Alaska Legislature: House Floor Session, 4/29/26, 10:30am

Will the House please come to order.

Will members please indicate their presence by voting.

Will the clerks please tally the board? 39 Members present. 39 Members present. We have a quorum present to conduct business. Mr.

Majority Leader. Mr. Speaker, I have no previous excused absences today.

Leading the invocation this morning is Pastor Anton Burrell of the Calvary Fellowship Church. Will members please rise?

With deep respect for the religious beliefs of all Alaskans, I offer the following prayer. Let us pray. Almighty God, to govern a state as vast and magnificent as Alaska requires many hands, a multitude of voices, and a shared devotion to the common good. First, we lift up the governor and the administration, praying for clear vision, steadfast courage, and wisdom in execute— in the executive duties. We pray for the Senate, that they may navigate the complex deliberations with the steady hands and sincere hearts.

And here in the House, we recognize the heavy lifting of governance so often happens behind committee doors. For the members wrestling with resources, energy, and fisheries, grant them clarity as they steward our wild and working lands. For those sitting through deep emotional testimony in the Health and Education and Veterans Affairs, guard their spirits, keep their empathy alive, and root their decisions in true compassion. And for those pouring over ledgers and finance, charting our transportation, or navigating the fine print of judiciary rules, give them a fresh burst of focus when the coffee goes cold and the binders grow heavy and the hours get late. Lord, today we also lift up the vital unseen hands.

That make this entire Capitol function. We pray for the aides managing the daily chaos, the pages running the messages, and the security personnel keeping these halls safe. We ask a special blessing upon the clerks, the cleaners, the caterers. Grant strength to those dedicated professionals, protectors, and providers. Let them know that their tireless behind-the-scenes work is the very heartbeat of this building.

And as every person in this Capitol labors for Alaska, remind them of the fundamental purpose that brought them here. In your wonderful name we pray. Amen and amen. Representative Josephson, will you please lead us in the Pledge of Allegiance? [FOREIGN LANGUAGE] of the United States of America, and to the Republic for which it stands, one nation under God, indivisible, with liberty and justice for all.

[FOREIGN LANGUAGE] Representative Story. Thank you, Mr. Speaker. I move and ask unanimous consent that the prayer be spread across the journal Hearing no objection, the prayer will be spread across the journal. Will the clerk please certify the journal for the previous legislative days? I certify as to the correctness of the journal for the 98th and 99th legislative days.

Mr. Majority Leader. Mr. Speaker, I move and ask unanimous consent that the journal of the previous days be approved as certified by the Chief Clerk. Hearing no objection, the journal stands approved. Other guests for introduction this morning.

Representative Carrick. Thank you, Mr. Speaker. Permission to read my notes. Thank you, Mr. Speaker. Behind me today in the gallery of Peratrovich, if you would stand, is Ken Alper, a Juneau guy who can sort out any money glitch.

Hailing from these Capitol halls where the winter winds blow, he's a guy who keeps our finances in flow. From charts and ledgers to each fiscal note in line, he's shaping the path He makes public needs align. This Monday marked his 60th year. Old man, but full of life, a contradiction better than the one that he solves here. Through years of service, he's guided, supported, and advised.

He worked as Tax Division Director, right hand to Walker, witty and wise, then with Adam Wooll where ideas moved fast. It was Ken and I's shared hope as his staff to keep up with his raps. Now Ken's at the right hand of the co-chair, but beyond the work that he's done, he's also an amazing father, husband, and friend to each and everyone. So here's to 60 years, to a man strong and true, to all that he's built and will continue to do. Kenny, my dear friend, happy birthday, and I'm so grateful to introduce you.

Please help me welcome Ken Alper.

Representative Bynum.

Thank you, Mr. Speaker. It is my distinct privilege and honor to introduce to the body Mr. Don McConachie. He is in the Peradovich Gallery. If I could ask him to stand. Don is like family to myself and my wife.

He is an immigrant to this country. He immigrated from Canada. Many, many decades ago, many decades ago. He is the first, first mayor of the city and borough of Rangel. He served over 13 years on the assembly there, and from time to time he serves as a bed and breakfast.

Him and his wife host the member from District 1 at their home. It is my distinct pleasure to say I thank him for being here and gracing us with his presence. Help me welcome him to the chamber.

Not seeing further guests for introduction this morning. Madam Clerk, are there any messages from the Governor? Messages dated April 27th and 28th stating, in accordance with Article 3, Sections 26 and 27 of the Alaska Constitution,.

And Alaska Statute 39-0508, the governor submits the following list of appointees for confirmation. To the Board of Fisheries: Mike Wood, Blair Hickson, and Paul Sear. House Special Committee on Fisheries. To the Board of Game: Stanley Hoffman Jr., Jacob Fletcher, and David Loring. Resources Committee.

To the State Medical Board: Hannah Milkey and Robert Scala. Health and Social Services Committee. I have no further messages from the governor this morning, Mr. Speaker. Madam Clerk, are there any messages from the other body? A message dated April 28th stating the Senate has passed committee substitute for House Bill number 78 Finance amended effective date failed with the following amendments: Senate committee substitute for committee substitute for House Bill number 78 Finance amended Senate Retirement Systems Defined Benefit Options with a technical title change, and it is returned for consideration.

I have no further messages from the other body.

Mr. Majority Leader.

Mr. Speaker, I move and ask unanimous consent that the members go into the limbo file to take up House Bill 78. I will explain the changes made by the other body.

Mr. Majority Leader. Thank you, Mr. Speaker. Um, it is this, this past year, uh, this body, uh, passed this measure out of the House over to the Senate. I'm pleased to say that the Senate made this bill structurally more conservative and stronger, and these are the changes.

The effective date, Mr. Speaker, was moved to 2027. What that means is that for local governments to decide their option of participating or not in this plan, they will have from January 1st of this next year through June 30th, 2027. They'll have a 6-month window to decide if they want to participate in the plan. The employee election window will follow that for another 6 months. Employees will have their choice to participate or not.

The second was a technical correction identifying the terms of average monthly compensation, which is how a pension is, is based, to also apply to peace officers and firefighters. Just keeping the definitions the same for non-public safety and teachers and public safety throughout the bill. The third change was to make sure that an employee who comes in the plan as a defined benefit employee, if they want to go into the defined contribution plan, which the bill keeps alive and well, that they can do so in a way that doesn't forego what they have accrued in their DC plan and that they're afforded not only a fair actuarial conversion, but that the process is clearly laid out in statute for them to choose to leave the defined benefit plan to go into the defined contribution plan at any point before they vest. They have all the way till they vest at 5 years where they can make that final decision. And again, I want to emphasize to the body that this bill does not close our current Defined contribution plan.

It simply introduces a choice now, and both plans would be alive. The third change, Mr. Speaker, was we removed the employee cap. We— when we sent the bill over, the employee contribution was 8% of payroll all the way up to 12% of payroll. And the reason why we had that range is we wanted to ensure that no matter what there would be employees' skin in the game to keep the plan funded at 90% or higher. The Senate removed the upper cap with the idea that no matter what the plan costs, if we want to keep it at 90% or higher, employees need to pay a share that ensures that we will be there.

So based on the reports of our actuary, They do not see this ever occurring. I think it was a good change and I support it. I believe employees should have skin in the game. Mr. Speaker, the next change was we added a requirement for employees in PERS and TRS who reach normal requirement age and at least 10 years of service, but less than 20 or 25 years. So if you're in public safety, less than 20, or you did not quite work 25 years if you were non-public safety.

That you have to be actively employed in the system for 12 months immediately before applying for retirement to receive medical benefits. This was at the recommendation of the Alaska Retirement Management Board to keep the cost of the plan down. The next change was we increased the PERS— the Senate increased the PERS employer contribution from 22% to 22.5%. Mr. Speaker, this would apply to those local government employers who choose to stay in the defined benefit plan. What that half a percent means, I'll just give you a couple examples just so the body knows.

For the City of Soldotna, that would be a $29,000 increase to their annual contribution. To the City of Kenai, $50,000. For Juneau Borough, $66,000. Most of these numbers are in that range for municipalities. Mr. Speaker, the next change would be to add a choice for employers to opt out of the new defined benefit plan.

When this bill left this House, it was mandatory that all employers would be in it, and the Senate made it a choice. And the choice is they can opt out of the plan. I discussed that earlier. They will have a 6-month window to make that election. If they decide to opt out, they will continue their employer contribution at the current rate of 22% and their employees will only have the defined contribution plan available to them.

If they choose to be in the new plan, then the employer will pay at 22.5%. They'll have another half a percent to pay. That's because defined benefits are more valuable. One of the things I would remind the body that this bill does is we have long been concerned, this entire body has, that even under our defined contribution plan, No employee has non-occupational, non-occupational disability benefits, and this bill fixes that. So whether you're in DB or DC, we are going to give our teachers, our plow truck drivers, and our, our public safety people— if they come down with cancer, stroke, heart attack, anything happens to them, that's non-occupational disability.

Right now, Mr. Speaker, when they're put on disability, they lose their healthcare and their pay drops all the way to 40%. So what this bill does is it at least address the non-occupational disability so that there is some disability benefit for those people that are hurt or have a medical incident off the job. And let's see, Mr. Speaker, I think I have covered that. Finally, yes, the bill clarifies what happens to employees when they move between employers. If you're moving from an employer that's a DC employer, defined contribution employer with a 401(k), to an employer with a defined benefit, making sure there's a path where the employee can maintain their benefits that they have accrued in either plan.

So it's to make sure employees are taken care of when they move from one employer to the other. So that's the summary of changes, Mr. Speaker. I look forward to the debate and to any wrap-up at the end. Thank you.

Is there any debate on adopting the Senate changes to House Bill 78? Representative Stapp.

Thank you, Mr. Speaker.

Permission to read. Permission granted. Might be a bit.

You know, Mr. Speaker, FDR said that there's a mysterious cycle in human events, and that some generations much is given, to some generations much is expected. And sometimes, Mr. Speaker, arises a more frequent occasion when you offer much, expect little, prepare for nothing. And to quote the great philosopher Bill O'Reilly, you do it live. Mr. Speaker, the changes that the other body made to this bill yesterday— they did it live, Mr. Speaker, right on the Senate floor. And honestly, I don't even know how some of the mechanics are supposed to work.

There was an amendment to create a freeze in the event an employee moves around. If you leave one municipal government sector that opts into the— that defaults into the program— what, into another municipal employer that doesn't have the program? How do you go over there? How do you not diminish the benefit? That's all stuff that's gonna have to be litigated, Mr. Speaker.

How's it gonna work? I don't know. I don't think anyone currently knows yet, but that's obviously not gonna stop the root of this happening today. Mr. Speaker, I will say that this is a pretty historic moment today. This is a process that's been 20 years in the making.

I would consider this Alaska's rendezvous with destiny. Mr. Speaker, we are being asked today to take an action.

Not only this legislature but future legislatures for the next half a century.

HB 78, it's not a symbolic bill, Mr. Speaker. It's not a messaging bill. It's not a minor adjustment to the state's retirement system. It is a seismic shift in the financial obligations of the state of Alaska and a radical departure of the last 20 years and fiduciary responsibility the leaders of this state have charted.

And I want to be absolutely clear, Mr. Speaker, I'm not going to question the motives of people who are going to vote to concur on these changes today. I think there's a lot of things in this bill that are fine. I think the bill, as I'll go into the mechanics of the changes in the underlying bill here in a little bit, I think there's certainly a lot more sound system than we've had before. But I am going to question the math, Mr. Speaker. I'm going to question the risk.

I'm going to question the assumptions. I'm going to question whether or not we are about to repeat the single most expensive financial mistake in the history of the state of Alaska, Mr. Speaker, because we've been here before. We've lived the movie. We know how it ends. We know we're not going to be able to change the channel or skip the ads.

Point of order, Mr. Speaker. Representative Stutes. Thank you, Mr. Speaker. We should be debating the changes that have been made in between sending this legislation over to the other body and receiving it back and whether or not to concur. That is Mason's 122, Mr. Speaker.

Thank you. In terms of responding to the point of order, technically that is very accurate. And I'm going to attempt to bridge that line between— as the speaker of the comments referenced, this is a historic moment. I agree with that assessment. I think this is an extremely weighty topic.

But I would, Representative Staff, ask if you could confine your remarks to the changes. That's what the rule requires. And Representative Allard, if you wish to speak, please do your point of order. Otherwise, do not stand and speak. I would do an inquiry to you, Mr. Speaker.

I could do a point of order. I was just trying to be gracious. Do your— register your point of order. Declare your point of order. Okay.

So, Mr. Speaker, the reason I was— What's your point of order? Freedom of speech. And did you say point of order? Well, I wanted point of order, but I was wanting to do a point of inquiry because I don't think this actually would fall under a point of order. A brief release.

Will House please come back to order?

Representative Allard, do you—. Thank you, and I will proceed with the point of order, Mr. Speaker. Point of order, Representative Allard. Yes, and that was on advice of legal. So it's 92.2 in regards to the Mason's Manual for the point of order, and it's 94 of the Mason Manual is that when someone has the floor, they have the right to the floor.

And in regards to 92.2, I'm referencing that as that I believe at this point it's abuse of calling a point of order when someone rightfully has the floor. And in the Mason's Manual, it does reference that the minority— but it's highly unusual for the majority to keep calling points of order on the minority members. And I just want to make sure that when we're doing this, the person that has the right to the floor is not constantly being interfered with. By someone calling a point of order as an abuse. Thank you, Mr. Speaker.

Well, let me first attempt to address where we're at. We are, of course, discussing the changes made to a House bill that were made in the other body.

The custom, as it has been over the decades that I have been involved in this process, is that we largely and to the best of our ability confine our remarks to the changes in the vehicle that has come over from the other body. What I, in consultation with the majority and the minority leader, am going to do is I'm going to allow Representative Stapp, who is a member of the minority caucus, to speak a little bit more expansively, but largely contain his comments to the changes that are in the bill before the body, and then I'm going to keep other members, whether majority or minority caucuses, more strictly confined to speaking to the changes as the majority leader did when he introduced the bill before the body. So Representative Stapp, I'm going to give you a little bit more leeway, and if you would, to the best of your ability, to center your comments around the changes to the bill.

Thank you, Mr. Speaker. I appreciate the latitude. I'm going to speak to primarily the changes, Mr. Speaker. I'll say that the underlying question is, are the changes that the other body made to this bill, um, do they change the trajectory of, um, the fiduciary responsibility for the state or not? I'm going to say I agree in some areas with the Majority Leader that the changes certainly made the bill more fiduciary palatable, but I just fundamentally don't believe that they made the underlying bill without risk.

And also, some of the changes that the other body made, Mr. Speaker, are kind of bad. And I'll talk about how I think they're bad too. So, um, and Mr. Speaker, in order to kind of do that, it is important that we talk about, um, the, the history and why the state got away from a defined benefit system and whether or not these changes that were made in the other body, uh, correct or right that ship or not. And Mr. Speaker, um, In the early 2000s, Alaska's defined benefit system collapsed, and it collapsed because investment returns didn't meet projections, longevity costs increased, actuarial errors were discovered, and all of those same risks, despite the changes made in the other body, Mr. Speaker, continue today.

So currently, as it stands, Alaska has unfunded pension liability. And the good thing about the changes in this bill, Mr. Speaker, is I don't believe that you're going to have an unfunded pension liability based on the.

Mechanics of the bill. I think that uncapping the employer contribution that the other body made, as long as those things are not changed by a future legislature, will allow costs to increase because the bill will absolutely increase the cost of benefits, Mr. Speaker. But uncapping the employee contribution and allowing that to free float with the employer contribution allows the employee and the employer to absorb those costs as they rise. But Mr. Speaker, those, those still cost. And fundamentally, like, pension debt is the largest debt that the state of Alaska has ever carried.

It's not oil tax credits, it's not capital projects, it's not Medicaid, it's pensions. And the question is, did the changes the other body made to this bill Did they change that trajectory? And I'm going to argue that they didn't. And the reason they didn't, Mr. Speaker, is because better benefits cost more money. So nearly 20 years ago, we closed the defined benefit system.

This bill would return it to that despite the changes in uncapping the employer— employee contribution, despite the fact that municipalities are now an opt-out as opposed to an opt-in. Employees will bear a slightly higher burden of the financial costs, 22.5%. Currently sits at 20%. When the bill went over, we had no changes in that. Initially it was changed to 24%, then it went to 22.5%.

The question is like, is that going to lower the cost projected trajectory of the employer and the employee or not? And it's not going to do that, Mr. Speaker. Better benefits cost more money. Last time we were told the system is sound. We were told that assumptions are solid.

We were told the risk is manageable. Mr. Speaker, the benefit of the changes made by the other body is they made the risk a little more, bit more manageable, but it's still not. And you know, the real issue lies in our constitutional obligation, Mr. Speaker. Article 7 of the state constitution says we can't diminish benefit or impair, not by future legislature, not by governor, not by a fiscal crisis, not by a recession, not by a revenue collapse. Mr. Speaker, even with the changes that the other body made to this bill, it's still going to cost a heck of a lot of money.

When we create these liabilities, which despite the changes the other body made, we will still create new liabilities that we have to fund.

We can't reduce them. This is a constitutional obligation and we're deciding whether or not we want to concur with those changes today before we have figured out any type of way that we're going to be able to pay for the changes that they've made in the other body, Mr. Speaker.

And the difference between this concurrence vote and everything else, Mr. Speaker, is even if it were to go to conference in the event that you voted no and it ended up passing both bodies, or even if it's concurred upon today, it's not something you can fix later. It's not something that you can adjust if costs rise. It's not something you can tweak if your assumptions fail.

And even if the assumptions of the bill with the changes are wrong, and even slightly wrong, the state of Alaska is on the hook, Mr. Speaker. The employees of the plan are on the hook. In the event that you have the same actuarial problems that plagued the last defined benefit plan for public employees in the state of Alaska, those costs are going to be absorbed by employers and the employees on the plan. And those costs can rise exponentially based off the notion that though the changes in the other body effectively give the plan more shared risk, they still don't change the underlying problem, Mr. Speaker, which though the plan is shared risk, it shifts risk. It shifts risk by going from an opt-out to— excuse me, an opt-in to an opt-out.

That means every municipal employer is going to start into the plan paying a higher property tax percentage. That's most how the most municipal governments fund these types of benefits, pay 22.5% under this bill, and they're going to have to opt out, Mr. Speaker. If they opt out They're going to pay a little bit less money, which is technically the current amount of money they pay right now for their unfunded liability. Okay, well, if a municipality opts out, they're not going to have a better benefit. They're going to have a worse benefit for the employees because the truth about this bill, Mr. Speaker, it's expensive and it costs money because it's a better benefit.

All right, so raising the employer contribution from 22 to 22.5% was done so to demonstrate, hey, MSO employees, they're not state employees. They want the benefit, they're going to have to pay a little bit more money because at the end of the day, better benefits cost more money. But it's a risk-shifting change, Mr. Speaker. It takes the risk and it shifts it on somebody else. And ultimately, you got to ask yourself the questions.

The foundations of the changes Are they going to cost the state of Alaska more money or less money, Mr. Speaker? Maybe it will cost less money, but we're shifting that risk onto the employee. It's more fiduciary sound. We're shifting that risk onto the municipality. Makes the plan more fiduciary sound, but it still costs money, Mr. Speaker.

And for the last 10 years, Alaska's budget has been in fiscal deficit. How are you going to add a forever liability when you haven't figured out how you can pay for your current liabilities? Mr. Speaker, we tried that once. It failed. It cost us billions.

We're still paying for it. And it doesn't matter if you shift risks onto employees, if you add the municipalities a little bit more money, because the nature of these things is they always rise in cost. Actuarial assessments are wrong. We started out on our existing plan that was closed in 2006 with $15 billion total liabilities. That billion— that, that amount of money today, that liability on the closed plan is over $25 billion, Mr. Speaker.

This bill, despite structural changes in the other body, is going to do the same thing. Discount rate The other body, they delayed the effective date on the bill, Mr. Speaker. So what does that mean? That means when this bill goes over, if you were to concur on it today and it was signed into law, the employees are going to have the opportunity a year from now to be able to purchase the cost of their future benefits with their existing retirement. Okay?

That number, if the arm board, DRB, doesn't get that right, can create an immediate, immediate problem with the bill that we won't know for at least 5 years because that's the next time you're gonna have an experience study on the plant. 5 Years from now, Mr. Speaker, who in this room can predict what the state of our budget is going to be and how we're gonna absorb those costs? Because despite the changes that the other body made, those costs are gonna be absorbed by the 40 people in this room and the 20 people in the other room because it's a constitutional obligation, Mr. Speaker. You're gonna have to pay. You don't have any option not to pay.

And what happens when you don't have any option not to pay is somebody else is gonna pay, all right? So that means this priority is gonna compete with every other priority in state government. It's gonna compete with every other financial obligation in state government.

And something's going to give, Mr. Speaker. I don't know, even with the changes that the other body made to this bill, how the state of Alaska is going to tell people 30 years from now that we made the right fiduciary decision, because we don't even know how to balance our budget next year, Mr. Speaker. We don't. And despite the other body's best efforts, all they really did is shift some costs around. Didn't change the underlying issue with the bill.

It's going to cost us more money.

And Mr. Speaker, there was an amendment in the other body, did on the Senate floor. I call it the freeze amendment. All right, it passed almost unanimously. Means if you're an employee and you're in your DC plan and you go to another municipal entity that has the DB plan, your contributions freeze. And then if you go to, say, the— I'll give you a very good example.

Let's say the municipality of Anchorage stays in the DB. The, the Mat-Su Borough opts out of the DB and they stay in the DCR. Okay, if I'm an employee of the Anchorage Municipality and I got my DB and I moved to Wasilla and I work for the borough, my DB is going to be frozen in Anchorage and I'm going to start to accrue my benefit in DCR in the city of Wasilla. Okay, and then if I move back, my DCR is going to be frozen in Wasilla and I'm going to start to reaccrew my benefit in the defined benefit municipality Anchorage. Mr. Speaker, if that sounds like an absolute nightmare, it is an absolute nightmare.

I don't know how that's going to work. I don't know how that's not a benefit diminishment, Mr. Speaker. As I, I quoted in the state.

Constitution. We are not allowed to diminish benefits of employees. If these— all these municipal groups are all under the same PERS and TRS, this bill, they're all in the same retirement tier. How on earth are you going to tell one person who's in a DB that, oh, just because you're working for another municipal government, you're now not going to continue to accrue that? Like, I don't know, seems like a lawsuit, Mr. Speaker.

And I would implore anyone to explain to me how that— the freeze amendment actually works mechanically. Mr. Speaker, delayed effective date. I mean, I— that would be great, although I mean the other body failed the effective date clause, so I hope if it fails on this side, Mr. Speaker, then you're gonna have 90 days to figure out how this stuff works. And I began this discussion quoting the great sage Bill O'Reilly about doing it live, Mr. Speaker. This is not something that you should do live on the Senate floor and then concur in the House on the next day, Mr. Speaker.

These changes are forever changes, and we don't know how they work mechanically. And I would just conclude, Mr. Speaker, that you shouldn't concur on this bill, not because pensions are bad, not because we don't want to do better things for our employees, Mr. Speaker, You shouldn't concur on the bill because you don't know the impacts of the risks that we're taking in the changes, and that matters. And Mr. Speaker, it matters because we learned that lesson 20 years ago, and we can't afford to relearn that lesson. We can't afford to pretend that the risks aren't real. We cannot afford to bind future legislatures for promises we can't guarantee, or changes the other body made that we don't understand, and we cannot afford to mortgage Alaska's future on assumptions that we know are fragile.

Mr. Speaker, how many lawsuits is that provision—. Representative Step, I think you're making the same point repeatedly, and I'm giving you as much latitude as I can. I think I've got the limbo file comparison sheet in front of me. I'm tracking all the— your comments that are actually attached to every change. Before the body here today, but I'm hearing the same point repeatedly.

My job as a presiding officer is to manage time as well as decorum, of course, and I would ask if you could wrap up your comments unless you have any additional points specific to the changes before the body today. Point of order, Mr. Speaker. Point of order, Representative McCabe. Thank you, Mr. Speaker. Mason's 96, sir, you are not allowed to interrupt a member on the floor.

You're allowed to rule on points of order. A point of order would have had to come to the floor to from the floor for you to rule on. You cannot interrupt a member when he's speaking, Mr. Speaker. Mason's 96. Representative McCabe, in the process of keeping order and decorum on the floor, I have a number of rules in Mason's Manual in terms of dilatory, in terms of keeping order and decorum, in terms of keeping the debate on track that I can refer to.

I've given the member tremendous amount of latitude in terms of speaking to the bill. I've discussed that with Minority Leader and Majority Leader beforehand, but I'm looking at probably— I think we're all looking at probably a number of other mics being raised and a long discussion before we actually get to the vote itself. So I'm also contemplating that we have a number of bills before the body. We've got committee hearings that are taking place this afternoon. We have a lot going on.

With approximately 20 days of session left. So I'm balancing the need to give the member who was speaking the opportunity to speak, as I said earlier, more expansively, but at the same time to be germane to the topic before the body. And I'm recognizing that there are going to be many others— to repeat myself one last time here— a lot of other members are going to want to speak to this. So Representative Stapp, if you could Conclude your comments, please, and then we'll proceed forward. Well, you're wrong.

So, okay. Okay, we will— Brevities.

Will the House please come back to order. We have a motion before the body to sustain the ruling of the Chair in terms of the previously administered point Point of order.

Are you ready for the question?

The question being, shall the ruling of the chair be sustained? Members may proceed to vote.

Will the clerk please lock the roll?

Does any member wish to change his or her vote?

Will the clerk please announce the vote? 19 Yeas, 19 nays. So by a vote of 19 yeas to 19 nays, the ruling of the chair has not been sustained. So— oh, I've been corrected. It has been sustained.

So that brings us back to the debates. Representative Stapp, I believe you were concluding your comments. Yeah, Mr. Speaker, I'll wrap up briefly. I'm going to say— I was actually about to say this votes This concurrence vote is not about today. This is a vote about the next 50 years, Mr. Speaker.

But I think all this has pretty much demonstrated my point pretty well. I mean, you want to rush into this, not talk about it, tells you why you shouldn't vote to concur on the changes, Mr. Speaker. I'll conclude real simply, Mr. Speaker. For throughout this process, I fought the good fight, I finished the race, Here I stand. I can do no other.

And when you send this bill over to the governor, just know that the fiduciary responsibility of this body is going to die in celebration and champagne. Vote no concurrence. Thank you, Mr. Speaker. Representative St. Clair. Thank you, Mr. Speaker.

I'll make this brief. I wasn't here when this was initially passed by this body. Looking at the changes that were made, it's hard to assess and address specifically the changes that were made when we don't have a fiscal note and we don't have a financial analysis of what changes were made betwixt what left this body and what's now coming back to this body. Mayors in my area do not like this bill. We've talked about the amount of money it's gonna cost, potentially cost the municipalities.

I thought we were in a fiscal crisis. But here we're willing to spend funds on something that we don't know how it's going to work, as brought up by the previous speaker. So I'm going to be a no vote on pretty much that. I can't see— I don't see fiscal notes. I don't see the difference betwixt the two.

I don't see a— and I believe there's supposed to be a financial assessment that is supposed to be done. It was done in the other body. However, we do not have copies of that.

And this is— my district, my area opposes any type of defined benefits, and this is just going to put us back in, back in a bad place where we were before. Thank you.

Representative Fields. Thank you, Mr. Speaker. There are two changes made by the other body that I'd like to address. The first change, the other body did increase the employer contribution slightly from 22 to 22.5%. This is a small cost change.

The majority went over some of the details for smaller communities. In my jurisdiction in Anchorage, the cost change is roughly equivalent to the turnover of a single police officer or a single firefighter who gets trained in Anchorage and then goes to the Lower 48 or to Hawaii, to one of the 49 other states that have defined benefits for public safety. So I think in looking at the changes, we have to weigh this tiny increase in cost versus the very massive savings for employers, both local government employers and the state itself, in terms of reduced turnover. And there is no area where the savings are greater than in public safety. I was talking to a firefighter earlier this year who said more than a quarter of his class had already gone to jobs in the Lower 48, um, within the first year after academy.

So the Municipality of Anchorage spent hundreds of thousands of dollars training this firefighter. And for every single one of his colleagues who went to the Lower 48, to one of the 49 other states that have defined benefits, um, the Municipality of Anchorage lost hundreds of thousands of dollars. So I think the small increase in cost made by the other body, um, does not obviate the very significant savings in the underlying bill. The other change in the other body that I want to talk about is that the other body added an option for local governments to opt out. So if the local government of the previous speaker does not want to participate, they don't have to.

Every local government can make that choice. And what are local governments going to weigh? For teachers, again, in my community where we have hundreds of vacancies and the number one factor driving turnover teachers is the lack of a retirement, the worst retirement in the country for teachers, a local government will absolutely weigh the cost of that turnover versus the benefits of retaining teachers when we know that to achieve academic qualities, teachers gain experience and proficiency up through the 10th year of teaching. So if you care about student achievement, we have to retain teachers. And I don't have a problem giving local governments—.

Mr. Speaker, and I do care about— Are you administering a point of order? Can you please— Point of order, Mr. Speaker. He's impugning the motives of members by his statement. My ruling is I did not hear any members being impugned, whether singularly or collectively. Point of order, Representative Sadler.

Very gently, Mason's 101.1 does limit debate to the question before us, not the fundamental philosophical issues of the benefits of defined benefit pension. I understand you have to kind of ride that. You got to put your microphone on. I apologize to the body, Mr. Speaker. I raise a point of order based on Masons 101-1.

The speaker is getting far afield of the changes. I understand it's a difficult line to draw, but we're getting far into the philosophical benefits of defined benefits pensions, and that just is a little bit beyond what we're doing here, respectfully. Well, I'm going to thank you for making my argument for me, Representative Sadler. I appreciate that. Representative Fields, I did not hear you going far astray from— and I've got the amendments here in front of me, the limbo file amendments.

I'm tracking things. I would ask for you to continue. And Representative Sattler, I agree with your points. Brief ease. Brief at ease.

Will the House please come back to order? Representative Fields. Uh, thank you, Mr. Speaker. So just to return to where we were, the change I was talking about is the, the other body adding an option for local governments to opt out and how that might affect their effort and our effort to retain teachers to achieve academic quality. And I just want to be really clear, I know members in this body care deeply about teacher retention.

I definitely did not mean to imply that anyone doesn't. I know that goal is shared. So in closing, um, those are the two changes I want to address. And my point is, those changes, like the member from Fairbanks mentioned, do make the bill more fiscally conservative for the state and more flexible for local governments. Those changes do not take away the profound benefits and cost savings to the underlying bill.

Therefore, I will vote to concur.

Further debate, Representative Bynum. Thank you, Mr. Speaker.

Permission to read when necessary. Permission granted. Thank you, Mr. Speaker. We have 8 items of change in front of us on concurrence. I will speak to 2 of those, although 2 of them are related— or 3 items, but I will speak to 2.

Item 3 and 8. On the list, bullet points, are similar in nature. Mr. Speaker, all of my comments from May 12th, 2025 still stand. I do not believe that the concerns I had then have been resolved through this bill going through the Senate and being looked at. So because we're not going to be allowed to talk about those items of concern, I will not be bringing them up.

But item number 7, Mr. Speaker, is an added choice for the employer to opt out. As part of that opt-out provision, there was a change in the percentage of responsibility to the employer. Originally, Mr. Speaker, over in the other body, they had amended the bill in Senate Finance to have the number be 24%. That was changed on the floor to 22.5%. One of the major issues with the bill, Mr. Speaker, is revolving around this issue of the cap from the employer.

And one of the debates that we've heard here is, is that this is a better, a better benefit. It's a better benefit because it costs more. One of the challenges that I have with the bill is who pays. It was one of the themes when we talked about this before. Not only how much does it cost, but who actually pays.

Some of these changes that have been made in the bill, Mr. Speaker, address that specifically. My colleague from Fairbanks had mentioned the employee portion of the bill. Being uncapped, that was something that we vigorously discussed and fought for in House Finance. That was rejected on this side but was accepted on the other side. I think that is a modest change that answers the question of who pays, but it doesn't answer the full question.

Bullet point 7 says that the municipalities will be responsible for up to 22.5%.

The question is, is where does the rest of the cost go? Goes to the state. One of my leading objections to the bill has been that when an employer has an employee, they should be responsible for that employee's retirement. If that's a municipal employee, the municipal government should be responsible for that employee, not the state. When the state has an employee, the state should be responsible for that employee.

And I'm in full favor of saying that we need to make sure we're competitive. Bullet point number 8, Mr. Speaker, is another point of contention that I have. This is what I call the 37% penalty. The 30% penalty, Mr. Speaker, is really revolving around the choice that's been given to the employee in this bill. An employee can choose to be in the defined contribution or in the defined benefit.

But from the employer's perspective, what they pay that employee is two different things. Employee A versus Employee B, the employer pays them a different benefit.

So if the employee is hired in, they're immediately hired in as a defined benefit employee, they get an enriched retirement through this plan. From an employee perspective, that's a good thing. But we gave an illusion of choice in the bill. We gave the illusion that says for some employees, Mr. Speaker, they may choose to be a defined contribution employee for whatever reason is important to them. But when they make that choice, if they change, they are penalized the amount of money that they got previously under defined benefit to now a defined contribution.

It's a 37% penalty. On the amount of money that they get to carry with them. And Mr. Speaker, I just see that that is a problem for me. It's a problem that when we have two employees performing the same exact work, performing exactly the same way, employed by the same employer, that we give them, we give them a difference in how they're being compensated. We are saying that if you choose our golden plan, that you're going to get more benefit that if you choose the defined contribution plan, we are gonna diminish what we give you.

I don't think that's a fair choice. That's not an apples-to-apples choice, and it is not fair to the employee for making a choice that's best for them. So I'm not gonna be standing here, I'm not gonna be voting for yes for concurrence on this. I still believe that there are tremendous flaws in this bill. I think that we can do much better and I wish we would do much better.

Thank you, Mr. Speaker. Representative McCabe.

Thank you, Mr. Speaker. I'd like to speak on the unintended consequences of the opt-out provision that came back to us from the Senate, which we should have explored, um, somehow over there instead of doing it the way we did. So an opt-out provision is going to cause some of the smaller boroughs or cities or municipalities that don't have a big pocketbook or don't have property tax, such as the Denali Borough, to opt out, right? They can't afford it. Which is going to cause some of those teachers to say, well, I'm going to go to Wasilla or Anchorage who have opted in.

And it's gonna make it a struggle for those smaller boroughs or smaller cities, and I'm specifically talking about teachers, but it could be any employee group, it's going to cause them to struggle to retain employees. So by de facto, we are going to leverage them into opting in because we have done this because we said that we gotta attract employees with a defined benefit plan, and now we're giving them a chance to opt out of that defined benefit plan and they might not be able to afford to opt in, and if they opt out, they're going to lose employees. I don't understand sort of the hypocrisy of that particular portion of the concurrence of this, Mr. Speaker. Thank you.

Representative Ruffridge.

Uh, yeah, thank you, Mr. Speaker. Um, Well, I don't believe that I'll be concurring today.

And similar to my comments last year, I'm a little bit disappointed about that. I want to thank the sponsor of the underlying bill for taking time to talk to me today about some of the changes that are found on our change form. But I also want to agree with the comments from the member of District 30. This is exactly my concern as well, among other concerns. When the change was made in the other body, it was made essentially less than 24 hours ago on some of these provisions.

I personally would have appreciated, I think, a little bit of additional time to check with my municipalities my school district. I spent time, uh, yesterday evening attempting to get a hold of some of those individuals and talk to a couple this morning. They don't fully understand some of the provisions in here as well. One of the concerns that I have is the concern that was mentioned about the.

Opt-out provision and the forever change that a new tier is going to implement. So as I understand the underlying bill, from January 1st until July 1st of 2027, municipalities will have the ability to choose whether or not they will opt in or I apologize, opt out of the defined benefit option for their employees. If, as the member from District 30 implies, there is a handful of municipalities or school districts or others who choose to opt out for whatever reason they choose, they will never again have the option to join. That will be sealed. It will be sealed forever.

And if it's sealed forever, they will forever be in a position of, uh, well, I, I think being different from the rest. I'm not entirely certain that is a change that we should be super supportive of, and I'm, I'm actually sort of wondering what the benefits of that even even are.

I would have personally appreciated, I think, some additional time to discuss those changes with, well, with, with the individuals who will be responsible for making that change starting January 1st. In addition, the increase of the contribution from 22 to 22.5%, although I think on paper somewhat small, for some of the communities that will be affected by that change, I think it does represent potentially a burden to them. And I can see it now, and I think that is our responsibility as lawmakers, is to work through the very challenging aspects of unintended consequences. And if I start asking just the, I guess, what I consider fundamental questions that my constituents will ask me, I don't have a great answer for them right now. For example, what happens to a public employee employed by a school district?

'Cause there's a difference between PERS and TRS. I'm not entirely certain what happens to those individuals. What happens if you have a PERS employee employed by the school district who moves through some of our new apprenticeship programs and then becomes a TRS employee? I don't have a great understanding of what happens there, particularly if that school district was one that had opted out, because TRS does not have an opt-out option. I think— I believe that only applies to PERS.

I do want to thank the other body for the change that removed the contribution cap. I think that that does on some level make the underlying bill a little bit more, I guess, risk-averse. I'd also like to thank the other body for the change that they made in the effective date. I think that that makes it a little bit more palatable for updating what happens there. Because I think, Mr. Speaker, we have to, we have to understand that what, what's in the underlying bill is complicated, um, and some of these changes that we're making are, I think, actually add to the complicating factors.

And we're going to ask the Division of Retirement and Benefits to potentially move and shift thousands of people's plans over the course of a very short period of time and ask for those decisions to be made. And we're going to ask our constituents potentially to make a, a change, uh, that could have forever consequences. And when they call my office to ask what those forever consequences will be, I don't have a great answer at the moment. I think on its face, you know, we are taking a step forward in saying we have some issue, I believe, with how retirement and benefits are managed in the state, and we want to see some change to that. I do have just that fundamental question of, well, I guess my fundamental question is, why are we taking this up today?

But I can't change that.

I would like a little bit more understanding of some of the questions that I asked. I don't think there's a great answer for that. I think actually some of the answers are going to be, we will wait and see.

I think that should give us some concern. And for those reasons, I think I will be not concurring with the changes from the Senate. Thank you.

Minority Leader Johnson. Thank you, Mr. Speaker. I too will not be voting to concur.

One of the things that I have the privilege of doing is speaking to people that from other states as a legislator, other legislators. And one thing that when we get talking about defined benefits, they say, tell us about what's happening in Alaska. And I tell them, they were like, oh my gosh, oh, if only we could be in the position Alaska's in. They're struggling under the weight of their defined benefits plan. They have massive, massive, massive deficits based on years of the defined benefits that have, that are eating away at their government.

Mr. Speaker, we had an actuarial error back in, I believe it was the early 2000s. It might've been even before that.

We, the legislature, did not provide oversight to our benefit plan and we could not even find the people. We did actually sue the actuaries, but we couldn't get satisfaction as to where and how to get the money back or how to make that whole. So we're struggling under the combined weight of an error in the past. We had an infusion of $3 billion into PERS and TRS in, I want to say, around 2014 to try to get us some kind of relief on that debt that we have. But we're still $7 billion behind.

The 22% that we have in there for our municipalities to pay by employees, that was set during that time trying to make this system work that we have. And the 22% wasn't— it was based on a previous agreement with the municipalities. The state actually wanted 28%, as I recall at that time, to make it work. But the 28% was to— because some of the municipalities hadn't been charged the right amount under the actuarial error. So they were trying to go back to the municipalities and try to fix the error from municipalities.

That 28%, I mean, we ended up with that 22% as the negotiated point.

I don't know that this, at this point, that this system, the 22%, doesn't seem like it even, I mean, that's a number that was picked because that's where we're at right now. But should it be higher? Probably should be. Maybe it doesn't need to be 28%, I don't know. But I do know that we are behind and we're continuing to get behind.

And the state is having to continue to pay for our, our mistakes that we didn't— we did not take care of our defined benefit oversight as we had— we should have. And Mr. Speaker, I don't know. I mean, we talk about actuaries, and I like actuaries. That's my original field I was going to go into. I like actuaries, but they make mistakes too.

And so you can't just put everything out there and say, well, somebody else is going to take care of it. So unless we're determined we're going to take care of this, We need to be very careful. Someone said there would be massive savings. And so I would like to have them. I don't really have a scale on what massive savings is.

So we can say massive savings, but I don't know if that's $100, $100 million per year. What I know is that this plan, as it comes back, costs $467 million over the next 10 years and more. That's pretty massive. I hope that massive savings makes up for that $50 million that we have now that we're going to add into our budget. $50 Million that I didn't know that we had, but apparently we're going to find it.

But when I go out and I talk to people and I talk to them about defined benefits or whatever, without exception, when I talk about salary, I say, where are you at? Do you want defined benefits or do you want a higher salary? And it's always the salary is what's gonna keep them on their job. The salary is what's gonna attract them to a new position. The salary is what is gonna—.

Going to give them that longer— going to give them a little more drive to stay here in the state. And so, Mr. Speaker, we have a salary study out there. It's not back yet. Why are we doing this prematurely, in my opinion, Mr. Speaker? Because we do need to address the salaries.

And I would say putting about $50 million towards salaries, I would be for that, Mr. Speaker. I would be for addressing the salaries. Of our state employees. If that's what needs to be done and that's what the salary study says, I'm glad that the effective date was delayed, but it's not far enough.

So Mr. Speaker, I'm not going to speak to every point, but I believe that again, I will not be concurring. I believe that this is, there's a lot of, When we're using terms like massive and when we're using this, it's absolutely, it's gonna save us money because, well, it has to save money because we think it will make retention better. We don't have the facts on that, Mr. Speaker. Those are just words to fill in. What we really need is get the, we know it's gonna cost us more money and we know we're putting $50 more million per year into, our state government and to state employees.

And a lot of people out there are saying, if you're going to do that, do it with salaries. But other people that don't work for the state, a lot of them are wondering why we're increasing state salaries and state benefits at all, because a lot of people think that state employees are doing okay. Now, obviously there's conversation to be had about that, But this is not the conversation that has been in-depth and detailed that we need to have, Mr. Speaker. I'll be a no vote. Representative Sadler.

Thank you, Mr. Speaker. Speaking to the changes, I will not concur with the changes made in the other body. The other body, not the us thing. The changes before us in the concurrence vote do not make this underlying bill acceptable to me, and I think do not make it beneficial for Alaskans as a whole. You know, in my decades in this building, both elected and unelected, serving as staff, I've seen every year there has been effort by organized labor and state employee advocates, I think a good faith effort, to try to reverse the 2006 decision, which I believe was a prudent but difficult decision to protect the long-term financial health of the state and the prosperity of future Alaskans.

So every year there's been a new bill that just tweaks a little bit, makes a little change. Would this be acceptable? Can we get it passed if you do this? A little bit more little changes. And I believe the changes in this bill that were made across the hall yesterday represent the latest iteration of that.

Can we tweak it just a little more to make it acceptable? And Mr. Speaker, I would like to offer a metaphor. Once upon a time, if you wanted to buy a new car from GM, you could strip it way down. You could forego the power windows for roll-up windows. You could get this 3-in-the-tree instead of the automatic transmission.

You didn't have to get floor mats. You could get a basic stripped-down car, but then you had a car. Mr. Speaker, the metaphor here is defined benefit pension return is that car. And if the changes make it acceptable to enough members to concur and this goes into law, then we've got a vehicle. But in the aftermarket, there are billions of dollars in aftermarket add-ons.

You can swap out the engine, you can add air conditioning, you can get bigger tires. And once you have the vehicle, there's no end to what you can add. So my concern is that if this defined benefit pension bill gets through with the changes here, we will have a vehicle that will be a— the basis for an unending increase in the cost of the state and benefits to employees. And I might add, just a small portion of the people of the state of Alaska, not everybody. Works for the state of Alaska or for the poly subs.

In fact, most Alaskans do not. It's a bubble we live in, and you know, we deal with government, so we think that. But there's 80% of Alaskans who will not benefit from this. Yes, we hear the argument there will be pass-on benefits, but the direct cash benefits, the direct retirement benefits, will flow to public employees. That's a philosophical question.

As they say, that's a matter of policy, Mr. Representative. But I fear that we are opening with concurring on this change and approving this vote This bill opens the state up to an endless series of additional costs, which previous speakers have very eloquently said we don't know. It's a lick and a promise. It's a hope and a prayer. And I think it's not prudent.

And therefore, I encourage members to think twice, think three times, because the people in these chairs in 30 years will be paying the price for this, as will their constituents. So I will not concur and encourage members not to concur. Representative Vance.

Thank you, Mr. Speaker. I rise to not concur based on several reasons, one of which is that, as has been stated before, we don't know what the actual financial risk is. The other body highlighted that there has been an actuarial, but it is not an updated actuarial and definitely not with the changes that were made on the the floor yesterday. I think that's significant because, as has stated, this is a constitutional obligation that we have to prioritize above every other financial obligation that the state has. But the question that I've been asking myself around whether or not I would support this is, does it really solve the problem?

Does it, does it help us recruit and retain the employees that that we need to provide the service to Alaskans, whether that's through public safety, our teachers, or the other state employees. So because we don't have an actuarial, I've asked my staff to run some scenarios to help me understand what it is that we're looking at. And the freeze that was added, I think, is significant. And I wanted to know, okay, who wins the most out of this? Clearly our public safety is going to be the, the ones who benefit the most.

Teachers benefit on a moderate level and all the other employees benefit the least according to the scenarios that we ran. But when we look at teachers, that's what's been talked about the most on the floor today. And clearly we're all trying to help solve the teacher shortage and not only recruit but retain. And the scenarios is that we can assume an average career length of 25 years for a teacher, salary about $75,000. And with the freeze that was one of the changes that was adopted along with the optional provision for the municipalities does create issues that has been spoken.

I'm not going to repeat those. But I said, okay, what's the practical takeaway? If there is a young teacher that's looking about where they want to be, what they're going to need for their future, are we really addressing that? So if you expect to, to stay in one, uh, school district for 10 to 15 years, the defined contribution is probably going to be better for you because we— with this, uh, modern workforce, they lack flexibility, uh, family life changes. Different career demands, they want to be able to take their retirement with them.

Defined contributions does that. Now, if they know that they intend to stay 20 to 30 years within the same system, then defined benefits is going to be better. But here's how it breaks down. If you stay in defined contributions for your full career, you would end up with $40,000 to $50,000 a year in your benefit income. But according to the scenario that we ran, if you stayed in defined benefits for your full career, you would only have about $37,500.

So I'm failing to see how this is a better plan for our employees, for our teachers specifically, because all I'm hearing is that it's going to be a higher risk, that we technically don't know what that risk is. It's going to be a higher cost to our municipalities. But the bottom line for that individual teacher is actually going to be less money in their pocket. Now, there may be other benefits that don't equate to that revenue income that I'm not seeing in this modeling, but I, I don't want to just protect the state dollars that we have an obligation as the legislature to make sure that we are not biting off more than we can chew. I want to make sure we can keep our promises to these employees that we need.

But I also want to help benefit them in their needs and what they're looking for to be able to provide for their family. And, and this, this sounds like to me it's the golden handcuffs once again. And asking modern workforce to commit to 20 to 30 years to be able to keep their retirement is, I think, beyond what this young workforce is looking for. Especially when you talk about the freeze. If they were to make the change like our minority lead finance member mentioned, they are— they could lose, according to the scenarios that we ran, $50,000 to $150,000 in their contributions.

That's taking money that they helped work for, they helped earn, and that to me says that we're actually harming the ability to recruit and retain teachers and other employees. The scenario, scenario that we ran was specifically teachers with an average of $75,000 a year. I know that many of our state employees are going to fall into that pay range as well. So when I make this decision to vote no, it's based on what's going to be best for my constituents, what's going to be best to provide for them and their families.

Well as our financial obligation to the state. That's why I simply can't concur, because when it comes down to dollars and cents for individuals, I don't see the benefit here. Thank you, Mr. Speaker.

Representative Prox.

Thank you, Mr. Speaker. I rise in opposition to concurring with Senate Bill whatever it is there, 78.

When— just, I hope I got everybody, but I tried to explain to everyone that came into my office promoting this defined benefits plan that I thought that it didn't work out well for the employees, somebody— for me in particular. If I think about this as a state employee and I didn't think it came out in the— it added— there was too much risk to the state. And the underlying problem is the Constitution. Once we make this decision, we can't change it. And now there has been a couple of amendments that I think would reduce the risk to the state as a corporate enemy entity— enemy, a Freudian slip there— a corporate entity, but it shifts that risk to the employee.

So it makes it better on one hand, worse on the other. And the risk to the employee that the member from District 32 really pointed it out, This is golden handcuffs for state employees or municipalities in that there's a substantial risk to switching. The example was from Anchorage to Wasilla. Don't know if that's going to happen, but it would lock an employee into somewhere where there might be better benefits or better employment situation, but they can't get out of it because of the defined benefit plan and the benefits that they would lose. And that's a, that's really a big deal because it, this probably would work out well for, um, if both spouses had state jobs, um, not so big a deal.

But if there was only one employee working for the state government or municipal government that had the employee in defined benefit plan and the other was working in the private sector, um, and all of a sudden that person, the other, other spouse lost their job, they may be forced to leave. With the price of energy, maybe you can't afford to stay here anyway, but here you are trapped by the golden handcuff of this plan. Defined benefit plan. And that's a real consideration and, and a growing consideration because the state of Alaska, the state government really, has benefited from too much oil and we haven't diversified our economy. So we have kind of a fragile economy up here because we're so dependent on oil and we haven't diversified our economy.

So that risk is Growing every year, and I think this, the changes made to this plan by the other body, increase that risk to employees and then maybe even to the state, because there's one part reducing the recruitment expense, but there is also a tremendous amount of expense, and I've experienced this in a different employment situation. There's a tremendous expense to having disgruntled employees hanging around just because they're defined benefit. So I think I'm really concerned that this could be a lose-lose for both the state and the state as a corporation and the state employees and the economy of Alaska. So I would, I would encourage people to vote against concurring with this plan presented to us by the Senate. Thank you, Mr. Speaker.

Representative Tomaszewski.

Thank you, Mr. Speaker. I rise with a question. Mr. Speaker, I wonder, in speaking to just one of the changes in the, in the bill that came from the other body, They removed the 12% contribution cap.

When you look at, Mr. Speaker, the average salary of the teacher of, and you look at that 12% cap, that 12% represents about a $10,000 deduction in their salary. That was at the cap, the 12% cap. I just wonder if the employees understand the ramifications of removing that cap. How high will it go? And how many employees will you lose when that cap is— when there is no longer a cap now?

How many employees will we lose because those deductions just become so high and so unaffordable for the employees? That's really a major question and a major change in this legislation that the Senate has sent us back. That removal of the cap, that's important for the employees to understand and know. And I just wonder if they, truly understand those consequences of that particular one change. Representative Josephson.

Thank you, Mr. Speaker. Mr. Speaker, there's an irony going on here that's pretty transparent, and that is that the bill in the other body was actually made more conservative fiscally less risky on the margins bill. And, you know, we can all think about lessons we've learned about how you're supposed to vote in concurrence. Clearly what's going on is the underlying bill and people's feelings about it. But I did want to dispel some things that I've heard today that I think are erroneous.

First, I want to agree with the member from East Fairbanks whose briefly left the floor, but he called this bill a seismic shift. It is absolutely that, and I thank God for it. That's point number one. Point number two, I believe he said, and he conceded, the bill offers better benefits. It better offer better, better benefits.

That's the point of the bill. No one who supports this bill should run away from that. That's the point. It's the heart of the point. It's about fiscal prudence in that we spend $150,000 to $200,000 to train firefighters and police officers.

And that gets to the, the issue about will these modest costs to local governments growing from a 22% share to 22.5%, will those be such that a city council, a mayor, or an assembly won't want to stay in the program. I pray God that they don't because they're so de minimis compared to the savings and the benefit to public safety and school systems that will be gained from this bill. I want to talk about and stay focused on bullet 4, removal of the 12% contribution cap. That is absolutely pertinent to this debate. It's right there in our comparison sheet.

But some have said, and we just heard a comment about how, boy, will the employees be aware of the risks that that poses. It's noteworthy that there was an important seminal moment in the House debate. The Majority Leader was there at the time presenting on behalf of the Finance Committee's bill. And the former Buck Actuarial, or actuary, and Mr. David Kirchner, now working for Gallagher. Mr. Kirchner is the sentry at the gate to protect the state's fiscal purse.

He's the guardian of the treasury. That's what he's paid for by the Department of Revenue or Department of Administration, one of the two departments. And he said this bill is so tight, I'm paraphrasing, It is so— there are so many levers to protect the potentiality of insolvency, of dropping beneath 90%, that it's noteworthy. I wouldn't say he said it's unfathomable, unfathomable, but he said something akin to that. He said this bill is really designed to forestall risk.

So that's the state's actuary commenting on this bill. Now, the members of the other body have only made that fact more so. I would have preferred that there was no opt-out opportunity. We've heard members say, oh,.

Well, you know, members of school districts, for example, the Denali Borough, they'll be under pressure to stay in. And that led to arguments about golden handcuffs. I always find the golden handcuff argument interesting because I've lived here for almost 62 years. Is Alaska that bad? Is it that difficult to live here?

Where we have the cleanest air, the cleanest water, and the best salmon, and the best hunting opportunities, and the best trails. Is it that difficult? It's okay to provide an incentive for a long-term career. And this bill, if the, if the administration signs this bill, watch what happens to the 20-year-olds enrolled at the Department of Education at UAA. Watch the fire lit under those people.

To say this is a career worth pursuing. That's what's going to happen. There was a member from, I believe, the Sutton area who said there aren't— this— there was no sufficient financial analysis, there were insufficient fiscal notes. If you printed just the actuarial reports and the fiscal notes, you would need a separate binder to carry down to the second floor with you. There has been analyses from the former Gallagher, Buck, from Chiron, Gene Kowalski, from Flickfornia representing the public employees unions, from Dr. Teresa Ghilarducci.

It goes on and on and on. And members have said, well, wait a minute, we don't have a fiscal analysis of what happened yesterday. Well, the answer is, in some respects, not a whole lot. We heard the majority leader talk about how local governments may suffer a penalty of $30,000 for a major community. That's a rounding error in their budgets.

So there's not much to report. And in fact, if they opt out, that just makes the bill more conservative.

So, um, I, I just think that this is what we're going to see, and we've seen this in hearing after hearing. Our auditors noted this repeatedly in the state's audits. That even in our own Division of Treasury and in the Division of Audit, by God, perhaps the most important division we have virtually, we can't hire and retain employees. We cannot compete. And that's going to stop if the administration— if we do our job today and the administration supports this bill.

The bill offers I say unfortunately flexibility for local governments. It's been studied. I bet, I bet our majority leader, no exaggeration, has attended 50 hearings on this bill. Okay? I'm confident that that happened.

He must need a new pair of shoes at this point, wearing out the soles of his prior pair.

This is the pathway forward to arrest this problem of churn. This is the pathway forward.

And I support this bill. And I emphasize again as to bullet point 4, removing the 12% contribution. I bet when we're on our deathbeds individually, it will never even need to get above— the armboard will never even require it to approach anything near 10%. That's what the state sentry at the gate, Mr. Kirchner, reported effectively. This is a low-risk, pared-down benefit.

I urge your support.

Was that a point of order? Could you restate that, please? Like, point of order, Mr. Speaker. It sounds like we're debating everything in the bill. Thank goodness they're wrapped up, but if we're continuing on, I'd like to remind people.

Representative Johnson. I have— this whole conversation has morphed into allowing everyone to speak ad nauseam, even though we began— and you yourself spoke ad nauseam as well on the bill. So I'm hoping that we can in some time, short order wrap-up conversation, get to the wrap-up comments. But every member has the right to speak, and the plan at this point to amplify your concerns. The plan at this point is just to keep going until we get through the entire conversation on this bill and we get to the wrap-up comments and we get to the opportunity to vote.

So with that, I believe next in the queue was Representative Schwanke.

Thank you, Mr. Speaker. I will not be voting in concurrence on the Senate version of this bill today. And I'll try to be fairly brief in my concerns.

First, I want to thank all of the members from the other body for making their best attempt to try to bring a more fiscal conservative approach to the bill and help reduce risk to the state and future generations. Personally, I don't think it went far enough. They made a few good changes. Unfortunately, this is still a tremendously consequential bill, and I am very concerned that they didn't go far enough. This bill is built on hope that it's going to improve recruitment and retention for state and local government employees.

I am confident that it will not.

Labor markets have changed across the state, across the nation. These types of programs are not the draw that they once were. Our employees want flexibility, they want good pay, and they want great leadership.

Study after study has actually shown this. An ICER study just in the last year actually confirmed it.

I can confirm that this is the truth because myself, I walked away from a PERS program over a decade ago in this state with benefits better than what this bill package offers. I'm not alone. I can probably name half a dozen friends that have stepped away from their golden handcuffs Gold is pretty soft, you know. We can break through it. When we don't appreciate the leadership that brought us to that job, we will walk away.

I'd like to read just a minute from the Constitution, if that's okay. Permission granted. Article 1: All persons are equal and entitled to equal rights, opportunities, and protection under the law. And that all persons have corresponding obligations to the people and to the state. Mr. Speaker, I'm very concerned about the opt-out provision added in the Senate version, and I truly feel that it will create more division amongst Alaskans and our Alaskan communities.

The last thing we need right now in a time of incredible inflation, problems with our fish and wildlife populations, is more division. Between our communities, especially our rural, our smaller municipalities and the larger.

Mr. Speaker, government is necessary and government is expensive. I think government is a ground-up opportunity, right? It should come from the people. I think our local governments spoke very loudly about some of the provisions in this bill. And how much retirement of— for— and benefits from their employees were going to cost them.

They didn't care for the increased cost. They wanted somebody else to bear that cost. In no way should the state be responsible for increased local government growth and increased benefits.

One last small thing I want to mention is locked-in medical benefits. This is a risk, even if it's 12 months that someone has to serve before they are locked into medical benefits with retirement. This is something that we cannot control, we cannot predict. I recently just did my taxes. My husband and I together cost the state almost $30,000.

In medical costs. For us to move back to a defined benefits system, reinstating medical benefits going forward in a time of complete uncertainty in the cost of insurance, medical benefits, I truly feel like we will be— severely burdening the next generation if this bill goes all the way through. Senate changes did not go far enough, and I will not be voting in concurrence. Thank you. Representative Schraggy.

Thank you, Mr. Speaker. I rise in support of concurrence here today on HB 78, which has returned from the other body. You know, a lot has been said today about the underlying bill and about the changes made in the other body, and I just wanted to stand very briefly to talk about why I'll be supporting concurrence today. Obviously, it'll be no surprise to members that I supported the bill when it was originally before us. I'm a supporter of us returning to a defined benefit pension plan.

But I am still in support even with the changes made in the other body, and I want to talk about those just briefly. There's really two buckets of changes that I view the other body has made. The first bucket being the opt-in provision. I'm supportive of that. I think opt-in is good.

When you look at economic analysis of behavior, when you have an opt-in mechanism, more people will choose to stay in than you'll have opt out, and that's a good thing. I want more communities and more employees in enrolled in this system. I am absolutely sick and tired of hearing from teachers in my community talking about the, the hollowing out of the education system, of their workforce. I'm sick and tired of talking to students when I go door to door who are looking at career options and saying, I don't want to become a teacher anymore because I've heard from the folks that are in the system now, and I don't want to end up at the end of my life without a retirement system, without building economic security for myself. I am sick and tired of listening to people in public safety talk about the number of folks that went through academy with them that are gone in 4 years, 5 years, because they've been poached by communities out of our state who offer a pension system.

I'm sick and tired of state employees talking about how they look around their departments and there's no one left with the experience that they have because everyone has retired out and there is no one coming in behind them and staying with departments. Opt-in is good. Having employees have the option of a defined benefit pension system is a good thing for the state of Alaska. This experiment we've been on for the last two decades with the defined contribution system has failed us. Hundreds and hundreds and hundreds of thousands of dollars, millions of dollars has been wasted recruiting employees and attempting to retain them just for them to go leave us to work somewhere else because our system here in Alaska is the worst in the nation.

So I am supportive of the opt-in provision, and I am glad the other body made that change. The other reason that I'm going to support concurrent today is because changes in the other body made this system less risky. When I talk to constituents, when I talk to members of my community, when I talk to people in the state of Alaska, most folks from my experience support the concept of a defined benefit pension system. They support us providing a secure retirement to those who serve our state. The one concern they have is the unfunded liability from our past pension systems.

The changes in the other body make this plan more resilient. It makes this plan less likely to put us in a position that we've been in before. Now, is there no risk? Is there zero risk? No, you will never get zero risk.

But I'll tell you what, what we're doing now today has not worked. It will not work. Continuing to do the same thing that we've been doing for the last two decades is a disservice to our state and those who live here. And us making this plan less risky gives me the confidence that we can move forward with this, try something new, and see what the impact is. And we can always go and tweak the way that we offer this system in future years.

No, if people are already in the system, we can't diminish their benefits, but we can improve upon the system in future years and make sure that this works for our state and that it meaningfully improves retention in Alaska. And on the concerns about timing, on the concerns about us bringing concurrence up right after changes made in the other body, I will tell you that after we do our work here today, assuming we send this on to the desk of the administration, there will be an opportunity for review. And if there are truly fatal flaws, I think we'll find out about that and action will be taken. But for our part today, I'm standing up in strong support of concurrence, in strong support of us moving this bill forward, and us finally, after 2 decades, doing something to address one of the number one issues I hear when I go door to door. Our experiment has failed.

It is time to change the course of our state for the better, and I'll be voting yes today. Thank you, Mr. Speaker.

In wrap-up, Mr. Majority Leader. Thank you, Mr. Speaker, and I want to just begin by thanking every member of the body. Everybody comes at this from a different philosophical position in a different district, and I appreciate that. I want to begin on a note of humor.

I think the member from District 30 will appreciate that when I give the Alaska Railroad Corporation a shout-out, there must be something interesting about that. You know, Mr. Speaker, to begin with, I just want to respond to— I was taking notes of what the members had to say, just briefly respond to them. This bill is not built on hope, but it does bring it. And something that is not a theoretical example but a real-world example right now, Mr. Speaker, is the Alaska Railroad Corporation's legacy pension. They have a legacy pension, 1,150 members in it, and they're 96% funded.

And of course, their healthcare trust is many hundreds of percent overfunded. That is a legacy pension with none of the safeguards that this bill has in it. None. All the risk is on the employer. 1,150 Members in that legacy tier, they never got out of it.

We got out of it, but that's a state public corporation with a legacy pension with 1,150 members that is rock solid and has been for decades. Mr. Speaker, The action—. Representative Johnson, could you— Point of order. Stick to the changes, if you would. Mr. Speaker.

Representative Johnson, we are so far beyond this point. I'm just going to respond to the other one. It is my dear hope that we get done sometime soon. And Representative Kopp, I believe you share that feeling as well. Yes.

Thank you, Mr. Speaker. And thank you, Minority Leader.

I want to just briefly— but there was a member who asked about the defined benefit to defined contribution conversion question and asked why we're not staying with a dollar-for-dollar match if you're coming from the defined benefit plan. So you're an employee who chooses to come into this plan as a defined benefit employee, but prior to vesting you decide, no, I'd really rather be part of a defined contribution. Why can't you just take a dollar for dollar? Why is it $1 to 63 cents? Mr. Speaker, the reason why that is, is because the employer is contributing to your account at an 8% rate if you're a defined benefit employee.

If you're a defined contribution employee, they're contributing at a 5% rate. So to prevent gaming the system, if an employee who has not even vested yet in the defined benefit plan chooses instead to go to the defined contribution plan, they're simply getting the exact compensation they would have got if they'd been in the defined contribution plan the whole time. They're not getting their 8% employer contribution, they're getting the 5%. It's a fairness issue and equity so someone doesn't game the system. That's all that is.

Somebody asked a question about the employer choice option. Certainly that was driven by local governments. We heard local governments saying, We'd like a chance to review this. That's why we actually changed the election window from 30 days to 6 months. We agreed we want everybody to review it and to voluntarily decide if they want to be in it or not.

The PERS to TERS question addressed, I believe, by the member from Soldotna, that is already in statute and this bill does not touch that language. There is language that allows a PERS employee in a school district to become a TERS employee. Another member said, well, how can you have— how can you go from a DC plan account and then go to a DB employer? You know, how does that work mechanically, Mr. Speaker? How that works mechanically is you just can't accrue benefits in both those plans at the same time.

One, your 401(k) would freeze, and one, if you were going to a defined benefit, you would start accruing benefits in that plan. We had this reviewed by legislative legal They looked at it for a long time. We had tax plan attorneys look at it. They saw absolutely no problem. Mr. Speaker, another member asked if this would bring the state back to the dark ages of our old pension liability.

And Mr. Speaker, I just want to remind members that it was a remarkable event that got us here where we had for 3 years in a row an actuary, Mercer, that not only misled us but turned us $2.8 billion upside down. That's how bad the error were, and they covered it up. That's why we sued them, and we only recovered $400 million. But for those of us, Mr. Speaker, that— I mean, we all understand the time value of money. That $2.8 billion literally set us back to about where the liability is today, and we are on track to pay it off by 2039.

One member said, you know, will this affect the old liability? No, it will not. This is a separate trust entirely. It's a transformationally different plan. Will it help pay off the old plan?

Yes, but it will not affect the liability of that plan. The state's actuary, not an advocate's actuary, but the state's actuary has said that this plan to drop below 90% funding, they had to create a market.

A scenario where for 3 consecutive years they experienced 0% market returns, and they said never in the 70 years of Alaska having a pension has that ever occurred. So basically, the member from Midtown Anchorage had it right. It's almost an unfathomable occurrence that this would become unfunded because of the shared risk and because the plan reacts dynamically to the market. That's how it's designed. So why did the state get away from DB?

Because of that actuary error, rising healthcare costs, and basically we panicked. So, but what did we do to correct it? That's the most important question, is we no longer rely on one actuary. The state now relies on three. We have the administration's actuary, we have the arm board's actuary, and we have a third actuary that trues them up.

So we learned a lesson. Another member said that I don't believe, you know, some of these statements and, you know, how are we going to pay for these changes. And I just want to remind the body, the question is, is how do we pay for the cost right now? In the year we're in, we have $140 million in vacancy-driven overtime. $140 Million.

That's $140 million above what was budgeted. Budgeted was $60 million. It's projected to be over $200 million. The cost of what we're doing now is enormous. At an average salary of a state employee of $69,000, Mr. Speaker, if we could just cut the current 6% turnover rate— 6% turnover rate at $69,000 an employee— in half, if we could just cut it to 3%, we would save $62 million a year.

This is exactly what the actuaries say will occur. Mr. Kirchner has said this several times. You will fill seats. You will have people stay and work careers. A pension structurally is designed to do that.

Some members have said we don't want golden handcuffs. Mr. Speaker, mobility is our problem. Mobility is our problem. We have so incentivized mobility that those training dollars, that's $62 million. If we could just save that much, we could possibly do a lot better.

Just that much would be more than twice the cost of this plan. A member, the minority leader, correctly was talking about the annual cost to the state, but it's actually spread over 13 years, not 10. It's FY27 through FY39. Yeah, there's about a $35-36 million a year cost, Mr. Speaker. Just in the training dollars alone, we could double that recovery just in flattening the overtime curve alone.

We could more than triple the cost of this plan. And Mr. Speaker, if we could just reduce our errors and omissions— we all know we've been fined $40 million this year among various state agencies because their finance departments are missing. They can't hire these people. We have one grant through the Department of Military and Veterans Affairs, $247 million, that we did not submit reimbursement requests for in a timely manner because the staff didn't know to do it. That's a lot of money that we're missing out of our budget.

The cost of what we're doing now is orders of magnitude higher than what this bill introduces. Mr. Speaker, one member said that this is not expensive, or this is very expensive, and I just would say I think I've answered that question. I think shared risk is good. I think we actually, we all agree on that. This bill has nothing to do with the old pension.

It does not open the plan.

The defined benefit to defined contribution transition is not a diminishment of benefits when the employee and the employer choice have a free will. They have a free choice and they know ahead what that means.

I think I've addressed most of the members' concerns and I appreciate it, Mr. Speaker. I'm just looking at my notes here. I think I've covered it. So just in conclusion, Mr. Speaker, one, one member was concerned, and I appreciate— was Member 34, actually, from District 34. He was concerned about the employee 12% cap being removed, and I just want to remind the body that the only circumstance under which that would happen is if the 90% funding level was dropped to— and we know what the actuary said— it would take 3 consecutive years of 0% market returns for that to happen.

And that that has never happened and is very unlikely to ever occur. So if we truly do have faith in the plan, I think what just shows that we're putting our money where our mouth is. We're saying if it does happen, then your cost share could go up significantly. But if you want a pension, it's a choice. You don't have to take it.

You can stay in the defined contribution plan. In wrap-up, Mr. Speaker, we have had 32 legislative attempts to restore the broken system that we're in now. This bill had almost 50 hearings. There's been 8 independent actuarial reviews on this bill. Alaska, it currently is the only state in the country that does not offer a pension for public safety or teachers.

We are the only one, and we know what our teacher turnover rate is— 30%, and it is the highest in the country. We know what we're spending now We know what the cost is now. We know that 72% of our troopers that leave us are going to states that offer pensions. So, Mr. Speaker, with that in mind, I would just ask the body to say, do we want to continue down this path— high turnover, constant vacancies, and a growing strain on public services— or do we want to move forward with the plan that has been vetted, improved, and supported by both chambers, a plan that's involved a lot of collaboration and compromise, and a plan that reflects Alaska's long-term interests?

Thank you, Mr. Speaker.

Are you ready for the question? And I guess we do need to make a motion. Mr. Speaker, I move that House concur in the Senate amendments to committee substitute for House Bill 78 Finance amended effective date failed, thus adopting Senate committee substitute for committee substitute for House Bill 78 Finance amended Senate, and recommend the members vote yes. Are you ready for the question? The question being, shall the House concur with the Senate changes to committee substitute for House Bill 78, Finance, as amended in the Senate?

Members may proceed to vote.

Will the clerk please lock the roll? Does any member wish to change his or her vote? Will the clerk please announce the vote. 21 Yeas, 19 nays. With a vote of 21 yeas to 19 nays, the House has concurred with the Senate changes to House Bill 78.

Mr. Majority Leader. Mr. Speaker, I move the effective date clause. Are you ready for the question? The question being, shall the effective date clause be adopted?

Members may proceed to vote.

Will the clerk please lock the roll? Does any member wish to change his or her vote? Will the clerk please announce the vote? 21 Yeas, 19 nays. The vote of 21 yeas to 19 days— 19 nays.

Troop Freudian slip. The effective date clause has not been adopted. Brief it is.

At this time, the House will stand at ease until approximately 3 PM.