Legislature(2003 - 2004)

02/17/2004 02:04 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  explained the  changes made  to                                                                   
the  work draft  version of  the bill  before the  Committee.                                                                   
The committee substitute would  remove the previous change to                                                                   
the Cost of Living Allowance (COLA)  and would remove Section                                                                   
1, lowering the  fiscal impact.  He requested  that the draft                                                                   
be adopted.                                                                                                                     
Co-Chair  Harris  MOVED  to ADOPT  work  draft  version  #23-                                                                   
LS0426\I, Craver,  1/14/04 as the version of  the legislation                                                                   
before  the Committee.    There being  NO  OBJECTION, it  was                                                                   
Representative Anderson pointed  out that there are currently                                                                   
twenty co-sponsorships to the  bill, making it a priority for                                                                   
legislative  membership.   A  revised  fiscal  note has  been                                                                   
distributed with  the adoption  of the committee  substitute.                                                                   
Representative  Anderson  admitted  for  the record  that  he                                                                   
thought   the  fiscal   note  could  be   reduced  more   and                                                                   
recommended that be considered  through further deliberation.                                                                   
Representative   Anderson  stated  that   the  goal   of  the                                                                   
legislation  is  to create  a  "makes  sense" bill  that  has                                                                   
support, pointing out that the scope has been limited.                                                                          
Co-Chair Williams  noted for the  record that he  did support                                                                   
the bill,  however,  given the  size of the  fiscal note,  it                                                                   
will  be  difficult to  get  the  bill  to pass  through  the                                                                   
Governor's  office.  He  indicated that  he has been  holding                                                                   
bills  that have  fiscal  notes.   Given  the current  fiscal                                                                   
crisis  of  the  State  each piece  of  legislation  must  be                                                                   
justified.   When  the  State  is terminating  the  Longevity                                                                   
Bonus Program, cutting education  funding and troopers, HB 91                                                                   
will be  held in  Committee until  fiscal concerns  have been                                                                   
addressed.   He  asked if  Representative  Anderson had  been                                                                   
working with the Governor's Office.                                                                                             
Representative  Anderson  acknowledged  that  addressing  the                                                                   
fiscal impact is important, noting  that the testimony of Mr.                                                                   
Fox  would address  fiscal note  concerns.   He advised  that                                                                   
perhaps   the  House   Finance   Committee  could   determine                                                                   
alternatives for those costs.                                                                                                   
Co-Chair Harris emphasized two points for the record:                                                                           
   ·    Education is not being cut and the                                                                                      
   ·    State Troopers will not be cut.                                                                                         
Co-Chair  Harris  acknowledged that  the  fiscal  note was  a                                                                   
problem  and noted  that  he was  working  with  Mr. Fox  and                                                                   
Representative Anderson to address that concern.                                                                                
Co-Chair Williams  pointed out that  this year, the  State is                                                                   
$70 million dollars  "in the hole" resulting  from the Public                                                                   
Employees  Retirement System (PERS)  and Teachers  Employment                                                                   
Retirement  System (TERS).   Those  costs  must be  accounted                                                                   
for.  He noted that $70 million was the cost for one year.                                                                      
Representative  Fate  voiced   support  for  the  bill.    He                                                                   
indicated that  there are processes in which  the Legislature                                                                   
can come up with reallocations.   He reiterated that he would                                                                   
do "everything  that  he could"  to help the  bill pass  this                                                                   
Representative  Hawker  pointed  out  that the  bill  in  the                                                                   
Committee  from last year  would affect  State and  municipal                                                                   
employees.    He questioned  if the  municipal impact  of the                                                                   
bill  had been  considered.   Representative  Anderson  noted                                                                   
that  he  could  not  speak to  Kenai  or  Fairbanks  but  in                                                                   
Anchorage, Mayor Mark Begich has  indicated that he disagreed                                                                   
with  the assessment  given by  the previous  Administration.                                                                   
Representative Anderson  understood that Anchorage  supported                                                                   
the  current   version.    He   offered  to  find   out  more                                                                   
ERIC OLSON,  PUBLIC SAFETY EMPLOYEES ASSOCIATION  - SOUTHWEST                                                                   
REGION, ALASKA  STATE TROOPER, stated  that he had  began his                                                                   
law enforcement work in Bush Alaska  in 1992.  At present, he                                                                   
understands  both   the  rural  and  urban   aspects  of  the                                                                   
profession.   He  informed Committee  members that  HB 91  is                                                                   
very important.   A  career as a  law enforcement  officer is                                                                   
mostly 24 hours  a day, 7 days a week and it  is not uncommon                                                                   
to be  on call, due to  lack of manpower.   The work  takes a                                                                   
huge physical  and mental toll  on a person.   Normally, that                                                                   
job  class  had allowed  for  retirement  after 20  years  of                                                                   
service receiving  full benefits,  thereafter.  However,  due                                                                   
to the current  tier status change  for Tier 2 &  3 employees                                                                   
that is no longer  possible.  That employee will  now have to                                                                   
work 25 years  before qualifying to receive  medical benefits                                                                   
at the end of their career.                                                                                                     
Mr.  Olson noted  that  when he  started,  he  was under  the                                                                   
belief that  he would  be done  after a  20-year career.   He                                                                   
noted that he  was aware that other law  enforcement agencies                                                                   
in  the lower  48, provide  better  benefits with  a 20  year                                                                   
retirement and that many members  of his profession are aware                                                                   
of that advantage.                                                                                                              
Mr. Olson  pointed out that  from his graduating  class, only                                                                   
60%  are  remaining in  Alaska.    Some  of the  decline  has                                                                   
resulted  from the  hardships  of  the job  and  the lack  of                                                                   
benefits received.   He emphasized that a benefit  package is                                                                   
a  major  consideration  for people  interested  in  the  law                                                                   
enforcement profession.                                                                                                         
Mr. Olson reiterated  that this work is a "burn  out" for the                                                                   
entire family  and that HB 91  would revive an  incentive for                                                                   
law   enforcement  officers.      He  emphasized   that   law                                                                   
enforcement officers give 110%  for their jobs and because of                                                                   
the current  retirement opportunities,  many law  enforcement                                                                   
officers are leaving  State.  He respectfully  requested that                                                                   
the Committee consider the legislation.                                                                                         
Co-Chair Harris  asked how  many years Mr.  Olson had  been a                                                                   
police officer.   Mr. Olson  replied 12-years, five  of which                                                                   
was as a federal officer and seven  years as a State Trooper.                                                                   
Co-Chair  Harris  inquired  how   many  State  Troopers  were                                                                   
nearing the 20-year  time frame.  Mr. Olson did  not know and                                                                   
pointed out  that half of the  trooper force is young.   Many                                                                   
of those  candidates are now moving  down south to  other law                                                                   
enforcement  agencies.   He reiterated  that every year,  the                                                                   
force is loosing officers to either  retirement or moving on.                                                                   
Co-Chair  Harris asked  if there was  a mandatory  retirement                                                                   
age.  Mr.  Olson stated there  is not and there  are troopers                                                                   
that stay 30+ years.  That decision is a personal choice.                                                                       
Co-Chair  Harris asked  if a Peace  Officer,  in the line  of                                                                   
duty of  fieldwork, became less  efficient and safe,  as they                                                                   
age.  Mr. Olson acknowledged that  they do.  He noted that it                                                                   
is a normal fact  of life that our bodies wear  and slow down                                                                   
as we age.   He stressed that the field is  a demanding, high                                                                   
risk and  that a person's  attention span becomes  less keen.                                                                   
He reiterated that all officers attempt to do their best.                                                                       
Co-Chair Harris asked if it was  true that a schoolteacher in                                                                   
the State of Alaska was allowed  to retire with full benefits                                                                   
after 20-years service.  Mr. Olson  did not know.    Co-Chair                                                                   
Harris  commented  that  the physical  and  life  threatening                                                                   
demands would be greater on a  police officer than they would                                                                   
on a  schoolteacher.   Mr. Olson  echoed sentiments  that the                                                                   
job is  stressful and demanding.   Fights happen almost  on a                                                                   
daily basis,  compounded with the  aspect of being  away from                                                                   
home often, being  involved with weapons, and  drug offenses.                                                                   
All those  challenges wear a person  down.  He  stressed that                                                                   
the  law  enforcement   profession  is  more   stressful  and                                                                   
difficult than that of a teacher.                                                                                               
Representative Hawker pointed  out that there are a number of                                                                   
issues  before  the Committee  this  year for  public  safety                                                                   
officers.  He  commented that he was attempting  to reconcile                                                                   
the State's investment  for the "working guys"  and the large                                                                   
fiscal  issues  associated with  that.   He  emphasized  that                                                                   
Alaskans are concerned with "letting government grow".                                                                          
Mr.  Olson  replied  that the  Department  of  Public  Safety                                                                   
attempts  to  do  everything to  keep  overtime  costs  down.                                                                   
Historically,  there was  twice  the number  of officers  and                                                                   
half the amount of work.  He understood  that the salary paid                                                                   
officers is citizen's  money and reminded members  that those                                                                   
officers work at 110% capacity.                                                                                                 
Representative  Hawker  commented that  he  was surprised  by                                                                   
testimony given at  the last day of the  statewide conference                                                                   
hearing  in Fairbanks.   It  was evident  that many  citizens                                                                   
believe the only benefit they  derive from the State's wealth                                                                 
is  the Alaska  Permanent Fund  dividend.   He  asked if  Mr.                                                                   
Olson agreed.   Mr. Olson disagreed,  noting that he  was not                                                                   
speaking  on behalf  of the  Department.   Mr. Olson  claimed                                                                   
that Alaskans  are receiving  a "huge"  benefit from  the law                                                                   
enforcement   officers,   fire  fighters   and   correctional                                                                   
officers.   Those people do  more with less.   Representative                                                                   
Hawker  voiced  his  appreciation  for  that  response.    He                                                                   
emphasized  that comments  made at  the statewide  conference                                                                   
make it difficult to justify spending State money.                                                                              
Co-Chair  Williams requested  that the  Committee not  debate                                                                   
those issues.   He admitted that he understood  the direction                                                                   
of the discussion, noting that  the Committee meeting was not                                                                   
the place to discuss that now.                                                                                                  
Vice Chair  Meyer commented  that he supports  the bill.   He                                                                   
pointed   out  that   often  times   retirement  issues   are                                                                   
negotiated  in  labor  contracts.   He  questioned  if  their                                                                   
contract  was  currently in  the  negotiation  process.   Mr.                                                                   
Olson  clarified  that the  Department  of Public  Safety  is                                                                   
currently undergoing contract  negotiations and that HB 91 is                                                                   
not related to that.                                                                                                            
Representative  Croft understood  that the  argument for  the                                                                   
passage of the  bill is that it would retain  officers in the                                                                   
State system.   He noted that  the State is  loosing officers                                                                   
at  around the  15-year level  and  asked how  that had  been                                                                   
indicated  on the chart.   Mr.  Olson recommended  discussing                                                                   
that graph  with Mr.  Fox of the  Alaska State Public  Safety                                                                   
Employees  Association.   Representative  Croft requested  to                                                                   
see those numbers.                                                                                                              
MICHAEL   FISCHER,   CORRECTIONAL    OFFICER,   LEMON   CREEK                                                                   
CORRECTIONAL  FACILITY,  DEPARTMENT OF  CORRECTIONS,  pointed                                                                   
out that  there are not  many "old" correction  officers that                                                                   
would want to  do "serve" an additional five  years.  Working                                                                   
as a correctional  officer is the same as  being incarcerated                                                                   
with the  inmates.   Without passage  of the legislation,  it                                                                   
would be like  having an extension to your  20-year sentence.                                                                   
Mr. Fischer emphasized  that Alaska has a very  high turnover                                                                   
of  peace  officers  and  currently,   there  is  not  enough                                                                   
incentive to keep staff.                                                                                                        
Mr. Fischer  stressed that  working in  the prison  system is                                                                   
high stress and very difficult  work and stated that it would                                                                   
be  determintal   to  keep  older  officers.     Mr.  Fischer                                                                   
commented that very few correctional  officers make it to 20-                                                                   
years service.                                                                                                                  
TAPE HFC 04 - 24, Side B                                                                                                      
Mr. Fischer urged passage of the bill.                                                                                          
MIKE FOX, ALASKA  STATE PUBLIC SAFETY EMPLOYEES  ASSOCIATION,                                                                   
RETIRED FISH AND  WILDLIFE TROOPER, commented  that a problem                                                                   
with the  proposed legislation  is that  the fiscal  note has                                                                   
not  considered any  savings.   HB 91  would cut  operational                                                                   
costs  by  removing  the  five-year  disincentive  for  peace                                                                   
officers  to  take  normal  retirement.   There  would  be  a                                                                   
$23,105  dollar savings  in  the base  pay  leave during  the                                                                   
first  year  after  a  Corrections  Officer  III  takes  home                                                                   
retirement.  For  a Trooper Sergeant, that amount  would be a                                                                   
$32,508  savings the first  year.   Additional savings  would                                                                   
also  be  indicated  for things  such  as  overtime,  vehicle                                                                   
differential, and  shift differential.  When  a peace officer                                                                   
is pressured to  defer normal retirement, they  are likely to                                                                   
have higher risks with health, business, stress and income.                                                                     
Mr.  Fox  stressed  that  the  bottom  line  is  that  it  is                                                                   
expensive to keep  Peace Officers past normal  retirement and                                                                   
is not a  good choice.  He  suggested that if all  the Public                                                                   
Employees Retirement  System (PERS) members  defer retirement                                                                   
this year, the  State would be concerned about  how much that                                                                   
would  be  costing.    The  current   situation  is  creating                                                                   
pressure to  defer retirement, which  is an expensive  way to                                                                   
run business.                                                                                                                   
Mr. Fox  claimed that passage  of the bill would  improve the                                                                   
retention of the  younger peace officers.   Reducing turnover                                                                   
in the ranks of the younger officers  saves money.  The State                                                                   
invests  $91,460  dollars  to   hire  and  train  a  trooper.                                                                   
Training time is  33-weeks.  Every time a trooper  remains in                                                                   
service,  costs are  saved.  It  is expensive  for the  State                                                                   
when an officer leaves early in their career.                                                                                   
Mr. Fox  pointed out that  HB 91 is  a low risk  fiscal bill.                                                                   
The bill is not  open ended and there would be  no benefit if                                                                   
they leave before the 20-years.                                                                                                 
The only members impacted by the  bill are peace officers who                                                                   
retire between 20  and 25 years of service and  are less than                                                                   
60 years old.  It is a small group.   He added that it is not                                                                   
known how many of the 700 correctional  officers and the 300+                                                                   
troopers are estimated  to actually receive the  benefit.  He                                                                   
questioned how could  the accuracy of the bill  be determined                                                                   
without  knowing  how many  people  will  be affected.    The                                                                   
fiscal range is difficult to determine.   The one provided to                                                                   
the Committee  is 0.12%  (12 one  hundredths of one  percent)                                                                   
contribution rate.   During the  past 15-years,  the declared                                                                   
contribution  rate has  ranged  17.22%, down  to  7.1%.   The                                                                   
average change  has been  1.61% per year  and the  range over                                                                   
15-years has been over 10%.                                                                                                     
Mr. Fox pointed  out the margin of error on  the contribution                                                                   
rates when they are established.   He asked if .12% would fit                                                                   
into that  margin of error and  if it would be noticed.   Mr.                                                                   
Fox questioned why a benefit received  by others would not be                                                                   
extended to the peace officers.                                                                                                 
Representative  Croft asked  if the  dip was  obvious and  if                                                                   
there is  a loss at  the 15-year point  of service.   Mr. Fox                                                                   
stated that  the only people that  the bill affects  would be                                                                   
those in Tier  2 & 3.  There  will be no Tier 2  people until                                                                   
2006.  There is a relatively consistent  pattern from 0 to 20                                                                   
indicating the drop off.  Mr.  Fox pointed out that the State                                                                   
has been "all  over the map" for funding and  filling trooper                                                                   
positions.   Some years, zero  people were hired  and looking                                                                   
at  the  percentages,  Tier  1  people  already  receive  the                                                                   
benefit being asked for and 38%  of those people are still on                                                                   
the job.   That  is a model.   The  federal government  has a                                                                   
limit of  when they will  hire a peace  officer, which  is 37                                                                   
years  old  and  that  can  affect  statewide  peace  officer                                                                   
retention in the middle of their career.                                                                                        
MELANIE  MILLHORN, (TESTIFIED  VIA TELECONFERENCE),  DIRECTOR                                                                   
DIVISION   OF   RETIREMENT   &    BENEFITS,   DEPARTMENT   OF                                                                   
ADMINISTRATION,  ANCHORAGE, testified  that the Division  has                                                                   
adopted a  "neutral" position  on the bill.   She  added that                                                                   
the Division  does have concerns  regarding the  fiscal costs                                                                   
given the under  funded status of the PERS  retirement system                                                                   
at this  time.   The funding ratio  of PERS is  at 75%.   Ms.                                                                   
Millhorn  noted that  the Mercer  Actuarial  Company did  the                                                                   
fiscal note preparation.                                                                                                        
The  bill would  provide  medical  coverage for  Tier  2 &  3                                                                   
employees, appointed to their positions after 1986.                                                                             
The  actuarial consultant  has  computed  the legislation  to                                                                   
increase the  PERS accrued liability by  approximately $13.45                                                                   
million dollars.  The estimated  increase in the average PERS                                                                   
calculated  contribution  rate  would be  0.18%  of  payroll.                                                                   
Based on a  State PERS payroll of approximately  $680 million                                                                   
dollars,  the annual  cost increase  to the  State of  Alaska                                                                   
would be  $1.224 million dollars  and would be paid  from all                                                                   
State  agency  personal  service   line  items.    There  are                                                                   
approximately  900 officers  that would  become eligible  for                                                                   
the medical benefits through the legislation.                                                                                   
Representative   Anderson  referred   to   the  analysis   of                                                                   
retirement paid by the State as  presented by Mr. Fox.  There                                                                   
are savings  in the  payroll analysis.   He recommended  that                                                                   
the Division  of Retirement  and Benefits  work with  Mr. Fox                                                                   
and determine retirement and benefit  statistics of those who                                                                   
are retiring.   He contended that the fiscal  impact could be                                                                   
reduced but  stressed that it  is not only about  keeping the                                                                   
law enforcement  officers but  preventing them from  "wearing                                                                   
out".   He  emphasized  that there  is  a difference  between                                                                   
working  in   the  criminal  field   and  being   a  teacher.                                                                   
Representative  Anderson pointed out  the 15-year  level drop                                                                   
statistic.     He   referenced   Co-Chair  Williams   comment                                                                   
regarding   the  Governor's  support,   stressing   that  the                                                                   
Legislature must act as a separate  branch of government.  He                                                                   
urged  that all  aspects  of  the legislation  be  considered                                                                   
rather than just the retirement and benefits.                                                                                   
Co-Chair  Williams  stated  that  HB  91  would  be  HELD  in                                                                   
Committee for further consideration.                                                                                            

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