Legislature(2003 - 2004)
03/18/2003 01:47 PM House FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 officers. 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 positions. 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 Alaska. 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 st 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 benefits. 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 employees. 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 costs. Co-Chair Williams stated that HB 91 would be HELD in Committee for further consideration.