Legislature(2003 - 2004)

04/15/2004 01:30 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        HB  91-RETIRED PEACE OFFICER'S MEDICAL BENEFITS                                                                     
CHAIR   CON  BUNDE   announced  CSHB   91(FIN)  to   be  up   for                                                               
consideration  and  that it  was  accompanied  by a  power  point                                                               
REPRESENTATIVE  TOM ANDERSON,  sponsor,  said that  HB  91 is  of                                                               
great  importance to  law officers  whether  they be  correction,                                                               
firemen  or  policemen.  It is  a  cost-avoidance  bill.  Current                                                               
policy  requires that  Tier 2  and  Tier 3  peace officers  defer                                                               
retirement  an extra  five  years to  qualify  for their  medical                                                               
benefit. He believed that deferment  has a price tag and although                                                               
this bill has  a fiscal note from the Division  of Retirement and                                                               
Benefits,  the Department  of Corrections  and the  Department of                                                               
Public Safety haven't reported in at this juncture.                                                                             
     I think those fiscal  notes would basically deplete the                                                                    
     elevated fiscal note from  [the Division of] Retirement                                                                    
     and Benefits....  I hope you will  consider that. Also,                                                                    
     when a  peace officer  defers retirement, I  think it's                                                                    
     important to  note that  the operational  cost increase                                                                    
     is greater  than the  actual benefit  cost. So,  I want                                                                    
     you to  think of this,  first of all,  recognizing that                                                                    
     PERS  is managed  on the  basis of  equality among  its                                                                    
     members  and without  this bill  passing,  there is  no                                                                    
     fairness. You're  aware of what  it does; it  gives 20-                                                                    
     year retirement for medical  retirement and benefits to                                                                    
     peace officers....  There is a $23,105  savings in base                                                                    
     pay and  leave during  the first  year after  a 20-year                                                                    
     correction officer  3 takes  normal retirement.  So, we                                                                    
     see  a savings....  These  examples go  on  and on  and                                                                    
     on.... This is important even  though there is a fiscal                                                                    
     note, which again,  I think can be  reconciled down. We                                                                    
     have  to defer  to the  judgment that  we want  to keep                                                                    
     these peace  officers and the  old adage I said  in the                                                                    
     previous committee, hey, you  look at the service...and                                                                    
     the risks  and the  stress that  are involved...20-year                                                                    
     medical  retirement doesn't  seem  that  out of  kilter                                                                    
     with respect to the career and that choice.                                                                                
CHAIR  BUNDE  said  he  once  heard  that  because  the  cost  of                                                               
recruiting and training  was so expensive, the state  had to keep                                                               
these  people longer.  Now, because  of  other circumstances,  we                                                               
want them to leave sooner.                                                                                                      
REPRESENTATIVE  ANDERSON responded  that  Mr.  Fox's power  point                                                               
presentation would show that a 20-year  career span is as good as                                                               
it gets.                                                                                                                        
MR. MIKE FOX, PUBLIC SAFETY  EMPLOYEES ASSOCIATION (PSEA), showed                                                               
the  committee  a   power  point  presentation  on   HB  91  that                                                               
illustrated  how  HB 91  provides  medical  benefits for  retired                                                               
peace officers  after 20 years  of accredited service  instead of                                                               
after  working five  years beyond  normal retirement.  It removes                                                               
the disincentive  for peace officers  to take  normal retirement.                                                               
It  reestablishes parity  with all  other PERS  members. Mercer's                                                               
current  experience is  that 21  out of  100 peace  officers will                                                               
make it to retirement.                                                                                                          
SENATOR HOLLIS FRENCH asked what Mercer's Human Resources is.                                                                   
MR. FOX  replied that they  are the actuaries who  are contracted                                                               
by the Division  of Retirement and Benefits  to perform analyses.                                                               
He continued  that DPS  hired 90  troopers in  2002 and  2003, 13                                                               
percent per year; Department of  Corrections (DOC) hires about 70                                                               
[indisc.] per year, about 10  percent to maintain level staffing.                                                               
The remaining Tier 1 trooper  class had an approximate 62 percent                                                               
separation rate. This means that  38 percent of the troopers left                                                               
are Tier 1.                                                                                                                     
MR. FOX  explained that only Tier  2 and Tier 3  members would be                                                               
affected by this  bill. Major medical is already  provided to all                                                               
Tier 1  recipients. In 1986,  Tier 2 was created,  which provided                                                               
major  medical at  age 60.  In  2001, the  current situation  was                                                               
created where  after a 10-year  vesting period, major  medical is                                                               
provided at age 60 or at  normal retirement unless you're a peace                                                               
officer and then you must work five more years.                                                                                 
     The  perspective from  HB 91  simply removes  the five-                                                                    
     year extra  requirement for peace officers.  That's all                                                                    
     it  does. The  justification for  change -  current law                                                                    
     withholds  the benefit  from peace  officer members  of                                                                    
     PERS  unless   an  extra  five  years   is  worked;  it                                                                    
     undermines  the   intent  of  peace   officers'  normal                                                                    
     retirement; it  inhibits recruitment and  retention and                                                                    
     it causes inequality among PERS members.                                                                                   
     HB 91 is a cost-avoidance  bill. Current policy intends                                                                    
     to defer  retirement of  Tier 2  and 3  peace officers.                                                                    
     Operational cost  increases from a  deferred retirement                                                                    
     are  greater  than the  actual  benefit  costs. A  cost                                                                    
     comparison  example -  the  largest  group affected  is                                                                    
     correctional officers (CO).  A correctional officer 2's                                                                    
     additional base  pay and  leave costs  for one  year of                                                                    
     deferred retirement  is at  least $18,252.  DRB advises                                                                    
     that the  average benefit cost  is $9,670.  The current                                                                    
     policy  intends to  defer retirements  for five  years.                                                                    
     The choice is to fund  the benefit or fund the deferred                                                                    
     retirement cost increase.                                                                                                  
     COs by years  of service - When Tier 2  and 3 COs defer                                                                    
     retirement, the 15  - 20 group will be added  to the 20                                                                    
     - 25  group. This shift  in the workforce  profile will                                                                    
     significantly increase operational costs....                                                                               
MR. FOX explained the chart for Chair Bunde and reminded the                                                                    
committee that retirement is cut in half for those who divorce.                                                                 
CHAIR BUNDE pointed out that he couldn't assume that all the                                                                    
people in Tier 2 would continue to work after their 20-year                                                                     
retirement. There would be some reduction.                                                                                      
MR. FOX agreed and added that people drop out all along the                                                                     
curve. He continued:                                                                                                            
     Risk  - If  20 years  are  not completed,  there is  no                                                                    
     benefit change  and no new  costs. If an  officer makes                                                                    
     it to 20,  the benefit cost is balanced  by the payroll                                                                    
     reduction. There is  no risk of a  benefit cost without                                                                    
     a corresponding cost-avoidance.                                                                                            
     Problems  associated with  peace officers  working past                                                                    
     normal   retirement   -  increased   health   problems,                                                                    
     increased  risk of  injury, higher  compensation, lower                                                                    
     morale and burnout.                                                                                                        
Disability  rates were  provided  by Mercer  Human Resources  and                                                               
show  that troopers  and correctional  officers average  about 34                                                               
years  of age  when they  are hired  and they  reach 20  years of                                                               
service  at  approximately  age  54.  Another  graph  showed  the                                                               
increase in disability rates as  peace officers age. He noted the                                                               
steep increase when retirement is  deferred past age 54. The line                                                               
representing  other  employees  who  are not  peace  officers  is                                                               
significantly lower  than the peace  officers and the  gap widens                                                               
all the way to age 60.                                                                                                          
The  graph, using  2002 data  for  administrative versus  officer                                                               
positions,   illustrated  the   limited  opportunity   for  peace                                                               
officers to  move into administrative  positions as they  age. It                                                               
showed 709  corrections officers and 30  administrative jobs, 336                                                               
troopers and  33 administrative jobs. "It's  impractical to think                                                               
a person can  continue through their career until  they get older                                                               
and then move into a desk job."                                                                                                 
CHAIR BUNDE  asked if  he had data  that showed  typical behavior                                                               
for someone  who now retires  under the Tier 1  at age 54  or 55.                                                               
"They don't just play golf, do they?"                                                                                           
MR. FOX replied no, but he didn't  have any data to show him. He,                                                               
himself, is one of those guys,  however, and knows a whole lot of                                                               
others like  himself. He explained  that the PERS mission  is not                                                               
to provide a living wage for life.  It is, after 20 years, to get                                                               
45  percent of  your  average  monthly income,  at  the most.  He                                                               
elected  to buy  dental and  vision insurance  and the  long-term                                                               
care  insurance. He  elected to  buy a  survivor benefit  for his                                                               
wife. So, his actual monthly benefit  is much lower than where it                                                               
started out.  He did not  know of  any of his  contemporaries who                                                               
didn't go on to other employment.                                                                                               
CHAIR BUNDE asked if it was  likely that they had health benefits                                                               
in their other employment.                                                                                                      
MR. FOX  replied no. A  lot of guys  end up doing  something that                                                               
they have more  of an interest in and have  the freedom to pursue                                                               
even if it pays less money or benefits.                                                                                         
     PERS  is  managed  on  the   basis  of  equality  among                                                                    
     members. Normal retirement is after  20 years for peace                                                                    
     officers  and  after 30  years  for  all others.  Peace                                                                    
     officers  pay a  higher contribution  rate than  all of                                                                    
     the  members  to   maintain  equality.  Current  policy                                                                    
     withholds  benefits from  peace officer  members unless                                                                    
     they  work  five  extra  years.  HB  91  corrects  this                                                                    
     prejudice against peace officers.                                                                                          
     The current policy is unfair.  If a peace officer beats                                                                    
     the  odds, makes  it to  20, the  current policy  is to                                                                    
     defer  their   retirement.  That  is   accomplished  by                                                                    
     unfairly withholding  their medical benefit  until they                                                                    
     work five years beyond their normal retirement.                                                                            
     In conclusion,  the current  law undermines  the intent                                                                    
     of normal  retirement for  peace officers  and inhibits                                                                    
     the  PERS  mission  to recruit  and  retain  in  public                                                                    
     service.  HB  91  removes the  disincentives  to  peace                                                                    
     officers  to take  normal retirement  and reestablishes                                                                    
     parity among  all PERS  members and  this bill  is good                                                                    
     for peace officers and it's also good policy.                                                                              
CHAIR BUNDE  noted there  were no questions  and thanked  him for                                                               
his presentation.                                                                                                               
MR. CHUCK HANSEN, Correctional  Officer, Leman Creek Correctional                                                               
Center, said he has an  undergraduate degree in human development                                                               
and a  master's degree in  human services. He  represents himself                                                               
and  fellow correctional  officers  in  Alaska. He  is  a Tier  1                                                               
employee and has been  on the job 19 years and  9 months. His job                                                               
is  part-time,  seasonal,  and  he  doesn't  get  any  retirement                                                               
benefit for  it. He  noted the sick  behaviors and  violence that                                                               
make up  the daily stresses in  his job. The number  of prisoners                                                               
who are HIV  positive or have hepatitis  A, B or C  is far higher                                                               
than the  public population, because  inmates are  often involved                                                               
in high-risk  activities before they  come into the  system. This                                                               
also puts  COs at higher  risk than ordinary  citizens, resulting                                                               
in a potential need for long-term care health benefits.                                                                         
     Correctional officers  rarely make the  present 20-year                                                                    
     retirement  goal. I've  watched  over  250 floor  staff                                                                    
     come  and  go  without reaching  that  magic  time...at                                                                    
     Lemon Creek, alone.  I've lost track of  about 25 more.                                                                    
     One day, a  short time ago, I  asked my superintendent,                                                                    
     Dan Carothers, 'In your  27-year career in corrections,                                                                    
     how  many  floor  officers,  which  are  non-management                                                                    
     staff, have  you known  to complete  20 years  with the                                                                    
     Department   of   Corrections?'   Four   people.   More                                                                    
     recently,  a co-worker  made it  to 20.  So, that  is a                                                                    
     total  of  five  making  it   to  retirement  that  Mr.                                                                    
     Carothers knows of. The likelihood  that COs will reach                                                                    
     the  20-year  mark  before retirement  is  bad  enough,                                                                    
     pushing the mark to 25  years for full medical benefits                                                                    
     is next to  impossible and demeaning to us  when we are                                                                    
     all  at risk  of serious  long-term illness  because of                                                                    
     our jobs.                                                                                                                  
     HB  91 will  insure an  appropriate retirement  package                                                                    
     for those of  us who make it that far.  It is not cost-                                                                    
     effective  to continually  pay to  train new  people in                                                                    
     order  to   replace  those  who  see   the  25-year  as                                                                    
     unattainable and  so they quit  early. And  yet, that's                                                                    
     exactly what's happening now.                                                                                              
MS.  MELANIE  MILLHORN,  Director,  Division  of  Retirement  and                                                               
Benefits, deferred  her testimony on  the fiscal note to  let the                                                               
large number of citizens testify.                                                                                               
MR. DEAN  BAUGH, Finance  Director, City of  Homer, said  he also                                                               
represents  the Alaska  Government  Finance Officers  Association                                                               
(AGFOA).  He  didn't  want  to say  that  police  officers  don't                                                               
deserve this, but right now the PERS systems can't afford it.                                                                   
     If you  would have asked  me a  year ago, I  might have                                                                    
     said  that  is  one  thing, because  my  city  was  100                                                                    
     percent funded,  but if you  look at  me now, all  of a                                                                    
     sudden, I'm $6 million in the hole.                                                                                        
He  disputed the  fact put  forward by  Mercer's Human  Resources                                                               
that 21  percent of  the officers  would retire  at 20  years. He                                                               
thought closer to 80 - 100  percent of officers will retire at 20                                                               
years,  if medical  coverage is  provided. So,  the costs  in the                                                               
fiscal note  are incorrect. He  also noted  that it is  state law                                                               
once Tier 2  and 3 are changed again to  20-year retirements with                                                               
full medical, it  can't be changed again. At this  point, PERS is                                                               
looking  at creating  a Tier  4  to keep  the budget  actuarially                                                               
CHAIR BUNDE asked if the  committee changed the tier system today                                                               
so that it's not retroactive, would he support it.                                                                              
MR. BAUGH responded  that the issue would be argued  all the more                                                               
because  someone  who  had  been  there for  15  years  has  more                                                               
benefits than someone who has been there for one year.                                                                          
CHAIR  BUNDE said  the fiscal  note was  attached to  the state's                                                               
budget, not the municipalities' budgets.                                                                                        
MR. BAUGH responded that the state has said it would fund it for                                                                
the next year, but not forever.                                                                                                 
MR. MAURICE HUGHES, Alaska State Trooper, Public Service                                                                        
Employees Association, said it has approximately 350 members.                                                                   
     The difference between  Tier 2 and Tier 3  is that when                                                                    
     Tier 2  was created, the  members kept paying  the same                                                                    
     percentage for 20-year retirement.                                                                                         
TAPE 04-33, SIDE B                                                                                                            
3:55 p.m.                                                                                                                       
MR. HUGHES continued:                                                                                                           
     So, in  relation to the  statement where they  would be                                                                    
     going  back  to  paying   for  30  years...our  members                                                                    
     continue to pay that 7.5 percent....                                                                                       
     I would  just like  to make  some statements  about our                                                                    
     core message  and the message  about HB 91 and  that is                                                                    
     the  policy   that's  in  effect   right  now   -  it's                                                                    
     influencing  police officers  at Tier  2 or  Tier 3  to                                                                    
     defer  their retirement  from a  20-year retirement  to                                                                    
     25-year retirement.  This is being done  by the holding                                                                    
     [back] of  a retirement  benefit, which is  the medical                                                                    
     benefit. The  police officer who decides  to defer that                                                                    
     retirement, it could be for  a good reason. There could                                                                    
     be a  good reason  that officer  wants to  stay around,                                                                    
     but if  a person  is forced  to stay  to get  a medical                                                                    
     benefit that  he would otherwise  have if he  stayed in                                                                    
     some other  occupation at  his normal  retirement, then                                                                    
     that's not right.                                                                                                          
     It's hard  to accept, but  when you say old  and police                                                                    
     officer, the  two don't go  together. Police work  is a                                                                    
     young  man's game.  When you  get older,  you get  hurt                                                                    
     easier; it takes a longer time  to mend when you do get                                                                    
     hurt. Mike  pointed out that  you have issues  of sleep                                                                    
     deprivation and  it's tougher to  [do] shift  work. The                                                                    
     burnout issue is a real issue, the older you get.                                                                          
     On  the  other  end   of  the  spectrum,  with  younger                                                                    
     officers  coming along,  when they  get to  that 7  - 8                                                                    
     years on the job, they  have to make that determination                                                                    
     whether or not they want  to stay that extra five years                                                                    
     to receive  their medical  benefit or  to go  ahead and                                                                    
     possibly change  careers entirely  or to go  to another                                                                    
     system.  The extra  five years  of working  on holidays                                                                    
     and working  on weekends  and working when  your family                                                                    
     is asleep  is not a  real conceivable goal  for someone                                                                    
     to have to work that extra five years....                                                                                  
MR.  PAUL COMOLLI,  Juneau Police  Officer,  said he  represented                                                               
himself and  fellow police officers,  not the city or  the chief.                                                               
He related  how his long-time  friend, Kenai Police  Officer John                                                               
Watson, was  killed in  the line  of duty  while responding  to a                                                               
welfare check on a citizen, on Christmas Day 2003.                                                                              
     He  was searching  for a  person who  reportedly needed                                                                    
     help.  He was  doing his  job on  Christmas, trying  to                                                                    
     keep you  safe, just like we  all do - on  every shift,                                                                    
     every day and every night....  If John had survived two                                                                    
     more years on the job,  he would have been eligible for                                                                    
     normal retirement. Far less than  half of us make it to                                                                    
     20. John  had only two more  to go; he almost  beat the                                                                    
MR. COMOLLI said the current  policy is ill-conceived, unfair and                                                               
blatantly  prejudicial against  peace  officers.  This bill  does                                                               
nothing more than reestablish the parity among all PERS members.                                                                
     I've got my  benefits. It's not fair to me  to leave my                                                                    
     young brothers and sisters behind  me that are going to                                                                    
     step  up and  continue to  do this  job without  what I                                                                    
     have. It's not too much to ask.                                                                                            
CHAIR BUNDE commented  that he has a brother and  two nephews who                                                               
are police officers and knows what he is talking about.                                                                         
MR. LARRY SIMMONS, Certified Public  Accountant (CPA), said he is                                                               
finance director  for the  City of  Kenai, and  that he  had been                                                               
following this  bill since last year  and at that time  the AGFOA                                                               
passed a resolution against it. When  Tier 2 was created in 1986,                                                               
it didn't include medical benefits  until members reached the age                                                               
of 60, a requirement that stayed  in place for 15 years. In 2001,                                                               
benefits  were changed  for police  and fire  members to  receive                                                               
medical benefits  after 25  years. "Prior to  that there  were no                                                               
medical benefits, period, until age 60."   At that time, the PERS                                                               
was 106  percent funded, but  the following year the  PERS system                                                               
was funded  at 75 percent and  the expense for the  added medical                                                               
benefits are  huge. He was  very concerned about the  fiscal note                                                               
for HB 91. It is based on actual experience that only 21 percent                                                                
of the eligible members would retire.                                                                                           
     Do  you think  more people  will retire  when you  give                                                                    
     them medical benefits  at 20 years than  will retire at                                                                    
     20  years  if they  don't  have  medical benefits?  The                                                                    
     answer is  totally obvious and, therefore,  that fiscal                                                                    
     note  is well  understated.  I think  for  the City  of                                                                    
     Kenai, it is four times understated....                                                                                    
State funding for the increased benefits can go away when the                                                                   
next legislature decides to make it go away.                                                                                    
MR. CHRIS BURNS, Mercer Human Resource Consulting, said he would                                                                
answer questions.                                                                                                               
CHAIR BUNDE  noted there  were no questions  and thanked  all who                                                               
testified  and said  HB 91  would be  held over.  There being  no                                                               
further business to  come before the committee,  he adjourned the                                                               
meeting at 4:07 p.m.                                                                                                            

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