AWC Legislative Bulletin - Interim Bulletin #5
December 14, 2005 (Plain Text Version)

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In this issue:
From the Director: AWC Board Adopts 2006 Legislative Priorities
AWC Legislative Priorities for 2006
2006 City Legislative Action Conference (CLAC)
Energy & Telecommunications
Environment & Water
General Local Government
Land Use & Planning
Law & Justice
Municipal Finance & Economic Development
Personnel & Labor Relations
Transportation & Infrastructure

Personnel & Labor Relations

Pension Update

The Select Committee on Pension Policy (SCPP) will meet on Tuesday, December 13, and will likely finalize its recommendations to the Legislature on pension policy changes for 2006.

The following is a summary of where things stand now on some of the key issues.

PERS 1 Unfunded Liability

As we have mentioned in previous newsletters, the Legislature suspended the portion of the PERS employer rate that was directed towards paying down the unfunded liability in PERS 1 for the past two biennia. Since the State has now experienced two positive revenue forecasts in a row, there is pressure to direct some of this revenue surplus into the pension fund.

The Unfunded Liability Subgroup of the SCPP has recommended making up that shortfall by phasing in increases over the next three years.

While we had asked that any contribution rate increase not occur until January of 2007, it appears there is strong interest on the part of the SCPP and some legislators to resume payments toward the unfunded liability on July 1, 2006 – the beginning of the State fiscal year.

The current employer contribution rate for PERS is 2.25%, and it is scheduled to increase to 3.5% effective July 1, 2006. The Subgroup is recommending that the employer rate increase by an additional .87% as of July 1, 2006, to a total of 4.35% (plus the .19% administrative expense fee), with further rate increases for 2007 and 2008. The Subgroup is also recommending establishment of a minimum contribution rate of 2.68%, effective July 1, 2009, for the sole purpose of amortizing the unfunded Plan 1 liability by 2024.

It is likely that the SCPP will adopt the recommendation of the Subgroup, and we expect the additional .87% rate will be part of Governor Gregoire’s supplemental budget as well.

Gain-sharing for PERS 1 and PERS 3

The Attorney General’s Opinion on whether or not the Legislature can repeal the gain-sharing benefit was received on November 2. It affirmed that the Legislature can repeal the benefit at any time, because the language of the bill providing for gain-sharing clearly states that it is not a contractual benefit. There is still some concern, however, about whether or not a court would view it the same way.

The Gain-sharing Subgroup of the SCPP has recommended the repeal of gain-sharing coupled with a number of benefit enhancements that would likely cost more than the savings that would be realized with the repeal of gain-sharing. Those changes include:

Increasing the Plan 1 COLA by 48 cents
Allowing Plan 3 members to transfer back into Plan 2
Changing the vesting requirement of Plan 3 to five years (instead of 10 years)
Instituting a full "rule of 90" for Plans 2 and 3 (members could retire without an actuarial penalty if the sum of their age and years of service is 90 or greater)

A number of legislators have already expressed concerns with this proposal and it may not even be advanced by the SCPP to the Legislature.

AWC’s position has been that the gain-sharing issue should be considered separately from any benefit enhancements, ensuring fiscal stability for the current benefits before adding new benefits. If gain-sharing is not repealed entirely, AWC would support eliminating gain-sharing for new hires and allowing Plan 3 members a one-time option to revert back to Plan 2.

LEOFF 1 Benefit Cap

For LEOFF 1 members hired after February of 1974, the maximum number of years of service that can be included in their pension calculation is 30 – resulting in a maximum retirement benefit of 60% of final salary. There is no cap in place for those hired between 1971 and 1974. LEOFF 1 active members would like to eliminate the pension cap for those hired after February of 1974.

Because the LEOFF 1 pension system currently has a surplus, the cost of this benefit enhancement would come from the surplus, and it would not be necessary to reinstitute LEOFF 1 contribution rates for members or employers. Retired firefighters strongly oppose the proposal.

Because the change would come at no cost to employers, AWC is not opposed to the cap elimination. Advancement of this proposal has provided us an opportunity to outline our need for financial assistance for our LEOFF 1 retiree long-term care and medical liability. Use of the pension surplus to address the cap issue sets a good precedent for us.

LEOFF 2 Issues

The LEOFF 2 Board met on December 8 and adopted their legislative package for 2006. Their proposals are very modest and in total would increase the rates only .04%. These enhancements include a catastrophic duty disability benefit with an offset for workers’ compensation, survivor health care insurance, and a death benefit of $150,000 associated with an occupational illness.

If you have any questions on pension issues, please contact Deanna Krell at deannak@awcnet.org or Jim Justin at jimj@awcnet.org.