Transcript Prepared By the Clerk of the Legislature Transcriber's Office Floor Debate April 18, 2011 [LB84 LB176 LB229 LB229A LB235 LB279 LB283 LB289A LB289 LB297 LB305A LB357 LB382A LB382 LB388A LB388 LB449 LB464 LB479 LB524 LB535 LB543 LB549 LB600 LB600A LB601 LB606 LB628 LB665 LR40CA LR155 LR156 LR157 LR158 LR159 LR160 LR164 LR165 LR166 LR167 LR168 LR169] SENATOR GLOOR PRESIDING SENATOR GLOOR: Good morning, ladies and gentlemen. Welcome to the George W. Norris Legislative Chamber for the sixty-fifth day of the One Hundred Second Legislature, First Session. Our chaplain for today is the Reverend Dr. Selwyn Bachus, Salem Baptist Church, Omaha, Nebraska, Senator Council's district. Please rise. REVEREND BACHUS: (Prayer offered.) SENATOR GLOOR: Thank you. I call to order the sixty-fifth day of the One Hundred Second Legislature, First Session. Senators, please record your presence, roll call. Mr. Clerk, please record. CLERK: I have a quorum present, Mr. President. SENATOR GLOOR: (Gavel.) Thank you, Mr. Clerk. Are there any corrections for the Journal? CLERK: I have no corrections, Mr. President. SENATOR GLOOR: Thank you. Are there any messages, reports, or announcements? CLERK: Mr. President, a communication from the Governor. (Read re LB543.) Mr. President, a communication from the state of Idaho regarding the legislative resolution passed there. (Legislative Journal pages 1207-1208.) That's all that I have. [LB543] SENATOR GLOOR: Thank you, Mr. Clerk. (Visitors introduced.) We will now proceed to the first item on the agenda. Mr. Clerk. CLERK: Mr. President, LB382, a bill introduced by Senator Nordquist at the request of the Governor. (Read title.) The bill was introduced on January 13, referred to Retirement Systems for public hearing, advanced to General File. There are Retirement Committee amendments pending, Mr. President. (AM1101, Legislative Journal page 1095.) [LB382] SENATOR GLOOR: Thank you, Mr. Clerk. Senator Nordquist, you're recognized to open on LB382. [LB382] 1 Transcript Prepared By the Clerk of the Legislature Transcriber's Office Floor Debate April 18, 2011 SENATOR NORDQUIST: Thank you, Mr. President and members. As the Clerk mentioned, LB382 was introduced on behalf of the Governor. I will go through the bill as introduced, and then when we get to the committee amendment, we'll discuss the changes the committee made at that time. I first want to start by thanking all the groups that participated. I know they began with discussions with the Governor related to their retirement plans, and those continued. And I must say that we are lucky for our state plans to have great groups to work with, groups that are willing to come to the table to do their fair share to try to address the shortfalls in our plans. As I've said before, you know, our state has some of the best, most well-funded plans in the nation. When Pew did their study a few years back, we were a top performer. Certainly that's something to be proud of, as many other states are facing significant challenges when it comes to this. The bill as introduced, LB382, increases the retirement contribution rates for school employees and the Nebraska State Patrol plan members over the next biennium in order to address the actuarially determined unfunded liabilities. As proposed in the original bill that I introduced on behalf of the Governor, school employees would increase their contribution rate by 1 percent up to 9.28 percent from the current 8.28 percent for a period of two years. At that point, it would then decrease back down to 8.28 for a year and then return to the rate we were at in 2009, which was 7.28 percent. And the employee contribution, this employee share, is matched by 101 percent by the employer, or the school districts. Under this bill, the State Patrol member contribution rates would increase by 3 percent to 19 percent of the employee's monthly compensation. The state also would match that at 19 percent of pay. I will note, State Patrol members do not participate in Social Security, so that's why their rate is significantly higher. And then under the original bill, after the two-year increase it would drop down back to the current rate of 16 percent. That was the synopsis of the underlying bill. I will...that will be my conclusion on the underlying bill, and then we'll move on to the committee amendment. Thank you. [LB382] SENATOR GLOOR: Thank you, Senator Nordquist. As the Clerk stated, there are amendments from the Nebraska Retirement Systems Committee. Senator Nordquist, as Chair of the committee, you're recognized to open on those amendments. [LB382] SENATOR NORDQUIST: Thank you again, Mr. President. Committee amendment AM1101 replaces the underlying bill and amends contribution rates for the school employees, State Patrol, and Class V Omaha school employees retirement system and changes several state contributions in order to address the actuarially defined needs. The State Patrol plan does not change again from the underlying bill. They remain...it'll be 3 percent increase, from 16 to 19, for a period of two years, at which, on July 1, 2013, it will return back to the 16 percent employee, 16 percent employer rates. The school retirement plan, we did not move with the numbers introduced in the original bill. Essentially it would have been a little too much money in the first year, not enough in the second year, so we made the adjustments to appropriately hit the numbers that we need. So beginning September 1, 2011, there will be a six-tenths of a percent increase 2 Transcript Prepared By the Clerk of the Legislature Transcriber's Office Floor Debate April 18, 2011 from 8.28 percent to 8.88 percent. Again, school districts match 101 percent of that. Beginning September 1, 2012, we will go up an additional nine-tenths to 9.78. So over the biennium we're moving from the employee paying 8.28 percent to 9.78 percent, and, again, school districts match 101 percent. We worked closely with the State Education Association, the administrators, and the school boards and agreed that to get our plan straightened out--this plan did not have shortfalls prior to the...well, at least in the year...preceding year it did, prior--as the markets have ebbed and flowed. But in the preceding years, this plan was adequately funded, did not need that additional contribution. So we want to get back to that point. And the groups all agreed, came to the table, and said, we're willing to sustain these higher contribution rates out for six years total, and that, while it won't solve all our problem, will get us on a very, very good track to get closer to being where we need to be. So these higher rates of 9.78 and then the appropriate match from the schools will be in place until September 1, 2017, at which point they will return down to 7.28. Again, none of this is set in stone, of course, because markets do ebb and flow, and we will need to continue to make sure that we're meeting our required contribution. And I will note that on the school aid bill last year, LB...or last week, LB235, we amended on Select File to make sure that these increased rates were outside the school budget lid exemption. We also...while the employees and employer were maintaining the higher rate, we are maintaining an increased state rate that we put in place two years ago, which--the state contributes 1 percent of pay. That will stay in place for the same time line as the higher rates for the employer and employee. So at the same time, in 2017, the state rate will then fall back down to the rate it was, which was seven-tenths of a percent of compensation. Omaha...or let's see here, we've got the Class V system. As you know, Omaha maintains their own school employees retirement system. We are increasing their rates 1 percent, and that will be sustained with no sunset, where the states are sunsetted. The Omaha district, we are increasing their current rates 1 percent to 9.3 percent, which meets their actuarially required contribution. And then finally, we have...there's been a...since 1995, there was a state General Fund appropriation going to these plans to fund the COLA. When the COLAs were put in place, this was the funding mechanism. It was originally intended to sunset a year ago. We extended it so it will sunset in the following fiscal year, '12-13. And Omaha's plan at that point, when we made that last year, it did not have a sunset. We are now putting a sunset in place. So the COLA funding that goes to the Omaha plan will sunset in fiscal year '13-14, at which point that money will completely cease to all plans. And that essentially is the committee amendment. Again, it's certainly not the silver bullet, but it gets us on a pathway to shore up these plans. And, again, I greatly appreciate the work of Vice Chairman Pankonin, Senator Heidemann, certainly great members to work with on these issues, and the respective groups, the State Patrol, the NSEA, administrators, and school boards. Thank you, Mr. President. [LB382] SENATOR GLOOR: Thank you, Senator Nordquist. (Visitors introduced.) You have heard the opening on LB382 and the committee amendment. Senator Lathrop, you are recognized. [LB382] 3 Transcript Prepared By the Clerk of the Legislature Transcriber's Office Floor Debate April 18, 2011 SENATOR LATHROP: Thank you, Mr.