.  The number                 
  of years taught plus the teachers age must add up to 85.                     
                                                                               
  Representative Martin  stressed that  a 10  percent COLA  is                 
  paid to teachers that stay in state.   He asked if the State                 
  can opt in or out of social security.                                        
                                                                               
  Mr. Stalnaker stated that public employers can no longer opt                 
  in or out  of social security.   The State cannot opt  in to                 
  social security.                                                             
                                                                               
                                                                               
                                4                                              
                                                                               
                                                                               
  Representative Martin asserted that employees are better off                 
  without participating  in  social security.   Mr.  Stalnaker                 
  observed  that the state  of Alaska established  SBS when it                 
  opted out of social security.  He estimated that most people                 
  would agree that SBS coupled with PERS is superior to social                 
  security.   He  emphasized that  PERS provides  many of  the                 
  services  afforded  by social  security.   He  observed that                 
  teachers  do  not participate  in  social security.   School                 
  districts do not participate in SBS.                                         
                                                                               
  ROD MCCOY,  ANCHORAGE testified  in opposition  to CSSB  148                 
  (RLS) am(efd fld).  He stressed the  importance of teachers.                 
   He  asserted  that  self  respecting  persons will  not  be                 
  attracted to  teach under the  provisions of CSSB  148 (RLS)                 
  am(efd fld).  He observed  that a 30 year teacher  would not                 
  have medical coverage for their spouse.   He maintained that                 
  the  legislation is  an  insult to  teachers  and should  be                 
  placed in the trash.                                                         
                                                                               
  BRUCE LUDWIG,  ALASKA PUBLIC  EMPLOYEES ASSOCIATION,  ALASKA                 
  FEDERATION OF TEACHERS, AFC-LIO spoke  in opposition to CSSB                 
  148 (RLS) am(efd  fld).  He  stated that the legislation  is                 
  two bills in one, one good and one bad.  He spoke in support                 
  of the  RIP provision.   He spoke against  the PERS  and TRS                 
  portion of the bill.   He observed that the  legislation has                 
  only been in  review for a week.  He asserted that the "only                 
  thing driving  that train  was saving money."   He  stressed                 
  that the  retirement system  has been  built and fine  tuned                 
  over 40 years.   He suggested  that the legislation be  held                 
  and that school districts, municipalities and the State work                 
  together to meet the needs of all the elements.                              
                                                                               
  JOHN CYR, VICE PRESIDENT, NEA-ALASKA testified in opposition                 
  to  the  legislation.   He stated  that he  is a  teacher at                 
  Wasilla High School.                                                         
                                                                               
  (Tape Change, HFC 95-116, Side 1)                                            
                                                                               
  Mr. Cyr maintained  that the TRS system is sound  and one of                 
  the best  in  the United  States.   He  alleged that  it  is                 
  uncertain if the legislation will save  the State money.  He                 
  maintained that the provision will have a negative impact on                 
  the system.  He noted the lack of agency and public input on                 
  the legislation.  He questioned if the authorization section                 
  provides the RIP option for classroom teachers.                              
                                                                               
  DON ETHERIDGE, LOCAL 71 testified  in opposition to CSSB 148                 
  (RLS) am(efd fld).  He stressed  that his union supports the                 
  RIP  provision.   He stated  that if  RIP and  the  Tier III                 
  provision  remain  together  that  they  would  not  support                 
  passage of CSSB 148  (RLS) am(efd fld).  He  maintained that                 
  the  Tier  III  provision  would  not   be  fair  to  future                 
                                                                               
                                5                                              
                                                                               
                                                                               
  employees.                                                                   
                                                                               
  TRENA RICHARDSON, TEACHER,  SOLDOTNA testified in opposition                 
  to  CSSB 148  (RLS) am(efd  fld).   She  pointed out  that a                 
  member of the Committee indicated that  he did not know what                 
  was in the  legislation.  She asserted  that the legislation                 
  needs  more  review.     She  urged  members  to   hold  the                 
  legislation for further review.                                              
                                                                               
  CLAUDIA DOUGLAS, PRESIDENT,  NEA-ALASKA testified that  NEA-                 
  Alaska strongly  opposes CSSB  148 (RLS)  am(efd fld).   She                 
  maintained  that CSSB 148  (RLS) am(efd  fld) would  gut the                 
  retirement system.  She stressed that the plan is a divisive                 
  way to deal with public employees and teachers of the State.                 
  She alleged that  CSSB 148 (RLS) am(efd  fld) is inequitable                 
  and would be unfair to the children of the State.  She urged                 
  members  to  not  pass CSSB  148  (RLS)  am(efd  fld).   She                 
  clarified  that the 10 percent COLA only refers to benefits.                 
  She  emphasized that  the retirement  system is  actuarially                 
  sound.                                                                       
                                                                               
  Mr. Stalnaker explained  that the average funding  ratio for                 
  state pension plans is 85 percent.   He observed that TRS is                 
  at 89.6 percent and PERS is at 94 percent with the inclusion                 
  of prefunded health insurance.  He  emphasized that no other                 
  state  prefunds health  insurance.   He  stated that  if the                 
  state  of  Alaska retirement  system  was compared  to other                 
  states that it would be over 100 percent funded.  He pointed                 
  out that in  1990 a  sound funding provision  was passed  to                 
  guarantee  prefunded cost of  living increases  to retirees.                 
  He  explained  that  the  1990  change  recognized  a  large                 
  unfunded liability.   This provided for  a second tier.   He                 
  noted that the  unfunded liability is being  reduced over 25                 
  years.    He  observed  that  the  funding  ratio  has  been                 
  increasing since 1990.  He noted  that earnings in 1994 were                 
  low.  The earnings assumption was also lowered in 1994.   He                 
  explained  that these  two factors  caused the  ratio  to be                 
  reduced  from  92 percent  to 89.6  in  the past  year.   He                 
  asserted that the  State's retirement systems are  among the                 
  most sound in the country.                                                   
                                                                               
  Representative Parnell noted that the  unfunded liability is                 
  estimated at $1  billion dollars by the year 2019.  He asked                 
  if  the  proposal will  make  the  system more  sound.   Mr.                 
  Stalnaker  replied   that  the  system  will   maintain  its                 
  soundness as long as the actuaries are free to recommend the                 
  assumptions  that  should be  adopted  and to  calculate the                 
  employers contribution for each year.  He  stressed that the                 
  unfunded liability should  be compared to  the value of  the                 
  assets.  He observed that the funding ration is estimated to                 
  increase to 96 - 97 percent for both systems.  He emphasized                 
  that a billion dollar unfunded mandate in the year 2019 will                 
                                                                               
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  be within 3 - 4 percent of 100 percent funding.  He observed                 
  that it is a conscious strategy not to over fund the system.                 
                                                                               
                                                                               
  In response  to a  question by  Representative Parnell,  Mr.                 
  Stalnaker stated that  if the system contained  only Tier II                 
  employees PERS would run at approximately 10 percent a year.                 
  The system is currently at 14 percent because of the  Tier I                 
  employees.  He stressed that as long as the system is funded                 
  at 10 percent it is sound.   He clarified that the  proposal                 
  will lower the  cost to the  employer but not influence  the                 
  soundness of the system.   He stated that the issue  is what                 
  is the fair benefit level for the cost to the employer.                      
                                                                               
  In  response  to a  question  by Representative  Mulder, Mr.                 
  Stalnaker clarified that Tier I and  II benefits will not be                 
  affected  by  the Tier  III proposal.    He stated  that the                 
  employer/employee's contribution will change over time.                      
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Stalnaker restated  that TRS  employees do  not receive  any                 
  social security or SBS benefits.  He observed some districts                 
  have 403 B plans.  There is  no requirement for the employer                 
  to provide an alternative to social security aside from TRS.                 
                                                                               
  Representative  Grussendorf  observed  that spousal  medical                 
  benefits would not be  provided to Tier III employees.   Mr.                 
  Stalnaker  explained  that  Tier  I employees  receive  full                 
  health  benefits for  themselves,  their  spouse  and  their                 
  dependents  when  they retire.    Retired Tier  II employees                 
  under age 60 pay  the full cost of medical  benefits for the                 
  first  5 years in PERS and the first 8 years in TRS or until                 
  they reach age 65.  The system would pay half the cost after                 
  the 5 or  8 year period until  the retiree is 65  years old.                 
  At age  65 the system  would pay the  entire cost.   Tier II                 
  retirees would receive coverage for themselves, their spouse                 
  and their  dependent children.   Tier  III would pay  health                 
  insurance for the retiree only, paid by the system.  Spousal                 
  or dependent coverage could be purchased at the group rate.                  
                                                                               
  LINDA  MOATS,   ALASKA  COUNCIL  OF   SCHOOL  ADMINISTRATORS                 
  testified  against  CSSB   148  (RLS)  am(efd  fld).     She                 
  emphasized that Tier  III is  the system  that our  children                 
  will be hired and will retire under if CSSB 148 (RLS) am(efd                 
  fld)  is  adopted.    She  asked  that all  aspects  of  the                 
  provision be investigated.                                                   
                                                                               
  Representative  Therriault  asked  how  many  categories  of                 
  employees can  draw benefits after 20 years.   Mr. Stalnaker                 
  stated that teachers, police officers  and fire fighters can                 
  retire at 20 years, all others have to serve 30 years before                 
  retirement.                                                                  
                                                                               
                                7                                              
                                                                               
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker stated that teachers can  purchase up to 10  years                 
  of outside services.  He clarified that the 20  year-and-out                 
  provision  is only  for  teachers whose  service  is all  in                 
  Alaska.   Teachers  with outside  service can  retire at  25                 
  years.  There is no age limit on any of the year thresholds.                 
                                                                               
  RICHARD KERN, NEA-ALASKA, BETHEL testified in  opposition to                 
  CSSB 148 (RLS) am(efd fld).   He observed that as a  teacher                 
  he  is  preparing  students  to  become  teachers  in  their                 
  communities.    He emphasized  that  the benefits  that were                 
  permitted to him as  a non-member of the community  will not                 
  be available to those that were raised in the community.  He                 
  observed that  a teacher will have to teach 30 years if they                 
  begin teaching at 25  years old.  He  stressed that jobs  in                 
  rural communities  are scarce.   He  emphasized that  scarce                 
  jobs will be kept an additional 10 years before being turned                 
  over to other members of the community.                                      
                                                                               
  Representative  Parnell  emphasized  that if  overall  state                 
  spending  is  not reduced  our  children will  not  have the                 
  opportunities that are available now.                                        
                                                                               
  Representative   Therriault   expressed   concern  that   an                 
  individual of the  age of 44 or 45 should feel that they are                 
  entitled to draw a retirement.   Representative Mulder noted                 
  that a  teacher who  began teaching  at 25  years old  could                 
  retire at the age of 45 and begin receiving a benefit.                       
                                                                               
  PAUL  JARVI,  TEACHER testified  in  opposition to  CSSB 148                 
  (RLS) am(efd fld).  He stated  that he is a 20 year  teacher                 
  who has retired at 40 percent of his salary.  He  viewed his                 
  20 year retirement as an early  retirement.  He is currently                 
  running  a business  in  Ketchikan.   He  stressed that  the                 
  benefit package helps to keep people motivated and in public                 
  jobs.  He  spoke against  passage of CSSB  148 (RLS)  am(efd                 
  fld).                                                                        
                                                                               
  Representative Kelly  asked if  Mr. Jarvi  pays medical  and                 
  retirement benefits  for his  employees.   Mr. Jarvi  stated                 
  that he  has medical  benefits and  retirement for  his full                 
  time employees.   He acknowledged that  he cannot afford  to                 
  pay benefits which equal those  he receives.  Representative                 
  Kelly  stated  that "most  employees  in the  private sector                 
  would kill for  this horrible Tier  III bill."  He  stressed                 
  that the "party is over."  He estimated that people in  Tier                 
  III would still be above the private sector.                                 
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Jarvi  clarified  that he  receives  a  10 percent  COLA  on                 
  benefits for remaining in Alaska.  He noted that he receives                 
                                                                               
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  approximately $1,800  hundred dollars  a month.   He  stated                 
  that  he  retired  while he  still  had  productive teaching                 
  years.  He said  he would support a good  retirement package                 
  and teacher's rights over early retirement.                                  
                                                                               
  Representative Kohring stressed  that the State is  facing a                 
  monster of a fiscal crisis.   He reflected that members must                 
  make tough choices.                                                          
                                                                               
  (Tape Change, HFC 95-116, Side 2)                                            
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Jarvi  stated that  he  is  44  years old.    Representative                 
  Therriault  stated that,  in his  opinion, Mr. Jarvi  is not                 
  retired.  He stressed that his  retirement has become a part                 
  of his yearly income.                                                        
                                                                               
  Representative Kelly  maintained that teachers  retire after                 
  only 15 years of service when summer vacation is considered.                 
                                                                               
  ROB  PFISTERIR,  PRESIDENT, ANCHORAGE  EDUCATION ASSOCIATION                 
  testified in opposition to  CSSB 148 (RLS) am(efd fld).   He                 
  maintained that the legislation sends a message to education                 
  professionals that  they are not  valued.  He  asserted that                 
  the State is not in an economic crisis.  He maintained  that                 
  the  State is  in a priority  crisis.  He  observed that the                 
  state  of  Alaska  is  the  50th  state  in  taxation.    He                 
  maintained that the  State has refused to  identify taxation                 
  as a  way  of raising  revenues that  the State  needs.   He                 
  stressed that education is the  number one service that  the                 
  State should provide.  He alleged that CSSB 148 (RLS) am(efd                 
  fld) would  denigrate the  retirement system.   He  asserted                 
  that teacher's  salaries are not  high in comparison  to the                 
  salaries of other professionals in the State.  He noted that                 
  the average teacher makes $46.0 thousand dollars a year.  He                 
  observed   that  the   system  is   operated   by  teachers'                 
  contribution.      He   added   that   state  and   district                 
  contributions have been reduced.                                             
                                                                               
  Representative Kohring noted the  difficulty of prioritizing                 
  funding.  He acknowledged  that education should be the  top                 
  priority.  He requested that Mr. Pfister help identify areas                 
  for reduction.  Mr. Pfister stated that more money should be                 
  directed to the classrooms.                                                  
                                                                               
  Representative  Mulder observed  that  the public  would not                 
  support the reinstitution of taxes.  Mr. Pfister agreed.  He                 
  pointed out that in other  states revenue increases as  more                 
  people come on to the job market.                                            
                                                                               
  Representative  Therriault  discussed the  prioritization of                 
  reductions  in   the  Department  of  Administration.     He                 
                                                                               
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  acknowledged  that  revenues  will  have  to be  raised  but                 
  emphasized that  reductions will  still have  to be  made to                 
  fill the long term fiscal gap.  He noted that the State pays                 
  for  many  services that  could  be considered  municipal or                 
  county   services.     Mr.  Pfister   spoke  to   unintended                 
  consequences.      He   cautioned   against   lowering   the                 
  professional standards for teachers.                                         
                                                                               
  SENATOR  JUDY SALO spoke against CSSB 148 (RLS) am(efd fld).                 
  She maintained that  the process was as much as a problem as                 
  the bill itself.  She observed that there was not sufficient                 
  time to meet with affected employee  groups.  She added that                 
  the Administration was unable to determine how much money is                 
  saved and when  the savings will  begin.  She questioned  if                 
  there are  other options  which would  be less  agrievous to                 
  employees.   She reiterated  that teachers  have never  been                 
  involved in SBS.   She  emphasized that job  security and  a                 
  good  retirement help to attract good people to the teaching                 
  profession.   She acknowledged  that the  proposal may be  a                 
  cost savings but  cautioned that  savings should be  weighed                 
  against  the  effect on  attracting and  retaining teachers.                 
  She restated that to  make a good decision the  impacts must                 
  be known.  She maintained that  teachers care about who will                 
  follow them into the classrooms in the state of Alaska.                      
                                                                               
  In response to  a question by Representative  Brown, Senator                 
  Salo stated  that there  would be  no savings  for the  next                 
  several decades.   She observed that a retiree would receive                 
  $11.0  to  $16.0  thousand  dollars   less  annually.    The                 
  contribution rate  would also  be reduced.   She  emphasized                 
  that the  Committee should  have the  recommendation of  the                 
  TRS, PERS and Investment boards.                                             
                                                                               
  RICHARD BARLOW, MAT-SU  testified in opposition to  CSSB 148                 
  (RLS)  am(efd fld).  He noted  that he is a public employee.                 
  He maintained that public  employees are not over paid.   He                 
  spoke in support of  the RIP provision.  He  emphasized that                 
  RIP is a management  tool.  He expressed concern  in regards                 
  to  attitudes  toward  public  and  school  employees.    He                 
  stressed the importance of school and public employees.                      
                                                                               
  In  response  to a  question  by Representative  Mulder, Mr.                 
  Stalnaker  stated  that  projections   were  based  on   the                 
  contribution  rate as it represents the  cost per person per                 
  dollar.  He noted  that if the system was  entirely composed                 
  of Tier III  employees, the  employer contribution would  be                 
  5.5 percent for PERS.   He explained that the  savings would                 
  be  realized  over  time as  Tier  I  and  II employees  are                 
  replaced with Tier  III employees.   He estimated that  some                 
  savings would  begin in 3  to 4  years and continue  over 25                 
  years.                                                                       
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Mr.  Stalnaker  clarified  that  the  proposal was  not  the                 
  Administration's  recommendation.    The administration  had                 
  been researching the proposal with  the intent to work  with                 
  affected persons to see what was a reasonable change.                        
                                                                               
  Mr.   Stalnaker  noted   that  the  bill   allows  volunteer                 
  participation.    He  explained  that   a  school  district,                 
  University or public  employer, other than the  State, could                 
  elect to participate.  He stressed that actuarial work would                 
  be doubled because  assumptions would have to  be formulated                 
  for each of the two systems  separately.  He maintained that                 
  this provision  would be  extremely costly.   Representative                 
  Parnell clarified  that the  Department of  Administration's                 
  fiscal  note for  $665.9  thousand dollars  would  be for  a                 
  mandatory Tier III.  Mr. Stalnaker stated that it would cost                 
  $200.0  to  $300.0 thousand  dollars  to allow  the optional                 
  provision.  He discussed the difficulties of setting  up two                 
  plans.                                                                       
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker noted that the Division's  annual report gives the                 
  average  retiree  benefits  over  the  past  10  years.   He                 
  observed  that  only 30  percent  of employees  eligible for                 
  early retirement have taken the option.                                      
                                                                               
  In  response  to  a question  by  Representative  Brown, Mr.                 
  Stalnaker  reiterated that the fiscal note requirements have                 
  been  fulfilled.   He  restated  that the  soundness  of the                 
  system would not  be affected as  long as the actuarial  can                 
  continue to calculate the  cost of the benefits in  the term                 
  of the employer contribution.  He noted that the fiscal note                 
  includes the impact on the employer's contribution rate with                 
  demonstrations that the impact would be realized over time.                  
                                                                               
  (Tape Change, HFC 95-117, Side 1)                                            
                                                                               
  Mr. Stalnaker stated that  if benefits were cut in  half the                 
  employer's cost would be  approximately half. The employer's                 
  rate would  be cut by  more than  half if the  employee rate                 
  stayed the same.  He emphasized that the contribution amount                 
  is also  affected by state  salary schedules.   He clarified                 
  that the total employer contribution  rate includes PERS and                 
  TRS for Tier I, II and III employees.                                        
                                                                               
  In  response  to  a question  by  Representative  Kelly, Mr.                 
  Stalnaker stated that the  purpose of the system is  to help                 
  the employer attract and retain employees.  He observed that                 
  if the effective date  is March 31, 1996, to  allow affected                 
  groups to work  with the Administration  then there will  be                 
  new proposals next  legislative session.   If changes  occur                 
  after  the effective date  a Tier IV  would be  created.  He                 
  emphasize the need to include affected groups.                               
                                                                               
                               11                                              
                                                                               
                                                                               
  Mr. Stalnaker explained that a defined benefit plan pays for                 
  benefits while the employee is working,  so that it does not                 
  become an obligation to future employees.  He clarified that                 
  Tier I, Tier II and SBS would not be affected.                               
                                                                               
  Mr. Stalnaker stated that one  employer contribution rate is                 
  figured for all  employees.   The employer contribution  for                 
  all  employees will be reduced  as one rate  as the ratio of                 
  Tier  II  employees  increase.   The  estimated  5.5 percent                 
  employer contribution  would include all  employees still in                 
  the system.                                                                  
                                                                               
  BELINDA   DANIELS,   NEA-ALASKA,   ANCHORAGE  testified   in                 
  opposition to CSSB 148 (RLS) am(efd fld).  She asserted that                 
  the Committee did not have respect for what it means to be a                 
  teacher.  She  emphasized the  responsibility and amount  of                 
  energy that it takes to  be a teacher.  She maintained  that                 
  the legislation is short sided.  She stated that PFD's could                 
  be  used to fund services.  She stressed that the State must                 
  invest in education and be respectful of  those that provide                 
  services.                                                                    
                                                                               
  DON  HADLEY,  NEA-ALASKA,   TEACHER,  DIAMOND  HIGH  SCHOOL,                 
  ANCHORAGE testified against CSSB 148 (RLS)  am(efd fld).  He                 
  emphasized that there  is no common retirement  schedule for                 
  20 year teachers.  He observed that many factors influence a                 
  teacher's retirement.  He  stated that he did not  know many                 
  teachers that  had elected  to retire  after 20  years.   He                 
  emphasized that a  20 year  teacher does not  retire at  100                 
  percent  of salary.   He noted  that military  personnel can                 
  retire at age 38 if they enlisted at 18 years of age.                        
                                                                               
  Mr. Hadley concluded that Alaska "is  the first state in the                 
  history of the United States that is going to the poor house                 
  with billions of dollars in the bank."                                       
                                                                               
  Representative Martin referred to  the State's investment in                 
  its teachers.  Mr. Hadley stressed that teachers spend money                 
  to obtain additional degrees and hours.  He pointed out that                 
  teachers  move up  on their  salary hours because  they have                 
  spent  money  and   time  for   additional  training.     He                 
  accentuated that the  amount of tension  and stress that  is                 
  placed  on classroom teachers.  He  questioned the wisdom of                 
  requiring   teachers   to   work   beyond   their   physical                 
  capabilities.  He stated that he has taught for 26 years.                    
                                                                               
  Representative Parnell  asked if  the  NEA-Alaska Board  has                 
  taken a position  in regards to  income taxes and using  the                 
  Permanent Fund for  education purposes.   Mr. Hadley  stated                 
  that the Board has not taken a stand on taxes.  He clarified                 
  that the Board  has taken a  position in favor of  using the                 
                                                                               
                               12                                              
                                                                               
                                                                               
  Permanent Fund for educational purposes.                                     
                                                                               
  CSSB 148 (RLS) am(efd fld) was HELD in Committee for further                 
  discussion.                                                                  

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