Alaska Legislature: Senate Floor Session, 4/28/26, 10:30am

Will the Senate please come to order, and will members please signify your presence by voting.

The roll shows 20 members present. Thank you. With 20 members shown as present, we have a quorum to conduct business. The invocation this morning will be given by Megan Hardin, our Senate page. Members, please rise.

With respect to other peoples and religions, I give the following prayer. Lord, thank you for the opportunity to come before you and before this body today. Thank you that we all get to be here and get to work together for the good of this wonderful state and its people. Please give these senators wisdom and clarity as they discuss the important matters of today and prepare future work during this afternoon and the rest of this week. Speak.

Lord, I ask that you would remind us to listen first and speak second. Remind us to look to you for truth in our next steps, and remind us to notice the sunshine, the flowers, and the smiles of others in our day. Thank you for your love, your grace, and your son's sacrifice. In Jesus' name I pray. Amen.

Amen. Thank you, Megan. Senator Myers, would you please lead us in the Pledge of Allegiance? I pledge allegiance to the flag of to the flag 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.

Thank you, Senator Myers. Would the Secretary please certify the journal? I certify as to the correctness of the journal for the 98th legislative day. Madam Majority Leader. Mr. President, I move and ask unanimous consent that the journal be approved as certified by the Senate Secretary.

Thank you. Hearing no objection, the journal has been approved. Senator Hoffman. Good morning, Mr. President. I move and ask unanimous consent that the prayer be spread on the journal.

Thank you. Seeing no objection, the prayer has been spread upon the journal. At this time, are there guests for introduction? Senator Hoffman. Thank you, Mr. President.

It gives me great, great pleasure to introduce someone that probably doesn't need introduction to this body. He's a product of Mount Edgecumbe, which everyone has been hearing about quite a bit this session, and deservedly so. He is the son of Senator Olson and Will Olson. I've seen him grow up, many of us, before our very eyes. But what's phenomenal about this young man is he claims to be a good basketball player, but I would say that he's a better student than a basketball player.

He applied to 7 colleges and got accepted to them all, but in the end, he is going to be moving from the small town of Gullivan to a city that he hasn't been.

Been to yet. And I told him once he's downtown in the city, he's not— he can look around, he can look up at 45 degrees, he's not going to be able to see the sky. Sunrises very seldom. He's going to have to look straight up, Mr. President. He's been accepted to Columbia, which is one of the top schools in the United States, in New York City.

So we wish him Well, Jr. or Donald Olson Jr. Please give him a warm welcome to the Senate.

Thank you, Senator Hoffman. Senator Diesel. Thank you, Mr. President. I am pleased to introduce two special guest pages on your behalf, Mr. President. So I would ask Maxine Imus and Isadora Stevens to come forward.

Mr. President, you have adorable granddaughters. First of all, we'll talk about Maxine Imus. She is named after her great-great-aunt Maxine, a riot of a 4.5-foot woman who burst into songs. At any occasion. Maxine is 6 years old, born and raised in Alaska, and is in first grade at East Elementary School in Kodiak.

Maxine is here visiting you, Mr. President, and her grandma. She's much like her namesake in that way, with a witty stand-up comic presence and a contemporary dance flair. She will also be performing in Next Step Dance Kodiak's recital. And she loves first grade at East Elementary. In Kodiak.

Also with her is Isadora Stevens, but she likes to be called Izzy. Izzy was born and raised in Alaska and is an award-winning honor roll achieving 6th grader in Kodiak Middle School. She is here visiting her grandparents. Isadora is a thoughtful big sister to Maxine. She loves ballet and acro dance.

She will be performing in 4 dances in the Next Step Dance Kodiak's recital in May. She loves to read she loves to read and paint just like you, Mr. President, and loves all things fabulous like her grandma. In the gallery today, we also have Izzy's parents, Anna and Colby, and her grandmother Rita and longtime friend Sue Ann. So please help me welcome these special guests of yours, Mr. President.

Thank you, Senator Giesel. I know they are ready to guard that door so nobody gets in.

Thank you. Are there additional guests for introduction? Seeing none, Madam Secretary, are there messages from the governor? A message dated April 27th stating, in accordance with AS 3905080, I submit the following appointee for confirmation. State Medical Board, Robert Scala, Eagle River.

Thank you. Referred to House— to Health and Social Services. Those are all the messages from the governor this morning, Mr. President. Thank you. Are there messages from the House?

A message dated April 27th stating the House has passed and is transmitting for consideration CS for House Bill number 96, Labor and Commerce, amended by the House Labor and Commerce Committee, an act establishing the Home Care Employment Standards Advisory Board relating to payment for personal care services and providing for an effective date Refer to the Finance Committee. CS for House Bill Number 221, State Affairs, by the House State Affairs Committee. An act establishing the first Friday of every October as Alaska Arts and Culture Day and providing for an effective date. State Affairs.

CS for House Bill Number 249, Labor and Commerce, by the House Labor and Commerce Committee. An act relating to the transfer of a vehicle to an insurance company. Refer to Labor and Commerce. See us for House Bill number 363, Military and Veterans Affairs, by the House Special Committee on Military and Veterans Affairs, an act relating to the sale of alcohol, relating to the sale or dispensing of alcoholic beverages by patriotic organizations, relating to club licenses and providing for an effective date. Refer to Labor and Commerce.

Those are all the messages from the House this morning, Mr. President. Thank you, Madam Secretary. Are there communications? I have no communications Today. And are there reports of standing committees?

Report dated April 27th stating in accordance with AS3905080, the Judiciary Committee held a hearing on the following appointees. A signature on this report does not reflect intent by any of the members to vote for or against the confirmation of the individuals during any further sessions. Violent Crimes Compensation Board: Anna Kamida, Joel Hard. Signing the report: Senator Clayman, Chair, Senators Tilton, Kiel, Tobin. Report dated April 27th from the Senate Labor and Commerce Committee stating, in accordance with AS3905080, the Labor and Commerce Committee held a hearing on the following appointees.

The committee recommends that their names be forwarded to a joint session for consideration. A signature on this report does not reflect intent by any of the members to vote for or against the confirmation of the individuals during any further sessions. Alaska Labor Relations Agency, Jennifer McConnell. Alaska Workers' Compensation Board, Anthony Ladd, Randall McClellan II, Lake Williams, Brian Zamatis. Alcoholic Beverage Control Board, Dana Walukiewicz.

Board of Barbers and Hairdressers, Danielle Hager. Board of Certified Direct Entry Midwives, Stasha Miller. Board of Certified Real Estate Appraisers, Mackenzie Labuda. Board of Chiropractic Examiners, Edward Barrington, Walter Campbell. Board of Dental Examiners: Travis Perkins, Michael Sanders.

Board of Examiners in Optometry: Damian Delser, Kathleen Rice, Charles Rudstrom. Board of Massage Therapists: Annetta Atwell. Board of Nursing: Michael Collins, Heather Crivello. Board of Pharmacy: Rebecca Balms, Lilian Okpaleke, Sarah Rasmussen. Board of Professional Counselors: Jill Ann Garrity, Crystal Herring.

Board of Public Accountancy, Elizabeth Stewart. Board of Social Work Examiners, Ivy Villani. Board of Veterinary Examiners, Ciara Villaro. Fisherman's Fund Advisory and Appeals Council, Renee Alward. Marijuana Control Board, Daron Cooper, Eli Cyrus.

State Board of Registration for Architects, Engineers, and Land Surveyors, Sterling Straight. State Physical Therapy and Occupational Therapy Board, Eliza Ellsworth, Michelle Scott Weber. Signing the report, Senator Bjorkman, Chair, Senators Merrick, Dunbar, Gray, Jackson, Yunt. The Education Committee considered Senate Bill 232, Personal Collection of Certain Fossils, new zero fiscal note. Signing no recommendation, Senator Tobin, Chair, Senator Stevens.

Signing amend, Senator Keele. The bill has a further referral to the Resources Committee. The Labor and Commerce Committee considered Senate Bill 259, Property Tax Assessment Increases, and recommended it be replaced with the Labor and Commerce Committee substitute, new indeterminate fiscal note. Signing do pass, Senator Bjorkman, chair. Signing no recommendations, Senators Merrick, Gray Jackson.

Signing amend, Senator Dunbar, Yunt. The bill has no further referral. Thank you. Senate Bill 259 has picked up an indeterminate fiscal note, so I am adding A referral to the Finance Committee. Those are all the standing committee reports this morning, Mr. President.

Thank you, Madam Secretary. Are there reports of special committees? I have no special committee reports today. Thank you. Are there reports of— are there Senate resolutions for introduction?

There are no Senate resolutions for introduction today. And are there Senate bills for introduction? I have no Senate bills to be introduced today. Thank you, Madam Secretary. Please read the first item on today's calendar.

Senate Bill 239 by Senators Tilton, Myers, Kawasaki, Bjorkman, Cronk. An act relating to the registration and titling of legally imported motor vehicles and providing for an effective date. The Transportation Committee considered the bill. New zero fiscal note. Signing do pass, Senator Bjorkman, Chair.

Signing no recommendation, Senators Keele, Steadman, Tobin. The State Affairs Committee considered the bill. Previous zero fiscal note. Signing amend, Senator Kawasaki, chair. Signing do pass, Senators Gray Jackson, Tilton, Bjorkman.

Signing no recommendation, Senator Wilkowski. I have no amendments. Thank you. Senate Bill 239 will advance to third reading on our next legislative calendar. Madam Secretary, please read the next item on our calendar.

See us for House Bill 26, Transportation, amended by the House Transportation Committee, an act relating to the duties of the Department of Transportation and Public Facilities and relating to a statewide public and community transit plan. The Community and Regional Affairs Committee considered the bill, new zero fiscal note, signing no recommendation. Senator Merrick, Chair. Senator Yunt signing do pass. Senators Olson, Dunbar, Gray-Jackson.

The Transportation Committee considered the bill and recommended it be replaced with a Transportation Committee substitute. Previous zero fiscal note. Signing no recommendation, Senator Bjorkman, chair. Signing do pass, Senators Keel, Tobin. Signing do not pass, Senator Steadman.

There is a Transportation Senate Committee substitute.

Thank you. Senator Bjorkman.

Thank you very much, Mr. President. I move and ask unanimous consent that the Senate Transportation Committee substitute be considered in lieu of the original bill. Thank you, Senator. Would you explain the changes? Absolutely, Mr. President.

In the Senate Transportation Committee, we amended House Bill 26 to add the term tribal entity. Thank you. Thank you, Senator Bjorkman. Hearing no objection, the Senate Transportation Committee substitute has been adopted. This bill will advance to third reading on our next legislative calendar.

Madam Secretary.

Senate CS for CS for House Bill 78, Finance, an act relating to the Public Employees Retirement System and the Teachers Retirement System, providing certain employees an opportunity to choose between the defined benefit and defined contribution plans of the Public Employees Retirement System and the Teachers Retirement System. Providing for an effective date before the Senate in third reading on final passage. There is an amendment number 1 by Senator Kawasaki as well as other amendments on members' desks. Thank you, Senator Kawasaki. Mr. President, I move and ask unanimous consent to roll back to second for purposes of amendments.

Thank you. Hearing no objection, House Bill 78 is back in second reading and will remain in second reading until all amendments have been considered. Senator Kawasaki, I move Amendment Number 1.

There has been an objection. Did I hear that? Okay, it has been objected. Senator Kawasaki. Thank you, Mr. President.

Amendment Number 1 is very simple. All it does is move the effective date of the legislation to 2027. This gives some time for the department to do regulatory changes necessary, necessary for the bill, Mr. President. Thank you, Senator Kawasaki. Is the objection maintained?

The objection is not maintained. Amendment number 1 to the bill has been accepted.

There is an amendment number 2 by Senator Keele on members' desks. Senator Keele. Thank you, Mr. President. I move amendment number 2. There has been objections.

Senator Keele. Thank you, Mr. President. Amendment number 2 adjusts a little bit of high-efficiency drafting that got done when The Finance Committee version of the bill put back the employee choice. And just a little bit of context on this, back in 2005 when Senate Bill 141 passed creating the new defined contribution tier, it had a sweetener provision to try and get folks who were in the defined benefit system but hadn't vested yet to convert over to the new tier. It said if you do that, you can take the 8% of your pay that you've been putting into the trust fund, along with the interest that's earned on it— I think it's 4.5%— and put that in your new shiny defined contribution account, you lucky devil, you.

And just to show you how much we love you, your employer is going to match that dollar for dollar. So comparably, 8% of your payroll plus 4.5%. And because there was a little problem in the trust funds— I think they call that an unfunded something or other, Mr. President— the rule in that Senate Bill 141 said you can't take it out of the trust. Your employer has to come up with a check for that amount from some other fund source. That had a 1-year window on it.

That window closed 19 years ago or so— well, it was 18 years ago, Mr. President.

This makes a couple of little adjustments. If you hired on in the new tier after this bill passes, new defined benefit tier, And you don't ever file a piece of paperwork. You stay in defined benefit. But you have the option until the day you vest to convert to the new defined contribu— excuse me, the old defined contribution tier.

But if that contribution comes with 8% from your employer instead of the 5% you would have been getting as a DC employee, there's an opportunity to work the system for some extra bucks. And that's not how it's designed. So what Amendment Number 2 does is it just brings in parity. If you choose to convert to DC, fair's fair, you have the right to do that. It's an irrevocable choice, but you only get 5% from your employer.

Because this new system has a sub-trust, that money can flow not from a separate check from the sales tax fund or property tax fund at your local muni, but that can flow back out of that subtrust, so it's 5%. And the way we calculate that is 5 is 5/8 of 8, so we just put in the amendment 63%. You see in the Teachers Retirement System, it's 7/8. It's 88% because the employer contribution to the Teachers Retirement System is 7. So it's just a flat parity amendment, and it doesn't require the employer to come up with an extra check when an employee chooses to move over to the D.C. system.

So, Mr. President, that's all. Instead of using a defunct provision for a different purpose, it brings in parity. If you convert to D.C., you get the same contribution as if you'd been paying into D.C. Thank you, Senator Kiel. Is there discussion?

Brief at ease.

I will— the Senate, come back to order, please. We are under discussion for Amendment Number 2. Senator Steadman. Thank you, Mr. President. I rise in opposition to this amendment.

The issue is dealing with trust money. It's highly unlikely that you're going to be able to move money out of that trust, and I think they'd have to have an IRS determination. So I object to the inclusion of this into the bill.

It would have been more fortunate to have it earlier in the process so we could have clarified such an issue. But when you start dealing with trust money, you end up with a lot of federal regulations and laws you have to deal with. Thank you. Thank you, Senator Steadman. Is there further discussion?

So is the opposition still maintained, Senator Steadman? Yes. Okay, we have that objection, so we'll go to the vote. If you're ready for the question— no one else wants to speak to that? If you're ready for the question, the question being: shall the Senate adopt Amendment Number 2?

Senators may proceed to vote.

The Secretary will lock the roll.

Do any Senators wish to change their vote? The Secretary will announce the vote. 11 Yeas, 9 nays. And so by a vote of 11 yeas to 9 nays, Amendment Number 2 has passed the Senate. Madam Secretary.

There is an Amendment Number 3 by Senator Keele on members' desks. Senator Keehl. Thank you, Mr. President. I move Amendment Number 3. Chair?

Thank you, Senator Keehl. It has been objected to. Senator Keehl. Thank you, Mr. President. Amendment Number 3 is a simple little cleanup.

The Division of Retirement and Benefits pointed out an inconsistency in the language for public safety workers, so police, fire, in the retiree health section. Just a little context. The bill makes a change that was recommended by the Alaska Retirement Management Board in the defined contribution health system. So this is access to either pay the premium or get a share of the premium paid by the system when you retire from defined contribution. The bill lets— chooses one of the ARMB board's recommendations.

It lets a worker— a police and fire worker access a share of premiums paid by the system, paid out of the trust, when they hit their full career at 20 years instead of 25. The oversight is that the bill says 20 years and age 50 if you're in the new DB tier, but just 20 years if you're in the DC tier. They match, Mr. President. The new defined benefit tier in this bill uses the same trust as the defined contribution tier for healthcare, right? Not the pension part, that's different.

But for healthcare, they are identical, or they're meant to be identical, and the language right now isn't. So by taking out the age 50 requirement in one place, the two match. And just a reminder, Mr. President, We're only talking here for a 20-year police/fire employee about the opportunity to access the coverage and pay the full premium. So we're not creating new liabilities here. We're just getting you into the system on exactly equal terms.

Terms because it is exactly the same trust for the existing defined contribution system and the new defined benefit tier. Thank you, Senator Kiel. Is there further discussion? Objection has been removed. Brief at ease.

Brief at ease.

Senate, come back to order, please. Objection has been removed. Is there further objection? Seeing and hearing none, Amendment Number 2 has passed the Senate. Madam Secretary.

Amendment number 3 passed the Senate without objection. There is an amendment number 4 that is being distributed.

Senator Bjorkman. Thank you, Mr. President. I move amendment number 4. There has been no objection. Senator Bjorkman.

Thank you very much. Amendment number 4 keeps a promise to our local government that responsibility for past service costs of the legacy plan which this new plan really has nothing to do with, remains in place. I found it fascinating this legislature as we had conversations about what potential costs and savings would be and then how we ensure that we keep costs down for both state government and local government, that there were a lot of apocalyptic and maximum doom scenarios. And I'm not sure that any of us plan that way, Mr. President.

But if we are to assume that the absolute total worst thing would happen, then we might have a contingency. We might have a fallback position. We might have an insurance plan, if you will, Mr. President. What the actions were taken, though, however, previously on this bill, which broke the promise to local governments that they would only be responsible for 22% of the cost of the past retirement system.

It wasn't an insurance policy. It wasn't a what-if scenario. It was a guarantee. A guarantee, Mr. President, that local governments would pay more. Guaranteed.

Not a what-if. Not a what if the worst should happen. It was guaranteed that you will pay more and you will pay millions, in fact hundreds of millions of dollars more over time. That's what the change from 22 to 24% meant. This change, Mr. President, would force the budgets of local governments and their tax burdens to expand quite a bit.

Guaranteed. Not optional. Not if the worst should happen. But it's a guarantee that City Hall and municipal government are going to have pressure on them to raise taxes.

I would say that's bad. Now, as we look at what it is that we're doing here in this bill, we've had many folks say— experts, actuaries, all kinds of people— that all in, if you account for actual reality of scenarios that likely will happen, This plan is going to save the state money. It will save local governments money too. What's the alternative? It's dumping additional cash, which we don't have, Mr. President, into the system and increasing salaries.

There are legislative pieces of ideas floating around that would do that, but when the bills are adjusted to show the actual cost of those legislations, said, oh, we don't actually want to pay the bill for that. We don't want to be responsible.

This moves us in the opposite direction, Mr. President. It would be interesting if we look back and kind of unwound the history of how these things came to be and parsed through the tissues of these decisions. And if we were seeking solutions, you would understand that the municipalities around the state, they weren't responsible for creating the past service cost liability that exists currently. That's on the state. They were in charge of the plan, and those managers, they done messed up.

They made huge mistakes for expediency, to look good politically, out of the nature of cutting the budget, chose simply not to pay the bills.

12 Years ago, this body chose to refinance the entire mortgage of the plan at the same interest rate, and it cost municipal governments almost $3 billion more in past service cost. Is that fair?

Did they have a voice in that plan, Mr. President? No, they did not. The state decided by fiat that in order to save money in the short term to the state, they would shift that cost of $3 billion guaranteed to state and local governments. This Amendment Number 4 keeps the promise that the state agreed to in 2005 when they passed Senate Bill 141 that local governments would be responsible for 22%. That promise has already been eroded due to refinancing that debt costing much more money.

This is not an if the worst should happen amendment that was made in committee. This was a guaranteed cost shift to cost our local taxpayers more dollars. I might be able to consider this concept if it were a what-if scenario, if it was if the worst case should happen. The intent of this amendment is clear. It's clear on its face.

It is an exact cost shift to local government and not in the best interests of Alaskans. So I urge to return to 22%. That's a promise that we made to local governments. I urge folks to vote yes on this amendment. Thank you, Senator Bjorkman.

Is there further discussion? Brief at ease.

For the Senate Comeback Order, in front of us is Amendment Number 4. There has been an objection. Is there discussion?

Senator Steadman.

Thank you, Mr. President. Yeah, the white Kleenex was not a surrender.

But I thought I'd take the opportunity because there was some history put on the floor here on this amendment to straighten a few things out. There's a lot of misconceptions. It's a complicated issue, there's no doubt. So there might be a little bit of this tonight or this afternoon. Hopefully we won't go till tonight.

When we look at the current retirement system, excluding the bill in front of us, you know, and even excluding the current plan, the defined contribution plan, When we look at the old defined benefit plan, it did create a substantial unfunded liability, and we can go into all that. We owe about $7 billion, we paid about $8 billion, and I think we owe about $7 billion.

That has nothing to do with the bill in front of us. The bill in front of us, if adopted, has no unfunded liability. It starts that way.

And the cap on the aggregate payroll for non-state employers is set in the current system at 22%. And that 22% was put in several years ago because when we looked at the old system and terminated it back in 2006, it was very difficult to accurately calculate what communities had what amount of unfunded liability. We knew it was substantial. The communities that had a lot of retired people, like Fairbanks, were way underwater. In fact, we're concerned about Fairbanks going bankrupt.

And some communities that had very few people retired showed a surplus. And as we went forward, it was very difficult to unwind those. To come up with an agreement with the non-state employers, mainly communities, the vast majority. It was agreed to that we would cap their aggregate payroll at 22%, not of their paychecks, but that 22% of payroll would go toward the unfunded liability. When we dealt with the schools, TRS was grossly underfunded also.

But due to the constitutional protection of education— or constitutional requirement of education, the state has to pick that up. So the state did not increase the contribution to schools at 22%, left them at the normal cost.

So the 22% cap has nothing to do with this piece of legislation in front of us. The piece of legislation in front of us has no unfooted liability. But it does have increased costs.

And that's what we're talking about here. So, the cost issues come with an obligation for the employer to pay the ongoing cost. And the ongoing cost, roughly, when we tried to calculate it, increase, varied a little bit under the— it's about 2.5% or so, I think, roughly rounded off, 2.42.

The normal cost of the subject matter in front of us is 10.09, and the defined contribution normal cost is 7.67. So there's a 2.5%, 2.4% difference. Without getting all into that, I'd like to reference everybody to the fiscal note that was put on the desk yesterday. This fiscal note on the last page breaks it out. The cost of the proposal in front of us is more expensive than the old plans, and that's basically what we're looking at.

Comes out to about $467 million over 10 years on average. $1.2 Billion for the non-state employers.

That's a lot of money that would be pushed to the state. Because the way— if we adopt this amendment, it would block the funding— fund increase cost of this proposal in front of us to be rightfully paid for by the employer. There's no question the state, for all state employees, pays for it. But the state has no obligation to pay for the employees at Sitka and Anchorage and Fairbanks and Kodiak and Bethel and take your pick, right, all over the state. Those liabilities that may be created, some of us feel they will be created, and I'm one of them.

In the new plan, eventually, those will be borne by the employer, not the state.

The state will be responsible for its own and most likely Education Deters. So that additional cost of $467 million over the next 10 years is a— is part of it. The state's obligation going forward will pick up an extra $687 million for a total of $1.1 billion. That's what this cost would be over the next 10 years, $1.1 billion increase. And there's been concern expressed already about the finances of the state.

So in essence, what this amendment does is it requires the state to pick up the non-state employer costs and makes this proposal in front of us cost neutral. And when you increase benefits, you increase costs. You want to decrease benefits, it decreases costs. It's pretty simple.

So with that, Mr. President, I rise in objection to this inclusion. Those communities that want to add benefits to their plan, they can do that already. They don't need us to do it for them. They've got deferred compensation that they can do. They can put in their own retirement plan.

They can do— they can negotiate additional benefits. But what they should not be able to do is pass their local costs onto the state of Alaska. And I don't think the state of Alaska is going to make the same mistake they did decades ago when they were unable to unwind the actual liabilities and costs to each individual community. That, Mr. President, I will maintain an objection to the adoption of this amendment. Thank you.

Senator Stapleton, is there further discussion?

Senator Keele. Thank you, Mr. President. I stand in support of this amendment. I wouldn't want anyone to come away with the impression that anything about this amendment means any employer isn't paying the full cost of every employee working for them at every point. Right?

But this amendment is about the legacy, the old unfunded liability problem, and I appreciate the maker of the amendment spoke very clearly about why that's still lingering on and the choices that were made in this room and the other room down the hall that led to it lingering on longer than anybody anticipated. Munis didn't make that decision. Legislators made that decision. But this amendment doesn't change the fact that every employer is gonna put in every dollar it costs to pre-fund each year, to pre-fund the benefits that get earned that year. You hear the term normal cost thrown around, that's what that means.

That is well, well below the 22% rate today. It will be well, well below the 22% rate tomorrow with this bill. Nobody's picking up the municipality's cost or the school district's cost —for PERS employees in any different way if this amendment passes. The only difference is we are not shifting to your local property taxpayer, your local sales taxpayer, the 2% that the author of the amendment talked about, shifting more of those legacy costs to municipalities. So it is a good amendment.

It doesn't let any employer off the hook for paying for the benefits their employees are accruing every pay period. I recommend the members vote yes. Thank you. Thank you, Senator Keehl. Is there further discussion?

Go back to Senator Blakowski. Thank you, Mr. President. This— I support the amendment, as was just stated by the senator from Juneau. This If this amendment passes, the municipalities will continue to pay a staggering 22% of their payrolls as a result of the legacy costs, mistakes that were made in the past, actuarial errors— actuarial errors. When you ask actuaries to do an analysis, the analysis that they do is only as good as the numbers that they put put in.

It's only as good as the assumptions that they make. And so in arriving at the 24% number that's in the current bill, here's the assumptions that were made. The assumptions that were made were that every single employee will switch from defined contribution to defined benefit. That all future employees are going to select the defined benefit. That's the assumptions that were made by the actuary in making this suggestion to go to 24%.

That's never going to happen, Mr. President. That's never going to happen. And so the projections are more likely that it will be 3/4 or 3/5 of the employees will select the defined benefit. And the costs will be much lower. So what we're— what happened by going to 24% was we're passing— if this amendment fails, we will be passing huge costs onto the municipalities for completely unrealistic expectations.

It's not that the actuary was malicious or did something wrong, but again, the The assumptions that you make are key here, and the assumptions that were made are just completely unrealistic. And so we should not be passing the cost, this increase, which is millions of dollars, to local communities based on unrealistic assumptions. Now, the costs are not insignificant. The, the voting against this amendment is a property tax increase for every single community in the state that pays property taxes. Just to be clear what we're voting on.

A vote against this amendment is a vote to increase the property taxes of your communities if this bill passes. In Anchorage, it's $4.9 million.

This would impose substantial new costs statewide. I would urge the body to support this amendment. Thank you. Thank you, Senator Wielekowski. Is there further discussion?

Senator Hoffman. Thank you, Mr. President.

This is an optional program. It's not going to cost the taxpayers in Anchorage or anyplace else one penny if they decide not to opt in. If they decide to opt in, they're making a decision to tax themselves for these additional benefits that they will get.

It's not something the state is going to decide. That's why we put the provision in the legislation to make it optional.

No way are we saying you have to pay those additional taxes.

Only, only if you want your employees to get those additional benefits, then you are responsible for those expenditures. Someone said that this wasn't going to cost any more dollars. Well, I'm looking at the fiscal note and I would disagree with my good Senator from Juneau. On page 2 of 3 of the fiscal note, fiscal note number 4, in the middle of the page, underline after the graphics. May I have permission to read, Mr.

President? Without objection, Senator Hoffman. It said projected net total increase to PERS and to TRS, an additional state contribution from 2027 to 2039 will be $470 million. That's not a zero, that's an actual number. But again, the way the bill is written, it's a local decision, local control.

You have those employees. If you decide you want to add those additional benefits to your employees, you will have that choice. It's not— this legislation does not do any arm twisting. It just lays out if we want— if you want defined benefits, vote for it. The local governments will decide that question for themselves.

Not us. We're not passing anything on. It's a new benefit. And you as local governments can decide. Thank you, Mr. President.

Thank you, Senator Hoffman. Is there further discussion? Senator Bjorkman, in wrap-up. Okay, then. Is the objection maintained?

Objection is maintained. If you are Ready for the question. The question being, shall the Senate adopt Amendment Number 4? Senators may proceed to vote.

The Secretary will lock the roll.

Do any Senators wish to change their vote? The Secretary will announce the vote. 10 Yeas, 10 nays. And so by a vote of 10 yeas to 10 nays, Amendment Number 4 has failed to pass the Senate. Brief at ease.

ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន់។ ប្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រាន្រ අපි ස්තූතියි ස්තූතියි ස්තූතියි ස්තූතියි អាន្រាន្រាន្រាន្រាន្រ ស្រុង្រុង្រុង្រុង្រុង្រុង្រ បានានានានានានានានានានានានាំ

Would the Senate come back to order? And people need to stop wandering around so we have a full Senate. We are— I brought brief— Seneca MacArthur, please. Madam Secretary.

There's an amendment, number 5.

Thank you, Senator Clayton.

Yes, Senator Blekowski. I move and ask unanimous consent to rescind action on Amendment Number 4. Thank you. There has been a motion to rescind action on Amendment Number 4.

We have it on the board there if you are ready for the question to rescind our action On Amendment Number 4, Senators may proceed to vote.

The Secretary will lock the roll. Do any Senators wish to change their vote? The Secretary will announce the vote. And so by a vote of 10 yeas— I'm sorry, would you please announce the vote, Madam Secretary? 10 Yeas, 10 nays.

And so by a vote of 10 yeas and 10 nays, we have failed to rescind our action on Amendment Number 4. [FOREIGN LANGUAGE] A brief at ease.

ប្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រ ស្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រុង្រ

Will the Senate come back to order, please? We are dealing with the amendments to Senate CS for CS for House Bill 78 Finance as amended in the Senate. Madam Secretary.

There is an Amendment Number 5 by Senator Clayman on members' desks. Thank you. Senator Clayman. Thank you, Mr. President. I move Amendment Number 5.

That's with an objection. Senator Clayman. Thank you, Mr. President. The effect of Amendment Number 5 is it would move this from an opt-in option for local governments to an opt-out option for local governments. The example I would draw is a few years ago we had a whole discussion in legislation regarding smoke-free workplaces and smoke-free restaurants and whatnot.

And there was much discussion about whether local governments should opt in or whether local governments should have the choice of opting out. And after much discussion, that became a— what was passed by the legislature was opt-out legislation which recognized that I think what it recognizes at some level that the legislature is making the kind of the large policy decision whether it's a good decision, and in this case, is it a good decision to move to a pension retirement versus a defined contribution retirement. And this would basically be saying to the local governments, we think it's in your interest to be in this pension retirement program, but if they don't want to be, they will have the option to opt out, but they actually don't have to take action and meet as a local government body and go through the debate and get the same analysis that we've had, because that may actually, especially when we get to some of the different size communities, that may actually be more challenging than less challenging. So by having an opt-out, that will give local governments the choice of whether to participate and the way in which they participate. But if they do nothing, they will be into the pension plan, which is what— I believe the legislature is moving towards doing with this legislation.

And we've certainly heard from local governments that they're— they have an interest in participating in this plan and making it opt-out means they have to make the decision to step out. The default is that they're in the plan.

And I think this is an important change in terms of the policy since we as a legislature are bypassing this pension proposal which has had interest from local governments and people across the state. We're really saying it's a good plan, we think it's really good for all of us, and then if the government really feels it doesn't work for them, they can opt out. So that's the intent and the interest in Amendment Number 5 and urge support. Thank you, Mr. President. Thank you, Senator Clayman.

Is there discussion?

Senator Steadman. Thank you, Mr. President. I rise in opposition to the amendment. I think when you look at the local communities, they come in all kinds of flavors as far as sophistication. And we have big communities that are very sophisticated like Anchorage, and we have small villages that are very unsophisticated and have difficulty basically just keeping up with the decisions that they have to make.

I think it's better left at the local level to have that discussion and debate at the local councils and assemblies, have them thoroughly look at the cost-benefit. Clearly there's some cost going in, additional cost, and after this current unfunded liability of roughly $7 billion gets retired, they're still in higher cost. And if they make that decision to go ahead and execute that, that's fine. But they need to have the opportunity to have that discussion locally and make a rational and informed decision versus being caught in the automatic, you know, you're in and you got to take action to get out of it. So I object to the motion or the amendment.

Thank you, Mr. President. Thank you, Senator Steppen. Is there further discussion?

Senator Clayman, then wrap up. Thank you, Mr. President. I would just note in light of my colleague from Sitka's comments, what we saw again with the smoke-free workplace legislation was that it turned out that the vast majority of local governments actually did consider and were actually pleased to have the smoke-free workplace. I believe only one local government made the choice to have an election to opt out. That did not succeed, but I think the best way to give the local governments that choice is to let them choose to opt out.

The suggestion they won't look at this and carefully consider it, I don't think is true. I think they will look at it carefully because it's a change in their retirement, but I think it puts them in a better position to discuss that to be able to follow the legislature's example. Thank you, Mr. President. [Speaker:THE PRESIDENT] Thank you, Senator Clayman. And the objection is still maintained?

[Speaker:SENATOR CLAYMAN] Yes. [Speaker:THE PRESIDENT] Very well. If you're ready for the question— The question being, shall the Senate adopt Amendment Number 5? Senators may proceed to vote.

The Secretary will lock the roll.

Do any Senators wish to change their vote? The Secretary will announce the vote. 11 Yeas, 9 nays. And so by a vote of 11 yeas to 9 nays, Amendment Amendment number 5 has passed the Senate. Madam Majority— I'm sorry, Madam Secretary.

There is an amendment number 6 that will not be offered. An error was discovered in amendment number 7 and a corrected version is on members' desks. Corrected amendment number 7 by Senator Tobin. So you have before you the correct amendment number 7, line 14. 2026.

Senator Tobin. Thank you, Mr. President. I move Amendment Number 7. Hearing no objection. There has been an objection.

Senator Tobin. Thank you. Thank you, Mr. President. Well, Amendment Number 7 does something very simple. It gives our municipalities a little bit more time.

Now, we all here understand how important robust public notice, thoughtful discussion, and of course time for deliberation is for our locally elected governments. They do not move quickly. They need to follow follow open meetings acts and ensure that public notice requirements are appropriately provided to their communities. And of course, we know that there are many competing priorities that our local municipalities and school boards are faced with in this moment, as there is increased volatility, uh, not only with funding resources and services but also with the preparations for the next school year, and of course, as we enter into a robust election process. One of the things we do know is that more time to deliberate allows for reduced administrative strain on our local municipalities and school boards and allows for better decision-making.

We want to ensure that the folks who are determining whether this is the best step for, uh, their employees have time to make this determination. So the simple thing that Amendment Number 7 does is it fix the employer election window to allow for an additional 6 months to opt in to this program— excuse me, to now opt out, now to opt out to this program. And it gives employees up to June 30th, 2027 to also make that determination. I look forward to any discussion or questions that may be asked by my fellow members. Thank you, Senator Tobin.

Is there discussion? Is the objection maintained? The objection is not maintained. So hearing no objection, amendment brief at ease.

Come back to order, please, then amendment number 7. 11 Has passed the Senate. Madam Secretary, there is an Amendment Number 8 by Senator Dunbar on members' desks. Thank you, Senator Dunbar. Thank you, Mr. President.

I move Amendment Number 8. There has been objections. Senator Dunbar. Well, I'm sure once.

For once I'm done with my presentation, it will be removed. It'll pass unanimously, just like the previous amendment. Hold your breath.

So I, like many members of this body, had the pleasure to serve on a local assembly before I came to the state Senate. And while I was on the assembly for about 6 years, we were in the post-2014 period when costs were continually being shifted from the state down to local government. And that fundamentally is what this bill, if we do not amend it, will do. To go from 22 to 24, as was done prior, um, shifts costs from the state government to the local government. And we've been doing that for a long time now.

For more than a decade, we have been pushing costs down to the local government We've been pretending like we haven't been increasing costs. We've been pretending like we haven't been raising taxes. But fundamentally, we have. We've been raising property taxes in the places that have property taxes. We've been raising sales taxes in the places that have sales taxes.

We've been cutting the PFD, which effectively is a tax on Alaskans. And it's interesting, some of those costs are obvious and direct. When the state government closed the state trooper depot in Girdwood, the Municipality of Anchorage had to step into the breach and provide safety along the Seward Highway. If you ever driven from Anchorage to Kenai or Anchorage to Girdwood in the last decade, the police protection was now provided by the Municipality of Anchorage. That's a direct cost that the state shifted onto local government.

But some costs are not so obvious or so direct. For example, When this body cut the PFD, it reduced the municipal, municipal government in Anchorage by millions of dollars. That's because the municipality of Anchorage garnishes so many PFDs through a variety of settlements that when we cut the PFD, we reduce support to the municipality of Anchorage. Again, some of it is more direct things like reducing community assistance. That obviously is put a hole in the state governments that receive it.

But that's effectively what we'll do with this bill as well. So this goes from 22 to— or from 24, excuse me, to 22.5. It still shifts in the direction of those who wanted 24 as opposed to 22, but it provides a little bit more fairness for the local governments. And I'll say the last thing for those of you who maybe decided to to vote against the prior amendment. We're in a different world now.

We have a different bill now. Because Amendment 5 passed, we are now in an opt-out instead of an opt-in, and that means your local government is much more likely to find themselves in this system and to pay this higher rate. If you vote against this amendment, you are saying that your local taxpayers should pay in some cases millions more than if you support the amendment. So I do think this bill is going to pass, and for those of you who perhaps don't like it to pass and want to do a little harm reduction and want to reduce the cost to your taxpayer, your local taxpayer, I urge you to vote yes on this amendment. Thank you, Mr. President.

Thank you, Senator Dunbar. Is there additional discussion? Senator Steadman. Very briefly, Mr. President, you know, we've already gone through this, but clearly this plan costs more money. And the cap at 22% has nothing to do with this particular piece of legislation, has everything to do with the residual unfunded liability that we've been struggling with for the last 20 years and the next 10 years.

And with that cap in place at 22%, just to service the unfunded liability, all additional costs of a new plan because the municipality is capped at 22, it stops at the state level. And it's— by removing that, the actuarial analysis was run and that 2% spread to 24 was created by the actuary. And in the fiscal note on everybody's desk shows the estimated cost at $400 $67 million over 10 years and maybe it's 3/4 of that or 80% of that or some number if not everybody switches over or what have you depending on how the end of this bill looks. But this makes it more transparent what the benefits and drawbacks happen to be, the cost and the liability, the future liability when and if it's created resides at the state or the non-state employers resides at City Hall. It doesn't reside in the state.

So it's a whole different animal. And again, we're trying to blur this into the residual unfunded liability. It has nothing to do with the plan in front of us. So I object to the amendment. And quite frankly, Mr. President, I think it's a little— getting a little dilatory.

Thank you, Senator Steadman. Is there further discussion? Senator Toland.

Thank you, Mr. President. Well, I rise in support of this amendment, and I rise for a few reasons, and ones that I've heard a few, uh, of my colleagues make. I recognize that there is an existing unfunded liability. The folks who are currently working in our public schools, who are keeping us safe through public safety, who are ensuring that our homes are protected through fire service— well, they didn't cause that unfunded liability. But they sure are going to be asked to pay for this particular shift of the burden onto the local municipalities and school districts.

And we know this because we have letters from our constituents that say, well, if this goes through, we are going to lose 3 teachers because we've got to make up the difference from 22 to 24%. We have read a letter actually from the Sitka borough government that says we are going to have to pay over $48,000 to make to meet this gap. And that's going to result in potentially longer deferred maintenance lists. That's going to cost us some additional services to our community members. We also see here that this shift from the 22 to 24% cap are going to cost us additional resources in our public school system.

We know that Anchorage is looking at about a $2 million shift from the state onto their shoulders. The city of Nome, their school district is looking at a $19,000 shift. Right now our school kids are not getting the education they deserve. We are not providing them the quality services that will allow them to excel, and this will only continue to create additional attrition on those services that we provide. I recognize that there is concern about this particular new defined benefit program potentially costing the state additional dollars.

Well, I'll tell you, Mr. President, currently With the 28 to 33% vacancy that we see, uh, in our school districts because of high teacher turnover, we're already paying $20 to $30 million a year. We can either continue to pay that in turnover costs, or we can fund a quality retirement program that retains our quality educators, attracts new quality educators, and ensures that our kids get the best education that they deserve. I support this amendment, and I encourage my colleagues to do so as well. Thank you, Senator Tobin. Is there additional discussion?

Senator Keele. Thank you, Mr. President. Couldn't help myself.

This amendment actually comes much closer to what is a realistic expectation. Keeping in mind that when we're talking about this, all we're talking about is who pays that— what share of that legacy unfunded liability. And I agree with the member from Sitka, that's not the bill we have in front of us. That was created 25, 35 years ago.

But the shift up from 22% is a shift of who pays a liability that not one municipality played a role in creating, not one municipality managed the system, not one municipality managed the investments, The state did all of that, Mr. President. So I have in my hands a chart that the state's actuary put together when the 22% amendment— it was presented to the Finance Committee when the 24% amendment was under consideration in Senate Finance. And it compared the costs of the current plan. Then they provided us two other columns. One was House Bill 78.

If every single person who gets hired after this goes into defined benefits, and if every single person working in defined contribution today converts.

Highest cost conceivable option you could come up with. They got a second column, Mr. President— or third column— and that's what if three-quarters of the people move over. And I will tell you that in the past, when we have had return-to-defined-benefit bills, prior actuaries have estimated about 80% conversion. That was with a richer plan than HB 78. But be that as it may.

So much more realistic is about a 3/4 conversion, about 3/4 of people moving over. And when you look at the difference in what the state's on behalf would be in terms of percent of payroll, because that's what we're talking about, percent of payroll you have to contribute, it's not 2 points.

The on behalf.

Has the potential to go from 7.16% in FY30 to 7.96%. So it's 80 basis points.

Moving 200 basis points, 22 to 24, is just a shift in who has to pay off that legacy unfunded. It is a straight shift to the taxpayer. 22.5, Well, that gets us pretty close to square, gets us pretty close to even if the new bill passes and the new costs do rise a little bit. So, Mr. President, this isn't a cost shift, this amendment. This gets us pretty close to square on the nose.

So I think it's fair, and I recommend the members vote yes on this one to avoid shifting state-caused costs under your local taxpayer. Thank you, Senator Keele. Is there additional discussion?

Senator Dunbar, in wrap-up. Very well. If you are ready for the question, the question being, shall the Senate adopt Amendment Number 8? Senators may proceed to vote.

A brief at ease.

Gonna come back to order, please. We have before us Amendment Number 8. If you are ready for the question, question being, shall the Senate adopt Amendment Number 8? Senators may proceed to vote.

The Secretary will lock the roll. Do any senators wish to change their vote? The secretary will announce the vote. 11 Yeas, 9 nays. And so by a vote of 11 yeas to 9 nays, Amendment Number 8 has passed the Senate.

Madam Secretary. Amendment Number 9 will not be offered. There is an Amendment Number 10 by Senator Keele on members' desks. Senator Keele. Thank you, Mr. President.

I move Amendment Number 10.

Has there been an objection? There has been an objection. Senator Keele. I'm shocked, Mr. President. Thank you, Mr. President.

Amendment Number 10 is a tidy-up. Amendment Number 10 deals with this new scenario we have where some PERS employers will offer the new defined benefit tier and some PERS employers will not. We assume that at least somebody's gonna opt out. And so we have a situation where if an employee moves from one to the other, we have a little bit of statutory chaos that we need to clean up. Because right now, the way the statutes read, you can't be a member, you can't have an account in both defined benefit and defined contribution.

So the way Amendment Number 10 works— a lot of technical language in it— the way it works, Mr. President, is just like If somebody in one of those two tiers who switches from an employer that doesn't offer their tier, just like if they went to the private sector. So if you start with the state, you're in defined benefits, and then you go over to a city, a municipal employer, a school district employer who does not offer the new defined benefit tier, your DB freezes. You don't pay in, you don't earn any credits, your benefit doesn't change, your salary doesn't— new salary doesn't count. You're participating in the new— in DC, defined contribution. You have an account, you pay in 8%, your employer pays in 5%, just like it's been working for years.

If you were to go back, DC freezes, right? Let's say you didn't have 5 years in, so you weren't fully vested in the money the employer had put in. The years you're now working in the new DB tier, back for the state, they don't count. For vesting in that DC employer contribution. It's frozen, just like if you'd left the system and weren't working in it.

The only difference is the two plans use exactly the same healthcare provisions, same contributions, same trust, same rules all the way across the board. And so your time counts whether you're in DB or DC, your time counts toward the potential health care benefit. Doesn't count double. Nobody gets extra. But that's the notion here.

So if you go from one employer to another— and that happens all the time, Mr. President. A municipal cop becomes a state trooper or vice versa. A state accountant runs the— keeps the books for their school district or vice versa, right? Pick an employment. Area in public service, people go back and forth.

So this makes it possible. Nobody has to lose their retirement because they switched employers with Amendment 10. That's what it does. Thank you, Mr. President. Thank you, Senator Keeley.

Is there additional discussion?

Is the objection maintained? Objection is not maintained. And so hearing no objection, Amendment 10 has been adopted.

So we are now back in third reading. Senator Giesel, to carry your bill. Thank you, Mr. President. Mr. President, House Bill 78 comes down to a single fundamental question. Can Alaska attract and keep the people it needs to function effectively as a state and as local governments?

20 Years ago, we made a decision. We eliminated pensions. And since that moment, we have watched, not all at once, but steadily and unmistakably, the erosion of our public workforce. Today, that erosion is no longer subtle. It's visible everywhere.

In our schools, where teacher turnover exceeds 30% in most communities, and over 50% in our most remote areas. In public safety, where nearly 3 out of 4 state troopers leave for other states that offer pensions after we've invested over $200,000 and more in a year to train each one. Across state government, where vacancies force the remaining workforce to work overtime, double shifts, and carry loads— a load of positions we simply cannot fill. This is not a future problem. This is not a theoretical problem.

This is happening right now. And it's costing us. It is costing us over $200 million a year in premium pay. Mr. President, premium pay is overtime, double shifts, things like that. Premium pay, over $200 million a year just to keep basic services running.

That number has grown nearly 80% in the past 5 years. We have, in effect, turned Alaska into a training ground, a place where people come, gain experience, and then leave. So how did we get here? We have to do— we have to think about the history to really understand the elements that have been incorporated into House Bill 78. In the early 2000s, Alaska's pension system fell into serious serious deficit, not for one reason but for several: market downturns, rising healthcare costs.

But true— both of these are true, but most critically, flawed actuarial work by an actuary named Mercer. Actuarial errors and advice that led the state to underestimate its liabilities for several years. Mr. President, pensions require discipline, discipline of appropriate funding every year. Without that, a pension fails. That's what happened when Mercer told us no need to fund the legacy pension.

Well, the pension failed, and we sued when that malpractice was discovered, but it was too late. We recovered a fraction of the losses incurred to to our legacy pensions. We recovered a mere $400 million of the over $2 billion in underfunding costs. The damage was done. That devastating event drove the 2006 decision to abandon pensions entirely.

And that decision made Alaska an outlier. Every other state still offered pensions, at least to some public employees, and over time The consequences, consequences, consequences to our state became clear. People leave, people— fewer people come. So what does this state— what does this particular bill do? Let me be clear about what House Bill 78 does and what it does not do.

It does not touch the legacy unfunded liability. That's also called past service costs, Mr. President. That liability is on a defined path to pay off by fiscal year 2039. It's being managed, it's being paid down. House Bill 78 leaves it alone.

What this bill does is entirely different from the past pension plans. It creates a new retirement program, a new separate sub-trust accounts, fully funded from day one. It's not a patch, it's not a reopening, it's a new foundation. So here are the features, Mr. President, features that involve risk sharing.

Pension funding is a risk, and it's shared in this particular piece of legislation. In the old system, risk fell solely on employers. In this system, risk is shared and addressed in real time. Employee contributions adjust if needed. Employer costs are capped and predictable.

Past retirement pension adjustments— that's for retirees, Mr. President— change defen— depending on funding. And a contribution floor pre— prevents underfunding. The contrib— contribution floor is a bar that is set. This pension will not be allowed to fall below 90% funded. Why 90%?

That's considered to be the best threshold for a well-managed, funded pension. If 90% is breached, everyone pitches in to fix it. These safeguards are not optional. They're built into the design specifically to prevent what happened in the past. This new pension is not a mandate.

House Bill 78 gives employees a choice. New hires can choose between a pension or the existing defined contribution plan. Current employees get a one-time opportunity to opt in. They could stay in defined contribution or they could join the new pension. The pension structure rewards commitment.

Benefits grow with years of service. Final salary is averaged over 5 years to prevent spiking, Mr. President. Adjustments depend on actual funding, not promises. Health care remains consistent. This is not the old system.

This is a modern system built on the lessons from the past. Fully in view. What does it mean for employers? This new pension is not a mandate. House Bill 78 gives employers a choice, Mr. President.

The Municipal League made— the Alaska Municipal League made that point for employers. They wanted to be able to choose, and we listened. They could choose to remain in the new pension or choose the defined benefit contribution system. Employers who choose to remain in the DC plan, the defined contribution plan, permanently will continue contributing at the existing 22% rate. Employers who choose to participate in the new defined benefit tier contribute at the updated 22.5% rate.

The choice is theirs to make. And lastly, what does it mean for retirees? It means shared value and shared risk. Pension adjustments reduce automatically if the funding falls below 90%, joining in the adjustment burden with active employees and employers. But what does the actuary tell us about this plan?

Let's look at the facts. The state has an independent actuarial— actuary. That's David Kirschner of Gallagher. He evaluated this plan under the most conservative assumptions. His unambiguous conclusions were: this plan will remain well-funded, it is not projected to fall below 90%, and the risk factors— or excuse me, the risk triggers are unlikely to activate.

And critically, an unfunded liability is not expected to develop, even under extreme conditions. The system holds. The plan won't dip below the 90% funded threshold. The triggers, in his words, would not be met. That is not speculation, that is actuarial analysis.

Now, what did he assume as he drew these conclusions? Mr. Kirschner assumed all public employees would choose the new defined benefit. All public employees would remain in public service jobs until retirement. These most conservative assumptions are just exactly what we want to achieve, Mr. President.

But he went further. There is no projection showing that the new pension will go below 90%, Mr. President, even with a never-before-seen black swan event of 3 consecutive years with zero investment returns. Even then, he said, this pension holds up. The corrective measures are automatically applied. The actuarial— the actuary clearly said that the House Bill 78 pension is more valuable to employees than the current defined contribution plan.

This will achieve the goal of retaining valuable employees until retirement. But wait, there's more. Mr. President, you heard about the error that Mercer made years ago. After that Mercer malpractice maelstrom, Mr. President, we now have 3 auditors to watchdog our pensions. Gallagher works for the administration.

Callan works for the Retirement Management Board and the Permanent Fund Board, I will add. And there's a 3rd audit actuary that checks the other 2's homework. Every 4 years. We have belt suspenders and more, Mr. President, for that. Now the cost.

The fiscal note shows about $89 million per year. That's a real number, and I acknowledge it. But here's what we are already paying, Mr. President: over $200 million a year in premium pay. That's that overtime pay I talked about. Over $1 million a year in turnover cost, millions more in lost efficiency.

Those costs exist today. They are in our budget. So the real question is not, does this bill cost money? The real question is, why are we willing to keep paying more for a system that's not working? We're seeing the consequences, Mr. President.

They go beyond dollars. The state's latest 2025 audit finding found systemic problems driven by vacancies and inexperience. Chris Curtis is our legislative auditor. She cited high error rates in multiple state departments. Repeatedly, the root causes identified were staff vacancies, inadequately trained staff, and/or inexperienced staff.

This has resulted in a vast number of errors and omissions. These errors and omissions bring fines from the federal government and over $240 million in federal funds that were left unclaimed. We could have claimed $240 million, but due to inadequate staff training, those were left on the table. Ms. Curtis, a certified public accountant and a certified information systems auditor stated, "We, the state of Alaska, have a systemic problem." This is what instability looks like, Mr. President. Not just empty positions, but diminished capacity.

Now, we've heard a lot of criticism about this bill, Mr. President. You will hear large numbers quoted, a fill— quoted to this bill, but these numbers are not from our actuary. They are not grounded in actual analysis. You will hear that the current system is better, that the defined contribution works much better and costs less, but that assumes unusually high investment returns and ignores real-world outcomes, Mr. President. You will hear that the retirement structure doesn't matter, but our turnover rates tell us otherwise.

Critics have raised concerns, but they have not answered the central question. How do we fix the workforce crisis we have right now? So we have a choice, Mr. President. We've given employees and employers choice in this retirement system. So here is our choice: Do we continue with a system that drives over— turnover, increases costs, and weakens our workforce?

Or do we adopt a system that shares risk rewards commitment, and gives Alaska a chance to retain its people. Mr. President, we're paying the price of instability in dollars, in services, and lost opportunities. HB 78 offers a different path. Fully funded from the start, no new legacy liability, built-in safeguards, shared risks, a reason for employees to stay. For 20 years, we've seen the consequences of our decision in 2006.

This bill is the result of years of work to address those consequences. Every other state offers a pension for at least some of their public servants. We do not, and we are seeing the results. We ask our public employees to do difficult work, often in hardest conditions. The question is whether we will give them a reason to build a career here.

Because that's what this vote decides, Mr. President. For those who are here, for those deciding whether to come, and for the future of this state, I urge a yes vote on House Bill 78. Thank you, Senator Giesel. Is there further discussion?

Senator Gray Jackson. Thank you, Mr. Chairman. I'd like to begin my 40-minute speech— just kidding. I'd like to begin my speech as chair of the Legislative Budget and Audit Committee.

I take seriously our responsibility to follow the evidence. The recently released FY 2025 single audit, it gave us a clearer picture of where our retirement system stands and where it's falling apart. The findings show a pattern of rising long-term costs, workforce retention challenges, and the risk being shifted onto employees instead of being managed collectively. When we moved away from the defined benefit system, the goal was predictability and savings. The audit makes it clear that the reality has been more complicated and in some cases even more costly.

We're seeing higher turnover, recruitment struggles, and added costs from vacancies, training, and lost experience. These workforce gaps are— they're not just operational challenges, they're expensive challenges. Alaska state government is currently experiencing an annual turnover rate of 6% or higher across workforce of approximately 30,000 employees. This results in roughly $124 million each year in replacement, onboarding, and separation costs alone. If we're able to reduce that turnover by even half, we could save more than $60 million annually.

Simply put, Alaska is now spending more to maintain a broken system than it would cost to We've also seen the real-world impact of these policy changes on critical public safety positions. After our retirement system was changed, the state of Alaska saw approximately 72% of its state troopers leave for departments in states that still offer pensions. And in the municipality of Anchorage, we have firefighters and police officers who are doing exactly the same thing for years. That level of loss is not just a workforce turnover, it is a direct threat to public safety and continuity of service. Service.

In addition to overtime and other forms of so-called premium pay are now costing the state roughly $200 million per year, far exceeding what was anticipated and placing additional strain on an already challenged fiscal situation our state currently faces. At the same time, the audit shows that we're incurring tens of millions of dollars in fines and penalties, including missed opportunities for grant funding that could have strengthened our operating budget today. These are real dollars that reflect systemic issues that we can't afford to ignore. Taken together, these findings reinforce what we've been hearing across Alaska. Our current system is not serving our long-term, long-term fiscal or operational interests.

Restoring a defined benefit component is about applying what we've learned. It allows us to pool risk, stabilize costs, and support a more reliable workforce. I began my public service calling under a top-tier retirement plan, and for that I am so grateful. But throughout this debate over the past several years, I felt a deep sense of responsibility knowing that my own retirement is way more secure than what many Alaskans have today. These Alaskans, they're our constituents.

They provide the essential services that keep our communities safe. And functioning. Too often we hear that the lack of strong retirement system is driving people to leave Alaska in search of better opportunities. Well, that concern is not theoretical. It reflects the reality that we're facing.

I'd like to thank the representative in District 10 in the other body and also the senator here in District E for their many years and long hours of work trying to get us to this point. I also want to say that, you know, our hardworking men and women, they deserve better. You know, they're doing a really great job for us and our constituents, and they need something to look forward to, like a paycheck every month when their time is up. I will honorably— and gosh, I'm looking forward to voting yes on this bill, Mr. President. Thank you.

Thank you, Senator Gray Jackson. Is there additional discussion? Senator Tobin.

Thank you, Mr. President. Well, I rise today in support of our kids. I'd like to bring your attention to one of the many supporting documents that you have received over the last few weeks, and that is a resolution from the young Alaskans who are part of the Alaska Association of Student Governments. They were here last week for their annual conference, and I had asked, were they considering talking, uh, or introducing any particular resolution? And they said, yes, we have one.

We have one resolution in support of HB 78. On page 2 of that resolution, you'll see the students note that every year they see 23% of their teachers leave the state. Now we know that the actual number is closer to 30 to 33%, which is well above the national average of 7 to 8% national teacher turnover. The students also note in their resolution that it costs approximately $20,000 to replace a teacher, which is costing us about $20 to $35 million annually in turnover costs amongst our 53 school districts. And this doesn't even encompass the cost it takes to replace a principal or a superintendent.

Now, one of the things I think is really important to note that the students didn't discuss is between 1996 and 2006, our teacher turnover was about 12%, which is closer to the national average of teacher turnover at that time, which was between 10 and 12%. The resolution goes on to talk about the high cost of living here in Alaska. It discusses how we are the only state the only state that does not offer some form of a defined benefit system for our teacher retirees.

The kids get it. In that resolution, they talk about the value of compensating those educators through quality benefits and that relationship to ensuring that they stay in the classroom, that they stay here in the state. The students talk about the connection between a strong retirement benefit for their educators and classroom stability. They talk about how quality benefits lead to better educator quality and improving their own academic outcomes. Now, in 2023, we surveyed about 3,600 educators across Alaska, and in that report, which is called the Teacher Retention Recruitment Playbook, We learned that retirement was one of the top 3 issues, with a reinstatement of a defined benefit being the top-tier factor educators noted in requiring them to stay in the state, to having them retain and stay in the classroom.

Now, I know this is a personal issue for many, and for me it has become even more personal. Earlier this year, I learned that my best friend, my fellow valedictorian from Nome-Belts High School, a graduate of UAA, a teacher who earned her master's degree here at UAS, is leaving our state. And I get it. She can't hold out any longer for the state to invest in her as she has invested in it.

Is HB 78 going to fix all of our teacher retention problems? No, there is no silver solution to the many issues we face. But I know a reinstatement of defined benefits is a pretty dang good step in the right direction. And why do I know that? Is because I am here with you.

As I got older, retirement benefits became a chief decision point for me. So after 20 years in the nonprofit sector, I accepted a job back in public service. I accepted it so I could continue to serve my state, so I could work on good public policy, and so that I could become vested in my Tier 3 benefits. Whether it is retaining our quality teachers like Mrs. Cunningham, who I'm so sad to see leave, or attracting dedicated public servants like myself, A reinstatement of defined benefits is the best decision we can make for our state. It is a strategic decision.

It is a smart decision. It is a moral decision. And it is the right decision. Please join me and my colleagues in supporting HB 78. Thank you, Senator Tobin.

Further discussion? Senator— I'm sorry, first go to Senator Myers and then Senator Seven. Senator Myers. Thank you, Mr. President. So I'm sure the co-chair from Sitco probably have a lot more numbers than I do, but I do have, uh, just a few concerns that I want to voice on this bill.

So a large part of the discussion that we've had over this bill is whether or not the investments associated with it will earn enough money to make sure that we stay solvent.

The question I have is if they don't, if those investments fall, if the market drops, something like that, what's the backstop?

And, well, the way that our state finances are set up right now, Mr. President, the backstop is our largest revenue source, which is our draw off the permanent fund. So in effect, our backstop for poor investments is more investments. I have a funny feeling that if one fails, the other will fail at the same time, which is concerning. And I actually took a quick peek at that. Over this last interim, took a look at the returns from the ARM Board and from the Permanent Fund Corporation over the last about 30 years or so.

Very, very similar on their returns. So they definitely move in step with each other.

There's a question of effectiveness as to whether or not this bill will fix our recruitment and retention problem. And I got a part of a letter here, Mr. President, permission to read? Without objection, so ordered. Thank you, Mr. President. So this is part of a letter from the Fairbanks Police Department Union to the City Council a couple of years ago.

And pretty long letter, but one portion of it says, to enter this comprehensive discussion, FPDEA begins by pointing out that we generally disagree with the stance of many unions, even those here in Fairbanks. It is often referenced that the most prominent issues affecting retention economically center around the absence of defined benefit retirement plans. Municipalities nationwide, not just within Alaska, also prefer to cite this as the issue, primarily because it is self-serving. Defined benefit programs allowed municipalities to shift some economic burden onto state retirement systems and, by extension— excuse me— by extension, point the proverbial finger away from themselves. Most research about younger millennials and Gen Z, the city's newest officers and employees, indicate little interest in defined benefit retirement accounts but prefer a diversified offering of flexible retirement account options.

Logically, this makes sense as well. Defined benefit packages began going away in earnest when younger millennials entered high school. Generation Z is growing up when these packages do not exist and therefore have been planning accordingly, or at a minimum have no expectation of receiving such a benefit. This is a much different mindset than what baby boomers and millennials and Generation X entered the workplace with. To this end, FPDA sees no concern with the current retirement options and applauds the newly implemented supplemental retirement plan.

And then it goes on to talk a little bit more about the things that the City of Fairbanks has been doing with the retirement plan there, other efforts to increase retention such as increased pay, sign-on bonuses, retention bonus at 10 years, things of that nature. And saying that that's working. And so last year, the Fairbanks Police Department, for the first time in over a decade, was finally fully staffed, Mr. President. So I question whether or not this bill is going to be as effective as we may say. Question whether or not there may be other levers that we can pull that could have the same effect.

And we can see an example of that within our state here. So just this, just this year, the Department of Law, as we were going through our usual budget subcommittee process, the Department of Law came to us and asked for a supplemental for this year and then an increase to their budget for next year because, well, like most departments, they've been dealing with the vacancy, and like most departments, with the money left over from the vacant positions, they were turning around and using it to pay for other things, including other employee costs. Well, the vacancy rate on their lawyers has gone down enough that they don't have the money to do that anymore, Mr. President. So they were asking us for some extra money. Their retention problem has largely gone away.

Their vacancy problem is back down to manageable levels. And how did they do that? Well, a few years ago, we in this building passed a bill to increase the pay of the lawyers at Department of Law, Mr. President. Increased pay is still money. It's still a strain on the state treasury, but it's a heck of a lot easier to figure out going forward what you're paying somebody as opposed to what you might pay somebody in 20 or 30 years when they retire.

As the old saying goes, making predictions is hard, especially about the future. And finally, Mr. President, we had a little discussion yesterday here on the floor about the actuarial requirement in statute. And we've got the legal opinion that was handed out. I appreciate that. And it was interesting reading through it.

It effectively said the statutory requirement was met because a actuarial report existed. It did not say it was the right actuarial report for this version of the bill. And that's concerning me a little bit, Mr. President. It's a question of, are we following the letter of the law? Maybe.

Are we following the spirit of the law? No, I don't think so. Not in this case, Mr. President. So I have some, some serious concerns moving forward with this bill. Thank you.

Thank you, Senator Merrick. Senator Steadman.

Will the Senate come back to order, please? The call upon the House has been fulfilled, and we are all back together again. One happy dysfunctional family.

We are under discussion. Senator Steadman. Thank you, Mr. President. I— you know, today we—. It's a rarity.

Today we have an issue that's going to affect multiple generations of Alaskans, kids.

That aren't even born yet. So it's important that all senators are here on the floor, in my opinion, for this. Because this is protected by the Constitution and we can't back up. I want to hit on a few things and it's going to be kind of a little bit discombobulated. I want to jump around a little bit so everybody doesn't go to sleep.

I'll try to make it as short as I can. It won't be super long. But we had, in Finance, spent some time looking at this employee turnover issue. And trying to relate it to the retirement system or what it's related to. And there's really, there's a slight connection but not a very strong connection.

And if it was that easy of an issue to fix, the turnover rate, we'd pull another lever.

But what it really, what really stands out is salary levels. And I'll give you a couple of examples. Let me talk about the teacher system because that is within the scope of this bill.

Alaska has the highest cost of living in the country.

Our salaries are about number 11.

The average salary of Alaska teacher according to the NEA that just came out this month is about $80,400, $81,000. We're 11th in the nation. Washington State is at 96.5, and I think New York's around 100— excuse me, California's 103. Again, we're 81. One of the big issues with teachers, we're not paying them enough.

You want to slow down the turnover? Why don't you pay them? At least pay them what the State of Washington pays them. You know, if a Washington average teacher makes $96,000 and we're trying to get them up here for $81,000 with a higher cost of living, it's a difficult thing to do. Retirement system makes no difference.

It's salaries. When we take a look at teachers in general, I know this current proposal in front of us is a little bit more expensive, so let me use the old numbers because it's the same magnitude. Everybody on the floor here is a state employee. 25% Of our income, both union employer and employee, goes to retirement. 25%.

A teacher, 15%. 15%, Not 25%. So you take the lower pay, you take the lower contribution, no wonder we have problems. If they were to equal us, equal us, normal state workers— and let me back up a little bit. Within this plan that's on the floor, one positive point of it is that we haven't discussed is when you look at the salary replacement percentages per year, they are now going to be— if this bill passes and is signed, which I hope it doesn't, but if it is, they will be on the same schedule of salary replacement as the average Alaska employee.

Alaskan employee, 2% for the first 10 years, 2.25% for the next 10, um, 2.5% for the next 10, averaging up, um, so they're more on par. So that's all good. But they're missing a component part that we have, and that's Social Security and/or our SPS. That calculation by the Equable Group, not the Equitable Insurance Company, the Equable Group, calculates for a 30-year teacher, it's about $56,000 extra a year. In their retirement.

Their retirement would be in the high— estimated to be in the high $78,000 numbers, and this would be an additional $56,000 or an additional 70% increase. It doesn't matter if you're defined benefit or defined contribution. What we're arguing on that isn't fixing their issue at all.

When we look at the cost, the— of the plan, and the normal cost of this proposal in front of us is 10.09% of payroll. The current normal cost is 7.67% of payroll, and the spread is 2.4%. That's the issue that we were talking about earlier. The increases in the normal cost of the state will be responsible largely by the state, and it should frankly be, in my opinion, the employer. We're talking about non-state employees.

This year's budget, I want to talk a little bit about the magnitude. When we have Tier 1 put together years and years ago, there was no unfunded liability. When people started to retire, it flipped over, we started Tier 2. There was no unfunded liability on Tier 2 until people started to retire and it flipped over and we started Tier 3. Tier 3 ran on and it was flipping over when people started retiring, then we backed up, stopped those plans, started the defined contribution plan.

Today, If this bill is enacted, there is no unfunded liability to this plan, and that's actually very correct. There can't be an unfunded liability because you start out at zero. And if all of the actuarial assumptions become true, and I think there's like 3 dozen of them, there would never be an unfunded liability. In fact, these same assumptions were used in Tier 1, they were used in Tier 2, they were used in Tier 3. And they're gonna be used again.

They're gonna have the same challenges on getting it right. You have investment risk that's extremely hard to deal with because you're gauging on future economic conditions of the global economy and the US mainly.

The long-term investment risk assumptions, you know, vary depending on if we've got COVID or a war or whatever's going on.

We have salary increases that are gonna come and they're gonna be increases. They gotta guess all those, right? They gotta guess how long we're gonna live. And we've been living longer. You gotta guess inflation.

They got, I think, 34, somewhere in there. There's a lot of things they gotta guess. But if they get them all right, we'll never have an unfooted liability.

But once people start to retire, that's when you start having problems. [Speaker:SENATOR] I've got a couple concerns with the plan in front of us.

That is, when it goes upside down, goes below 90, then the retired people will lose part of their inflation adjustment going forward. They never get it back. And when we did Tier 2, which was before me, when we did Tier 3, which was before me, but when we did the next tier, Tier 4, the goal in all— in that was to make sure that we had a replacement that would target Tier 3 benefit package. So Tier 3 employee and the new defined contribution employee would be equal at the table. You can never get Tier 2 benefits, you can never get Tier 1 benefits.

This proposal in front of us today diminishes the benefit to the retired employee when it goes underfunded. And again, it won't go underfunded until people retire. Normally it takes about 30 years, but we've got 20 years already with the current defined contribution, so about 10 years out, which happens to be about the same time the unfunded liability that we owe, about $7 billion, will come to an end and hopefully be paid off. But with that, I would take a quick note, and I'll just use TERS because it's just by happenstance. In 2015, we owed $1.629 billion.

In 2025, it's $1.629 billion, and that is not a typo. The same number 10 years later after a billion pumped into it. So if just calculating the pension is so problematic, or I mean, so easy to do and control, why have we spent a decade with the same monies owed and spending a billion bucks and not going forward? And we got another $7 billion to go. So it's not easy.

In fact, It's a one-way street because you can't back up. You cannot diminish benefits. And my concern with this bill in front of us, it will diminish benefits to the retired employee, and we've never done that in all our tiers. I recognize it could help get the plan back up to full funding, but that's not, uh, yeah, it's just not something we should be doing.

The benefit issue, when we take a look at our employee— non-state employees and their ability— somewhere in my stack of stuff.

There's a couple dozen, three dozen communities that are way behind on payroll. So when we put them in automatically, they don't make the payment, who eats the bill? State of Alaska eats the bill. We have employers that are over 500 payrolls behind.

We have some that are 400 payrolls behind. They figure they pay every two weeks, right? Do the math. They're more than 30 days late. We have to cover it, because somebody has to pay the bill.

So if we look at trying to deal with our benefit packages, there's lots of levers we can pull. We can raise the salaries, we can raise contributions, we can do a lot of things that do not lock the state of Alaska and expose them to billions of dollars of potential liability, which will be our grandkids.

And we should take that very seriously because our salaries are too low across the board. We have a large salary study going on, and everybody in here is well aware of that. It's going to cost a lot of money to fix it if we go into the ranks of the state employees that are dealing with some of our social services. We have huge trouble holding their employment, the turnover rate's so high. And the reason is we don't pay them enough.

We've increased state troopers, we increased the Department of Law, we increased the operators at the Anchorage Airport, don't have issues.

It's salaries, salaries, and then you can find some housing. And everybody wants more benefits as long as somebody else pays it. I understand that. And the communities were pretty quiet on this until they realized that there was additional costs. And right now, with the way this is structured, Bill, they're going to get just a small portion of the added costs.

But when that number drops below— when that liability starts coming down and that and that cost goes under 20% or 22.5% now, when it drops under that, they're gonna start seeing the real cost of this plan, that 2.5%. So it is not a free ride. So we need to take that into account. There's been a lot of talk about actuaries. It seems like, you know, when you wanna use the actuary, use the actuary.

When you don't like the actuary results, discredit the actuary. Well, we all got the physical note in front of us, and you can take the, you know, the $400-some million it's gonna cost and take away a quarter of it or 20% of it if you want, but that's— that would be the number if there's only 80%. 'Cause it is true that I think he used 100%. So just take the $400-some-odd million and shave 20% off. The other thing I'd like to, again, point out to the communities that 21 and a quarter, excuse me, 22 and a quarter, is not constitutionally protected.

That's in statute. What's constitutionally protected is the benefits to the employee. You can't diminish it. And if you do a conversion, that's another little point, if you do a conversion and you get up 15 years later and realize you would have been better off under the old plan, you just go down to your local dial 1-800 lawyer and he takes you to the courthouse and we lose quick. You cannot diminish benefits and you cannot hoodwink them into a selection that diminishes them.

We'll have— stand no chance in the courthouse on that one. And the communities, the liability created under this plan, it's in a separate trust, sits in the lap of the liabilities. And as Fairbanks was mentioned earlier, Fairbanks, if they convert, it's a Fairbanks, Sitka, Anchorage, wherever. It's not the state's responsibility to pay for the benefit package of the non-state employees. It's just not.

I think a lot of the work in this bill was sold as it didn't cost anything. And it didn't cost anything because they were relying on the 22% cap at the local level. And the bill could go in and be signed by the Governor this year, next year we can pull the cap off. Boy, you hear the screaming then. Because the normal rate right now would be $27.55.

$27.55. Spread between $22 and $27.55 is picked up by the state. With that, Mr. President, I would just encourage everybody to— I know they got 4 buttons here. 2 Are white, don't push those. Don't push the green one.

Hit the red one. Think of the liability protection of the future generations. Let's not do what our granddads, grandparents did to us back in the '60s and give us a liability that we struggle with for 30 years. Thank you, Mr. President. Thank you, Senator Stebbins.

Is there additional discussion? Senator Cronk. Thank you, Mr. President. I really wasn't going to talk about this, but I figure I have to address a few things. One of the big issues when I walk around my district and talk to people is the amount of pay they get.

So my generation, my father retired 2 times, served the country for 20 years, and then went back to the FAA and served for 20 more years. And then while he was doing that, he was in the IBEW doing the telephone work. So he has 3 retirements. So there's nothing like following your father's footsteps. So obviously, I became a teacher, and I did my 25 years.

And I do have my teacher retirement. But things have changed. People have changed. Younger people are not into, hey, I'm just going to sit there and do something for 30 years, and then I'll be done. My whole goal was to do my time.

I thought I was gonna get out at 20 years, but I was in Tier 1 and I found out I needed 25 for those medical things. So I did my 25 and figured I would start another career and, well, I really didn't. And I'm here at the legislature. But as a teacher, we'd sit here and talk about, well, we can't keep teachers, right? Well, I'm gonna argue against that a little bit because we have a teacher shortage across our country.

And when I was working in our school district, the number one reason we couldn't keep a teacher was because of bad administration. When you have bad leadership, people leave. I, I lived where I lived. I, I really didn't matter who was my administrator, I'm going to deal with them because that's my home. But for all the other teachers that came and moved in there, they were out 2 years later.

They're done. We're not putting up with this anymore. And rightfully so. When you look at education, they just bail. They're like, we're not gonna stay here, we'll go find another environment that's better.

So one thing we need to look at is our environment that we have for employees. Is it a good environment? When I talk to some of my DOT friends that, you know, spent a long time in DOT, they left because of the environment. It wasn't because they didn't have a DB, it wasn't 'cause any of that. They left because of the environment.

You know, part of the environment is we tenure teachers. Once you're tenured, Man, it's an act of Congress to get rid of a tenured teacher. You know, it takes like a year's process if you even wanna start that. And then, you know, our other unions, you know, state employees, they literally protect bad employees. I'm not gonna go through many examples that I have, but there's some people that literally should be fired, but they are protected by the unions, and so they're there, you know?

And people are gonna be tired of working with that. When they see those kind of things, they just said, "Well, we're done." So I would say a focus should be on our pay. 'Cause I think more younger people are like, "You pay me more, I'm gonna be more into this." When we have private sector jobs in our communities that pay more money, we're watching our state employees walk away. And they're like, "We wouldn't walk away from that job if we were just paid a little bit more." That's all they're asking. They just wanna be paid a little bit more.

But when the pay is double, they're gonna walk away, and I don't blame them for doing that. So I think we need to focus on that. And for the last thing, it's like, you know, I came into this job thinking it's like, I'm 56 now. My kids are here. I have 2 kids in-state, 2 kids out-of-state, 6 grandkids.

And so I have never based a decision on what's gonna happen today. It's all about them. I think we had a little conversation about that earlier today. And I was like, one of the baseline is I am gonna do my best to make sure we are not furthering burdening with more debt for our kids and grandkids. If we look at our federal government, what are we, $40 trillion upside down?

That's totally unacceptable. And for adding this kind of burden for the future of generated costs is something I just can't be a part of. I know we have a problem. I think there are other solutions out there that can help this problem. I believe there's another bill called SB 55 that has solutions to help this, but I don't think this is the answer by putting this burden on our kids and grandkids.

And that's my baseline of not supporting this bill. Thank you. Thank you, Senator Cronk. Senator Wolkowski. Thank you, Mr. President.

Mr. President, there has been a quiet, heavy crisis unfolding all across Alaska. In our schools, in our state office buildings, in our courts, in our communities all across Alaska. It's the sound of a door slamming shut as another family packs up to leave. It's the sight of a state trooper looking at his kids and realizing that to give them a secure future, he has to leave the state he loves. It's the sight of a Teacher of the Year saying, I love Alaska, but I can't afford to live here anymore.

We talk a lot about fiscal responsibility in this chamber, but I ask you, what is responsible about watching our most precious resource, our people, walk out the door? Right now, Alaska is acting.

As a high-priced training academy for the lower 48, we take the tax dollars of Alaskans to train young idealistic officers and teachers. We give them the skills, the experience, and the Alaska heart. And then, because they— we offer them a retirement of uncertainty rather than a promise, we watch them take those skills to Washington Oregon, Idaho.

We are paying for the safety of other states while our villages go unprotected. In rural villages across Alaska, troopers can take days to show up after a crime because they're spread so thin. That isn't a budget line item. That is a moral failing. We're told we can't afford HB 178.

I tell you We are already paying for it. We're just paying for the failure instead of the success. And it's not just about wages for employees. Workers want to be able to retire with dignity. We talk about the good old days, and when I think a lot of Americans, especially older Americans, think about the good old days, they think about the 1950s when people retired, worked for someone for their whole life and retired with dignity, retired with a pension that would enable them to, to to spend time with their kids and their grandkids.

Do we really want the future generations to be exposed to the whims of stock markets? Let's give them some sort of stability. Alaska has the worst retirement system in the nation. It's not even close. The only state in the nation with no pension option for new public employees, and no Social Security either.

Just like we hear the many businesses that appear before us about how they need— we need to— they need stability, they need to, to be competitive, or they'll take their business dollars elsewhere. Alaskan employees, troopers, and teachers and firefighters are making that exact same choice. And the results are in on this 20-year experiment of no pensions. 12 Straight years of outmigration, teacher turnover that now exceeds 30% in nearly every Alaskan community type. In rural hubs, principal turnover has reached 44%.

In remote rural communities, principal turnover is 55%. The national teacher— the national average for teacher turnover is 16%. In Alaska, it's double that. The national average for principal turnover is 17%. In rural Alaska, it's triple that.

For public safety, our turnover rate is more than double the national average.

We see the vacancy rates all across the state. We see the inability to hire snowplow workers and heavy mechanics. That have caused schools and businesses to close.

And all across Alaska, and in Anchorage in particular. When the actuaries factor the cost of this plan, they don't factor the 5 or more days that schools have been closed in Anchorage routinely in the last few years. Because they can't hire snowplow operators. And they can't hire heavy mechanic operators. They don't factor in the cost of the mom or dad who has to take off those 5 days of work every year because of those unplowed roads.

They don't factor in the businesses that have to shut down because their workers can't make it in because the roads are shut down.

We've seen hundreds of unfilled teacher positions across the state. The actuaries don't factor in the unseen costs of our kids having classrooms with 30 children in them. Vacant trooper positions, vacant police positions— they don't factor in the cost of increased crime and delayed justice caused by an inability to hire prosecutors and troopers and detectives and investigators and judicial clerks.

They don't factor in delayed environmental permits which cause projects to be delayed.

The actuaries don't factor in cost to businesses that have to wait months to get permits, an inability to hire workers to process SNAP benefits and retirement benefits, which has resulted in tens of thousands of Alaskans being denied their benefits, waiting months. They don't factor in the cost of training and certifying a single state trooper that we lose which costs over $200,000, takes 12 to 18 months to train them, often to see that trooper leave and go to another state that offers a pension. They don't factor in delayed murder investigations. They don't factor in burglary and theft cases that go uninvestigated because of a lack of experienced officers. They don't factor in the premium pay that we currently pay our various departments.

Premium pay in Correction has grown 91.4%.

From fiscal year '20 to 2025, a direct reflection of chronic understaffing and the cost of covering vacant positions with mandatory overtime. DOT, Department of Transportation, premium pay has grown 91.6% over the last 5 years. Infrastructure projects delayed because there's not enough engineers, not enough inspectors, not enough project managers to move work out the doors to the contractors who are losing jobs because they can't get these projects permitted. Premium pay in Department of Natural Resources, critical to funding huge chunk of our budget. Premium pay in DNR grew 62.6% in the last 5 years.

And how much is all this premium pay costing? We talk a lot about cost. This, this is not factored into the actuarial analysis. How much is premium pay costing us? $140 Million per year.

And growing.

This— on top of that, the state of Alaska turnover rate costs us $124 million per year in replacement, onboarding, separation costs. These are conservative estimates. Cutting that just in half saves us another $62 million a year. Over a 14-year actuarial period, that's over $1 billion in savings. Every time we pay a double shift because we have a 20% vacancy rate in our troopers, we're paying.

Every time a project is delayed because we can't keep engineers, we're paying. We're currently spending $144 million— $140 million in excess emergency pay, money thrown at a fire of our workplace crisis. We had a statewide audit recently. We've heard some talk about that. It's a constitutionally required audit, and anybody can go online.

It's, it's a big, big packet, and, and read some of the findings. We had two Qualified opinions. Two qualified opinions. They're not clean opinions, they're qualified opinions. You, you can look through this report, dozens, dozens of deficiencies, significant deficiencies, material deficiencies.

Finding 2025-029: DMVA staff inaccurately reported federal expenditures, understating expenditures by $297 million.

DMVA staff inappropriately removed $3.9 million from a draft. Finding 25030: a review of 17 fiscal year '25 disaster grant payments found that 88% lacked adequate supporting findings.

There were 327 disaster grants totaling $325 million. During FY25. The audit tested 17 of those totaling $188 million. Tested 17. 15 Were inadequately supported.

15 Of 17. $188 Million inadequately supported. Finding 2025-038: DNR staff inaccurately reported federal expenditures. The cause, according to the report, the —cause, according to DNR staff, the late submission was due to staff turnover and competing priorities.

None of this is factored in the Actuarial Report. Finding 2025-05-2: 16 of 60 cases tested had insufficient documentation to verify work hours, which resulted in work activities being reported inaccurately. The cause: division account of staffing turnover and shortages.

Finding 2025-055, Medicaid, 14 of 16 cases have— of 60 cases had timing issues. CHIP, 26 of 60 cases had timing issue. The cause: staffing and resource shortages adversely impacted. The list goes on and on. There's finding number 2025-062, significant deficiency in Department of Transportation.

Infrastructure net of depreciation was understated $441.6 million. Buildings net of depreciation was understated $5.7 million. And CIP was overstated $406.9 million.

Dozens of projects incorrectly reported. And that's just, that's just a fraction of the inaccuracies and mistakes None of that factored in. Hundreds of millions of dollars, not to mention the $240 million in unclaimed federal funds.

That we lost because of staffing shortages, because we just don't have the staff. We have turnover. We can't— we're not— we're not getting people to fill these positions.

HB 78 isn't a new cost. It's a choice to stop throwing money at a fire and start building a foundation. It's the choice to move from managed chaos to managed stability. Let's look at the generation we're trying to keep here. Our millennials, Gen Z workers, they're not looking for a windfall.

Let's not pull the ladder up from them after so many of us have climbed that ladder and take away the pensions that, that we got and that we earned and say, no, sorry, you don't get that. Let's not take that away from them.

If millennials don't want this, if they don't care about it, Under this bill, they don't have to take it. They can take the defined contribution. They're free to do that. This bill gives them that choice.

What they want— Gen Z, millennial workers— they want to know that if they give 30 years of their life to the snow, to the cold, and to the service of this state, that this state will not let them outlive their earnings. Outlived their savings. When the state shifted from a pension to 401(k), we told our public servants, you're on your own. Is that the Alaskan way? Is that how we treat the people who run toward the emergency when everyone else runs away?

We got an email this morning. You probably all got it in your inboxes from Americans for Prosperity Alaska. Saying this is a key vote, key vote, vote no. Why? Who's Americans for Prosperity?

This is a billionaire-backed outside organization. Why in the world would a billionaire-backed outside organization want to take away pensions for the people who are running into the fires and saving people when everybody else is running out? I can tell you it's not the outside billionaires who are running in and saving them. I can also tell you it's not the outside billionaires who are running to the hostage situation and taking fire when shots are fired.

It's the police officers, the Alaskan officers whose spouse wakes up every morning and wonders, "Is my spouse gonna come home alive today?" It's not the outside billionaires who are walking into our classrooms every day to teach 30 kids in packed classrooms. It's not them. This shouldn't be about a race to the bottom. This should be about providing a retirement with dignity. That's what we're doing today for generations to come.

This bill has not been rushed. This is the 32nd legislative attempt to restore defined benefit system since 2009. This bill has been in the making for 19 years. It's had 24 committee hearings. We've had 8 independent actuarial reviews by Gallagher and Cherian.

Every funding scenario has been modeled. But this isn't about math. This is about the trooper who stays an extra 10 years because they know their family is taken care of. This is about the teacher who decides to buy a home in Fairbanks instead of looking at the job boards in Seattle.

This bill is a modern, accountable, and essential reform. It's a hand extended to our workforce saying, We value you. We want you to stay. We want you to grow old here. Let's stop being a stepping stone.

Let's be a home. Let's vote yes on HB 78 and restore the promise of the Last Frontier. Thank you. Thank you, Senator Wielekowski. Is there further discussion?

Seeing none, and wrap up, Senator Giesel. Thank you, Mr. President. Just a couple things to address. It is true that over the last 20 years we've had 33 efforts to correct the defined contribution retirement's effects on first responders and teachers. This policy right here before us actually has had 43 hearings, Mr. President, and the 8 actuarial assessments.

I heard the request that we have an updated actuarial Mr. President, that actuarial will actually show less and less cost. The reason being, this bill was draft— the first actuarial was drafted assuming 100% of employees would choose defined benefit. We know that is not true. We know that probably 75% to 80% will. Mr. President, in addition, we have put in choice.

In this for employers, something that was never considered by the actuarial assessment that was done, that is on our tables, that in addition will lower the cost significantly. Mr. President, I'm really glad Washington State was brought up because that's where our teachers, our police, and our firefighters are going. Not only is the pay higher, but they have a defined benefit in Washington State, Mr. President. Related to Equitable, I know that group has spoken to many of the committees, but if you go to their website, you'll find that Equitable is not— they're not professional actuaries. In fact, they're a think tank with political organizers and writers, not actuaries.

Mr. President, we have still defined benefit pensions that are active. That's in the judiciary. Branch of government right now. They never changed to defined contribution, and their pension is 100% funded. This is according to the 2025 Comprehensive Fiscal Report.

Mr. President, the Alaska Railroad has never gone away from a defined pension. 94% Funded. Mr. President, the points that have been made about young people deciding whether to come here or to stay, these are valid points. Mr. President, they're looking for stable and predictable future, and that's what this bill offers. Mr. President, I urge a yes vote on House Bill 78.

Thank you, Senator Giesel. If you are ready for the question, the question being, shall Senate CS for CS for House Bill 78 Finance as amended in the Senate pass the Senate? Senators may proceed to vote.

The secretary will lock the roll. Do any senators wish to change their vote? The secretary will announce the vote. 12 Yeas, 8 nays. And so by a vote of 12 yeas to 8 nays, Senate CS for CS for House Bill 78 Finance has passed the Senate.

Madam Majority Leader, with less than—. Mr. President, I move the effective date clause Thank you. The question being, shall the effective date clause be adopted? Senators may proceed to vote.

The secretary will— Senator Brown, thank you. The secretary will lock the roll. Do any senators wish to change their vote? The secretary will announce the vote. 20 Yeas, 0 nays.

And so by a vote of 20 yeas, 0 nays, the effective date clause has been adopted. Mr. President. Before you do that, Senator Giesel, let me say I truly appreciate and recognize this has been a long day for the Senate. I appreciate the discussion and debate. I appreciate the difference of opinion, and I thank you for still acting in a civil way with respect.

Thank you. Senator Giesel. Mr. President, I serve notice of reconsideration of my vote on HB 78. Reconsideration has been posted immediately or tomorrow? Mr. President, I move and ask unanimous consent that the reconsideration be taken up on the same day, that being today, as a procedural vote.

Very well. Brief at ease.

Senator Giesel has made the motion for reconsideration on the same day. Is there objection? Yes. Has been objection.

Objection is to reconsideration on the same day. Are you ready for the question? The question being, shall reconsideration of Senate CS for CS for House Bill 78 Finance as amended in the Senate be taken up on the same day? Senators may proceed to vote.

The secretary will lock the roll. Do any senators wish to change their vote? The secretary will announce the vote. 15 Yeas, 5 nays. And so by a vote of 15 yeas to 5 nays, reconsideration of Senate CS for CS for House Bill 78 Finance amended in the Senate.

Will be taken up on the same day, brief at ease. How many votes?

Come back to order, please. It requires 14 votes and we did 15, so we are now under reconsideration. Is there discussion?

Seeing none, Are you ready for the question? The question being, shall Senate CS for CS for House Bill 78 Finance as amended in the Senate pass the Senate on reconsideration? Senators may proceed to vote.

The secretary will lock the roll. Do any senators wish to change their vote? The secretary will announce the vote. 12 Yeas, 8 nays. And so by a vote of 12 yeas to 8 nays, Senate CS for CS for House Bill 78 Finance as amended in the Senate has passed the Senate on reconsideration.

I remove my call.

I will listen and come back to order, please. Madam Majority Leader, on the effective date. Mr. President, I move the effective date clause. The effective date has closed. Is there an objection?

Hearing no objection, if you are ready for the question. The question being, shall the effective date clause be adopted? Senators may proceed to vote.

The Secretary will lock the roll. Do any Senators wish to change their vote? The Secretary will announce the vote. 20 Yeas, 0 nays. And so by a vote of 20 yeas to 0 nays, the effective date clause has been adopted.

Madam Secretary, please read the next item on today's calendar. There are no further items to consider on today's daily calendar. Very well. At this point, is there unfinished business?

Senator Rauscher. Yeah, thank you, Mr. President. I move and ask unanimous consent to be excused from the call of the Senate on May 11th, 6 PM, May 13th at 10 AM. Without objection. For state business.

Without objection, so ordered. Senator Rauscher. Additional unfinished business at this time. Moving on to committee announcements. Seeing none, are there— Senator Kawasaki, committee announcements?

Please go ahead. Thank you, Mr. President. Under Rule Uniform Rule 23, I ask that it be waived for purposes of scheduling. The Senate State Affairs Committee meeting on Saturday will now be held at 10:00 a.m. We will be hearing House Bill 176, University of Alaska fee transparency. House Bill 13, municipal property tax exemptions.

Senate Bill 169, Welcome Alaska Office. Senate Bill 204, subteaching school board eligibility. And Senate Bill 243, definition of prohibited weapons/suppressors. Without objection. Saturday, right?

Wonderful.

We are under unfinished business. Senator Merrick. Thank you. Under committee announcements, Community and Regional Affairs is canceled today. Committee and Regional Affairs is canceled.

Are there additional committee announcements? How about other announcements? Seeing none, Senator Kawasaki on other announcements. Thank you. Under other announcements, Mr. President, I just wanted to say that Tonight there is a special gathering for Big Brothers Big Sisters of Alaska.

They do incredible work across our state. I was in fact a Big many years ago. There are kids waiting sometimes over a year. This—. You'll have a chance to hear a little bit more about Big Brothers Big Sisters and what they do across your communities from 5:30 to 7:30 at the Spice Gallery and Cafe.

All it does is takes a little to be a Big. And so I hope to see you all there. 5:30 To 7:30 at Spice Gallery tonight. Thank you, Senator Kawasaki. Additional other announcements?

Moving on to special orders. Seeing none, Madam Majority Leader. President, I move and ask unanimous consent that the Senate stand in adjournment until tomorrow at 11:00 AM. That's Wednesday, April 29th, 2026. Thank you.

Hearing no objection, the Senate is adjourned.