Legislature(2003 - 2004)

03/18/2003 01:47 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 91                                                                                                             
     An Act relating to a cost-of-living allowance and                                                                          
     medical benefits for retired peace officers after 20                                                                       
     years of credited service.                                                                                                 
REPRESENTATIVE   TOM  ANDERSON   testified  that  the   State                                                                   
troopers,  firemen, correctional  officers, and others  known                                                                   
as "peace  officers" employed by  the State of Alaska  are an                                                                   
invaluable resource.   These employees risk  their health and                                                                   
safety in their service to the citizens of Alaska.                                                                              
Until  1986, all  Public  Employee Retirement  System  (PERS)                                                                   
benefit  recipients were  eligible to  receive major  medical                                                                   
insurance benefits  after becoming  vested in the  retirement                                                                   
system.    In  addition,  peace  officers  were  eligible  to                                                                   
receive  an   Alaska  Cost-of-Living-Allowance   (COLA)  upon                                                                   
retirement.  In  1986, the requirements for  medical benefits                                                                   
and  COLA  were modified  to  reduce  the number  of  benefit                                                                   
recipients eligible to receive those benefits.                                                                                  
Currently,  the   participants  may  receive   major  medical                                                                   
insurance  benefits upon  their  normal  retirement after  30                                                                   
years of  service.  Normal  retirement for peace  officers is                                                                   
after  20 years  of service,  however,  current law  requires                                                                   
peace officers  to have 25 years  of service before  they are                                                                   
eligible   to  receive   medical  benefits.     That   system                                                                   
undermines the intent of the peace  officer normal retirement                                                                   
by  withholding  their  medical insurance  benefit  until  an                                                                   
additional 5 years of service are given.                                                                                        
Representative Anderson pointed  out that HB 91 would correct                                                                   
the  existing benefit  delay by  allowing  peace officers  to                                                                   
receive major  medical insurance at their  normal retirement.                                                                   
Alaska  COLA  is  currently  payable   to  non-disabled  PERS                                                                   
benefit recipients,  age 65  or older,  who remain  in Alaska                                                                   
after retirement.   HB 91 would  provide the COLA  benefit to                                                                   
peace  officers  upon normal  retirement  after  20 years  of                                                                   
service, offering  an incentive  to those citizens  to remain                                                                   
in  Alaska,  where  they may  continue  contributing  to  the                                                                   
public good.                                                                                                                    
The  legislation   would  end  the  requirement   that  peace                                                                   
officers  work beyond  their normal  retirement  in order  to                                                                   
obtain their medical benefits.   By offering the COLA benefit                                                                   
upon  retirement,  the legislation  also  encourages  retired                                                                   
peace officers to remain in the State.                                                                                          
Representative Anderson listed  the number of bi-partisan co-                                                                   
sponsors  for  the  legislation:  Representative  Guttenberg,                                                                   
Representative Gara, Representative  Crawford, Representative                                                                   
Heinz,  Representative  Lynn, and  Representative  Dahlstrom.                                                                   
The  bill  also  has the  support  of  the  Public  Employees                                                                   
Retirement   System  (PERS)  Board,   the  Anchorage   Police                                                                   
Department, the Anchorage Fire  Fighters Union, Public Safety                                                                   
Employees   Association   and    numerous   police   officers                                                                   
throughout the State.                                                                                                           
Representative  Anderson acknowledged  that  there have  been                                                                   
questions regarding the cost of  the legislation for the City                                                                   
of Anchorage.  That amount would  be the annual PERS employer                                                                   
contribution increase of $44,544 dollars.                                                                                       
MICHAEL  FOX,  PUBLIC SAFETY  EMPLOYEES  ASSOCIATION  (PSEA),                                                                   
discussed the merits of the proposed  legislation.  He listed                                                                   
the people that would be affected by the legislation:                                                                           
   ·    Police officers                                                                                                         
   ·    Fire fighters                                                                                                           
   ·    Peace officers                                                                                                          
   ·    Public safety officers                                                                                                  
   ·    Chief of police                                                                                                         
   ·    Correctional officers                                                                                                   
   ·    Probation officers                                                                                                      
Mr. Fox pointed  out that the PERS mission is  to attract and                                                                   
retain qualified  people into public service  employment.  It                                                                   
is not the PERS mission to provide a living wage for life.                                                                      
Mr.  Fox  addressed the  history  of  the  program.   Tier  1                                                                   
consists  of  employees  hired between  1961-1986  with  COLA                                                                   
payable to all benefit recipients.   HB 252 passed in 1986 by                                                                   
Senator Duncan  changed that to  Tier II.  Tier  II clarified                                                                   
that COLA  would be payable after  the age 65 and  that major                                                                   
medical  would   be  provided   at  age  60.     HB   242  by                                                                   
Representative  Kott  passed in  2001  created  the Tier  III                                                                   
system.   The  Alaska COLA  will be  paid after  the age  65,                                                                   
major medical at  age 60 and/or at normal retirement  for all                                                                   
others, except  normal retirement  plus five years  for peace                                                                   
officers.   Mr.  Fox  continued,  HB 91  changed  that to  an                                                                   
Alaska  COLA payable  after  the  age 65  years  or to  peace                                                                   
officers at  normal retirement  and major  medical at  age 60                                                                   
years  or  at normal  retirement  for  all others  and  peace                                                                   
Mr. Fox  addressed the  increase of  $1.2 million dollars  to                                                                   
the fiscal  note of which  approximately $600  thousand would                                                                   
be  taken  from  the general  fund.    The  current  employer                                                                   
contribution  is  8.42%  with  an increase  of  0.18%.    The                                                                   
employer contribution  is a percent of salary.   In 1990, the                                                                   
employer  contribution  was approximately  12%,  in 1994,  it                                                                   
peaked at  about 17% while,  this year it  is at 8.42%.   The                                                                   
proposed fiscal  note would change that percentage  to 8.60%.                                                                   
All other employees contribute  about 6.7% and peace officers                                                                   
contribute 7.5%.                                                                                                                
Mr. Fox  stated that  the justification  for change  rests in                                                                   
the fact  that current  law undermines  retirement for  peace                                                                   
officers by  denying benefits  requiring an extra  five years                                                                   
of  work.   That  requirement  inhibits  recruitment,  lowers                                                                   
morale and inhibits retention.                                                                                                  
Mr. Fox pointed out that the graph  indicates turnover by the                                                                   
percentage of Troopers per year  class, who are still working                                                                   
compared  to those  separated  from service.   The  following                                                                   
graph illustrates  turnover by  using the number  of Troopers                                                                   
by groups of year  class.  There are 237 Troopers  out of 315                                                                   
who have ten years  or less of service.  The  following graph                                                                   
indicates turnover using the number  of correctional officers                                                                   
by years of service.                                                                                                            
Representative  Anderson  stated that  the  concern rests  in                                                                   
year #9 when  up to 40% are  leaving the force.  Part  of the                                                                   
reason  for  that  turnover  is   the  lack  of  medical  and                                                                   
benefits.   He added, it is  difficult to recruit  the number                                                                   
of people needed  when so many in the force are  leaving.  He                                                                   
emphasized that  the chart indicates  that separation  is due                                                                   
to lack of guaranteed medical benefits and other concerns.                                                                      
Mr. Fox commented  that there is great potential  for savings                                                                   
through improved  retention.   There is  a direct savings  in                                                                   
recruiting  and  retaining  troopers.     It  costs  $104,871                                                                   
thousand  dollars for  each trooper  trained and  hired.   He                                                                   
added that the improved retention  equals experience and that                                                                   
makes  for  better  decisions.   Better  decisions  make  for                                                                   
better  savings for  the State.   Peace  officers are  called                                                                   
upon to  make life and death  decisions and that  experienced                                                                   
officers are more likely to make better decisions.                                                                              
Mr.  Fox  mentioned   the  problems  associated   with  peace                                                                   
officers working past normal retirement:                                                                                        
   ·    Increased health problems                                                                                               
   ·    Increased risk of injury                                                                                                
   ·    Low morale                                                                                                              
He   continued,  the   next  graph   indicates  the   limited                                                                   
opportunity    for   peace   officers    to   promote    into                                                                   
administrative positions.   The graph compares  the number of                                                                   
patrol-level officers  to the number of  administrative-level                                                                   
Mr. Fox listed  the benefits of  Alaska COLA.  It is  not the                                                                   
intention of PERS  to provide a living wage  upon retirement.                                                                   
The base benefit for a peace officer  at normal retirement is                                                                   
45% before  deductions.   Peace officers  have to work  after                                                                   
normal retirement.   He  stressed that it  is in  the State's                                                                   
best  interest to  keep the  peace officers  working here  in                                                                   
Mr. Fox summarized current law:                                                                                                 
   ·    Undermines the normal retirement for peace officers;                                                                    
   ·    Inhibits the PERS mission to recruit and retain                                                                         
        peace officers in public service.                                                                                       
Mr. Fox  suggested that  HB 91  could restore retirement  and                                                                   
improve retention.                                                                                                              
Co-Chair  Harris referenced  the handout,  which states  that                                                                   
current law requires  peace officers to work  five years past                                                                   
normal  retirement to  receive  medical benefits.   He  asked                                                                   
which tier  that related  to.   Mr. Fox  replied that  Tier I                                                                   
would  receive  the benefits  at  20  years employment.    He                                                                   
explained that if  the person was vested with  five years and                                                                   
was hired prior to 1986, they  would receive medical benefits                                                                   
if they worked  beyond those five years.  They  would receive                                                                   
the retirement  benefit when  they qualified  for it.   Other                                                                   
people have  to be vested  for 10 years  and be age  sixty or                                                                   
have 25 years  of service.  The legislation  would change the                                                                   
25 years of service to 20 years of service.                                                                                     
Co-Chair  Harris commented  that a peace  officer would  only                                                                   
have to  work for 20  years to qualify  rather than 25.   Mr.                                                                   
Fox  reiterated  that  a  peace  officer  would  not  receive                                                                   
medical  benefits unless  they worked  25 years, whereas  all                                                                   
other State employees  only have to work 20  years to receive                                                                   
the  benefit.   Co-Chair Harris  pointed out  that no  matter                                                                   
what their  age, after working  20 years, they  would receive                                                                   
automatic retirement.                                                                                                           
Vice-Chair  Meyer asked if  there is  concern that  the peace                                                                   
officer would  stay for only  20 years, get their  retirement                                                                   
and then  would leave the State  to find a  second retirement                                                                   
job.   He suggested  they could leave  the State  faster than                                                                   
they currently are.                                                                                                             
Mr. Fox commented that when a  person retires, they must make                                                                   
a choice as  to where they will work after  their retirement.                                                                   
He admitted  that most peace officers  do retire and  then go                                                                   
back to work and  that the hope of the bill  is that it would                                                                   
provide incentive to keep them in the State.                                                                                    
Vice-Chair Meyer  thought that the incentive  could keep them                                                                   
in Alaska  for 20-years.   After that,  they would  have full                                                                   
retirement and  they could go  anywhere they wanted  to move.                                                                   
He  stated that  the bill  accompanied with  the fiscal  note                                                                   
were difficult at this time.                                                                                                    
Vice  Chair  Meyer questioned  where  the  idea of  the  bill                                                                   
originated.  The  people who are responsible  for recruitment                                                                   
and retention are  the mayors of Anchorage and  Fairbanks and                                                                   
the Governor  of Alaska.   He pointed  out that the  files do                                                                   
not contain any letters of support from those people.                                                                           
Representative   Anderson  explained   that  the   statistics                                                                   
indicate  that  most  fish  and  wildlife  officers,  retired                                                                   
fireman,  and troopers  have an  affinity to  stay in  Alaska                                                                   
when  they retire.   The  proposed  bill is  a supplement  to                                                                   
their foundational  interest.   There is  always the  risk of                                                                   
providing  benefits  for  someone that  leaves,  however,  he                                                                   
pointed out that  many in officer positions  have remained in                                                                   
the State.                                                                                                                      
Representative  Anderson  emphasized  that  at  10  years  of                                                                   
service,  many peace  officers are  leaving the  force.   The                                                                   
certainty rests that the State  is loosing good men and women                                                                   
to other  agencies.  The  State needs to revisit  recruitment                                                                   
and benefit issues, which is the  impetuous behind this bill.                                                                   
Vice-Chair Meyer  agreed that  there are many  people leaving                                                                   
at the 10-year  period.  He reminded  Representative Anderson                                                                   
that the legislation  would have a financial  impact on local                                                                   
cities  and questioned  why the  Mayor of  Anchorage had  not                                                                   
publicly supported the legislation.                                                                                             
Representative   Anderson  acknowledged   that  concern   was                                                                   
warranted.   He  requested that  teleconference testimony  be                                                                   
taken  to address  some  concerns.   Representative  Anderson                                                                   
noted  that  the  sponsors  had   spoken  directly  with  the                                                                   
department staff rather than specifically to the mayors.                                                                        
MIKE  COUTURIER, (TESTIFIED  VIA  TELECONFERENCE),  ANCHORAGE                                                                   
POLICE DEPARTMENT, ANCHORAGE,  voiced support of the proposed                                                                   
legislation.     He  explained   that  the  Municipality   of                                                                   
Anchorage  opted  to  place  its  officers  under  the  Peace                                                                   
officers PERS retirement system  in 1994.  The change reduced                                                                   
the  disability, debt  and retirement  benefits for  officers                                                                   
hired  after 1993.   The action  resulted in  making it  more                                                                   
difficult to recruit and retain employees.                                                                                      
Officer Couturier offered some  basic recruiting and training                                                                   
facts for  consideration.   He noted that  it takes  over 100                                                                   
applicants to obtain  one hired recruit.  It  costs $5,000 to                                                                   
get one recruit  to the 1  day of the academy  and $93,400 to                                                                   
fully  train and recruit  one  officer.  Those  costs do  not                                                                   
include the patrol  car.  The field officer  training program                                                                   
is 3.5 months long.  He emphasized  that it is very expensive                                                                   
to  recruit,  hire  and  train   one  police  officer.    The                                                                   
investment  is  huge  and  it  is  important  to  keep  these                                                                   
officers serving Alaska for as long as possible.                                                                                
Officer  Couturier observed  that  the Anchorage  police  are                                                                   
currently  loosing early  and  mid career  officers to  other                                                                   
police  agencies out  of state.   Officers  are hiring  on in                                                                   
order  to receive  their training  and  after receiving  that                                                                   
credential,  they are  transferring out  to the lower  forty-                                                                   
eight.  He noted that the California  PERS system offers high                                                                   
benefits  after twenty  years  of service  regardless of  the                                                                   
employees age.                                                                                                                  
Mr.  Couturier encouraged  Committee members  to support  the                                                                   
proposed legislation.                                                                                                           
Representative Hawker  questioned how many officers  would be                                                                   
affected  in  Anchorage  if the  legislation  were  to  pass.                                                                   
Officer  Couturier   responded  that  the   Anchorage  Police                                                                   
Department presently  has 318 officers, of which,  72% are in                                                                   
PERS Tier  II and Tier III,  which means about  250 employees                                                                   
would be affected.                                                                                                              
Co-Chair Harris  suggested that the bill be  accompanied with                                                                   
a "letter of  support" from the current mayors  of Anchorage,                                                                   
Fairbanks and Wasilla, the largest  communities in the State.                                                                   
He  asked  what  costs those  municipalities  would  have  to                                                                   
absorb  for   the  proposed  fiscal  note.     Representative                                                                   
Anderson  responded  that  he  would  have  that  information                                                                   
available for the next meeting.                                                                                                 
DAN  COLANG,  (TESTIFIED  VIA  TELECONFERENCE),  CORRECTIONAL                                                                   
OFFICIER,  DEPARTMENT  OF  CORRECTION,  FAIRBANKS,  spoke  in                                                                   
support of  the legislation.  He  commented on his work  as a                                                                   
correctional  officer and the  pressures associated  with it.                                                                   
Law enforcement  is stressful and  to ask someone to  work an                                                                   
additional five  years to receive  their medical  benefits is                                                                   
not  fair.   Mr. Colang  urged  that the  Committee pass  the                                                                   
legislation  so that  the peace  officer  workers can  retain                                                                   
their sanity and self worth.                                                                                                    
MIKE  DAVIDSON,  (TESTIFIED  VIA  TELECONFERENCE),  ANCHORAGE                                                                   
FIRE DEPARTMENT, ANCHORAGE, urged  the Committee's support of                                                                   
the legislation.  He noted that  the fire profession requires                                                                   
long and  intense hours  and difficult  decisions.   He noted                                                                   
that currently, he works 60-hour  weeks due to not being able                                                                   
to fill  all the vacant  positions.   He reiterated  that the                                                                   
main reason  for these long hours  is the difficulty  for the                                                                   
Anchorage Fire  Department to recruit successful  applicants.                                                                   
During  the   mid  1980's,  the  Municipality   of  Anchorage                                                                   
provided a good  pay structure, which was comparable  to many                                                                   
other states.   Because  of that  benefit package,  there was                                                                   
not a shortage of personnel applying for these positions.                                                                       
Mr. Davidson  emphasized that  passage of  HB 91 would  allow                                                                   
fire   fighters  to   better   gain  successful   applicants.                                                                   
Generally, these  employees come from a group  of people that                                                                   
are already  educated.  The provisions  in HB 91  would allow                                                                   
Alaska to  be more  competitive in  recruiting.  He  believed                                                                   
that the  ability to recruit  new employees would  offset the                                                                   
costs for the  fire department.  HB 91 should  provide better                                                                   
leverage  for more  successful recruiting,  which will  allow                                                                   
for filling job openings.                                                                                                       
ADAM  BENSON, (TESTIFIED  VIA  TELECONFERENCE), ALASKA  STATE                                                                   
TROOPER,  KETCHIKAN,  noted  that   the  bill  was  extremely                                                                   
important to all  State Troopers and would help  the State to                                                                   
retain troopers.   He noted that  the troopers that  he works                                                                   
with   are   mostly   young,   well-educated   professionals.                                                                   
Troopers take great  pride in the work that they  do and take                                                                   
their  training responsibilities  very  seriously.   Men  and                                                                   
women become  troopers because they  choose to.   The initial                                                                   
training  programs are  rigorous as  well as  are the  annual                                                                   
follow  up training  programs,  in  which there  is  constant                                                                   
exposure to new and challenging situations.                                                                                     
Mr. Benson  claimed that  experience is  a valuable  asset to                                                                   
the State and that  it would be in the State's  best interest                                                                   
to retain  these people.   He explained that  the challenges,                                                                   
which make the work worthwhile,  are not always beneficial to                                                                   
his family  and his future retirement.   With the  passage of                                                                   
HB 91,  there would be  more incentive  to stay in  the force                                                                   
for  20-years.   However,  without  the  bill, he  and  other                                                                   
troopers will  want and need to  explore other options.   Mr.                                                                   
Benson stressed that HB 91 will  act as an "insurance policy"                                                                   
for the State of Alaska.                                                                                                        
DR. GENE  SANDERS, (TESTIFIED  VIA TELECONFERENCE),  CLINCIAL                                                                   
DIRECTOR, POLICE  STRESS INSTITUTE, urged support  for HB 91.                                                                   
He  stated that  the  legislation  is supported  by  numerous                                                                   
studies done over  the years.  Dr. Sanders spoke  to the work                                                                   
and stress associated with police  work and that few officers                                                                   
actually  make it  to the retirement  age.   When they  leave                                                                   
prematurely, they  think that  the compensation is  no longer                                                                   
worth the  risk.  On the  other hand, police respond  well to                                                                   
health and  retirement programs  that help  them to  do their                                                                   
jobs.    It is  very  common  to see  police  officers  spend                                                                   
inordinate  amount  of  time   and  energy  in  the  face  of                                                                   
adversity  when they  believe that  the work  is feeding  and                                                                   
caring  for them down  the road.   Reducing  retirement  to a                                                                   
reasonable  and achievable  20  years becomes  and  effective                                                                   
approach to keeping highly trained officers on the job.                                                                         
Dr.  Sanders encouraged  serious consideration  of the  facts                                                                   
and  a support  vote for  HB 91.   He  stressed that  passage                                                                   
would be a medically sound and a responsible decision.                                                                          
GUY BELL, (TESTIFIED VIA TELECONFERENCE),  DIRECTOR, DIVISION                                                                   
OF  RETIREMENT AND  BENEFITS,  DEPARTMENT OF  ADMINISTRATION,                                                                   
ANCHORAGE, requested to testify on the bill.                                                                                    
TAPE HFC 03 - 35, Side B                                                                                                      
Mr. Bell addressed  the fiscal note.  He noted  that the note                                                                   
shows a  .18% increase  in payroll  costs resulting  from the                                                                   
legislation.   A dollar amount  is not indicated  because the                                                                   
cost  of the  change  would  be  spread across  the  personal                                                                   
services line of all state agencies,  which would amount to a                                                                   
spread  of  $1.2  million  dollars.   He  offered  to  answer                                                                   
questions of the Committee.                                                                                                     
Representative  Croft  inquired if  the  State would  require                                                                   
that  the municipalities  participate  in the  program.   Mr.                                                                   
Bell   replied   that   participation    by   the   political                                                                   
subdivisions  is  voluntary.   Those  political  subdivisions                                                                   
designate groups of employees  that will participate in PERS.                                                                   
Once  they  participate   in  PERS,  the  statutes   set  the                                                                   
Representative   Croft  asked   if  there   were  any   major                                                                   
municipalities  that  do  not   have  their  police  officers                                                                   
participate.  Mr. Bell responded  that the only one that does                                                                   
not participate is the Municipality  of Anchorage.  Anchorage                                                                   
has a police and fire retirement  system that effectively has                                                                   
been closed since  the mid 1990's.  Any employee  hired after                                                                   
that date is in the PERS system.                                                                                                
Representative Croft  inquired if a major  municipality could                                                                   
choose not to participate in the  legislation if passed.  Mr.                                                                   
Bell  responded  that the  participants  choice  would be  to                                                                   
participate  or to  not participate  in  PERS; however,  they                                                                   
would  need  to  offer  another   retirement  plan  to  their                                                                   
Representative Croft  commented that it would  be interesting                                                                   
to hear the  various municipalities decision  regarding this.                                                                   
He  pointed out  that  the  legislature would  establish  the                                                                   
State standard.                                                                                                                 
Representative  Hawker noted that  the fiscal note  indicates                                                                   
that   the  increased   PERS  accrued   liability  would   be                                                                   
approximately $13.45  million dollars.  He asked  if that was                                                                   
unfunded  pass service  costs or  a prospective  calculation.                                                                   
Mr. Bell responded  that was the unfunded past  service cost.                                                                   
The .18%  would include  that  and would amortize  it over  a                                                                   
period  of 25  years.   In  addition,  it would  include  the                                                                   
future costs,  costs of  benefits, which  will accrue  in the                                                                   
future as a result of the change.                                                                                               
Representative  Hawker   asked  if  .18%  payroll   would  be                                                                   
amortized as  $13.45 million dollars  over a 25-year  period.                                                                   
Mr. Bell replied that was correct.                                                                                              
Representative Hawker  advised that an $85 thousand  dollar a                                                                   
year  trooper, at  .0018 benefit  cost would  amount to  $153                                                                   
dollars a  year or $13  dollars a month.   He was  curious if                                                                   
the  participants would  be willing  to absorb  any of  those                                                                   
Co-Chair  Williams  stated  that  HB  91  would  be  HELD  in                                                                   
Committee for further consideration.                                                                                            

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