LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT

Senator Dean E. Johnson, Chair of the Legislative Commission on Pensions and Retirement, called the meeting to order at 9:40 a.m.

Representatives Philip Krinkie, Ann Lenczewski, Harry Mares, Mary Murphy, and Steve Smith
Senators Don Betzold, Dean Johnson, Lawrence Pogemiller, Dan Stevens, and Roy Terwilliger

Ms. Jessie Montano, Assistant Commissioner, Office of Teaching and Learning, Department of Children, Families and Learning (CFL), and Ms. Audrey Bomstad, Supervisor, Budgeting Payments and Categorical Aids, Program Finance Division, CFL, testified and distributed a letter prepared by Ms. Bomstad.

Ms. Montano clarified the role of the Department of Children, Families and Learning with respect to charter schools. She said that charter schools are considered to be independent school districts under Minnesota Statutes, Section 124D.10; therefore, CFL provides oversight of charter schools but does not provide direct management.

Ms. Bomstad summarized her letter, which responded to questions from Commission staff, provided CFL’s recommendations regarding the proposed potential remedies, and made additional suggestions. Sen. Johnson asked Ms. Bomstad if CFL intends to bring forward legislation forward on those issues and Ms. Bomstad replied that they do not intend to do so at this time.

Sen. Johnson asked Rep. Mares if the House Education Committee has taken any testimony on this issue and whether he intends to do so in the future. Rep. Mares replied that the Education Committee has not looked at this, and that he believes it is the responsibility of the Commission to address the issue.

Ms. Montano commented that CFL is concerned that teachers and other personnel who are due their retirement receive it. She also said that they are trying to maintain the integrity and the philosophy behind how charter schools were created and try not to overstep the management as they were authorized under legislation to be considered school districts.

Sen. Johnson said that it would be prudent for both the House and Senate Education Committees to look at the situation and bring back to the Commission some recommendations related to retirement.

Mr. Steve Dess, Executive Director, Minnesota Association of Charter Schools (MACS), testified that he recently met with the administrators of the pension plans, and he provided a memorandum with recommendations regarding potential remedies. Mr. Dess said that the need for knowledgeable sources is a high priority, and MACS will serve as one of those sources. He noted that legislation was passed last year requiring a charter school to report its students on a quarterly basis in its first three years, so they are no longer operating on the basis of projections and that should help with cash flow decisions. Rep. Murphy asked Mr. Dess if he believes charter schools should be able to opt out of TRA or PERA coverage. Mr. Dess replied that if a charter school indicates they don’t think they should be in the plan, they need to justify the reasons why not.

Ms. Kristin Dybdal and Mr. Jim Schowalter, Department of Finance, provided a summary of the Governor’s budget recommendations as related to pensions. Ms. Dybdal reviewed that summary.

Ms. Peggy Ingison, Assistant Commissioner, Budget Services, Department of Finance, provided additional information and responded to members’ questions.

Sen. Betzold moved approval of the minutes for the Commission meetings of November 13, 2001, and December 11, 2001. MOTION PREVAILED.

Mr. Thomas K. Custis, Milliman USA, reviewed the Summary of 2001 Valuations and discussed the impact of the asset valuation method. Mr. Custis noted that there is a correction to be made to the Judges Plan—in the sufficiency measure, the liabilities and the required contribution requirements are correct, but the contributions for those judges who have capped out on service are going in to a separate account, so the statutory contributions are not the full amount as shown on the summary but rather approximately a half percent less.

Mr. Custis said his greatest concern is that the Minneapolis Teachers Retirement Fund Association (MTRFA) continues to deteriorate and it is only going to get worse, and dramatically worse, if corrective action is not taken to address the funding status of the plan.

In summary, Mr. Custis said that StPTRFA and MSRS-Correctional need to be monitored, PERA needs attention, and MTRFA is reaching a critical point and corrective action is needed soon. He also said that last year’s PERA-General legislative changes were not sufficient and that further action will be needed.

Mr. Custis reviewed the results of the actuarial experience studies, the combined service annuity provision study, the proposed actuarial assumption changes, and the financial implications of the combined effect of both the demographic changes and the change in the combined service annuity loading factors. Mr. Custis also responded to member’s questions regarding the impact of the Governor’s budget recommendations.

Mr. J. Michael Stoffel, Executive Secretary, DTRFA, clarified that another factor affecting the DTRFA drop in sufficiency that was not mentioned is that about 0.9 percent of payroll is being reduced because they are losing $483,000 in state aid.

Ms. Laurie Elliott, City of Shoreview, testified to the consequences of last year’s PERA exemption changes for Shoreview, specifically the Community Center. She said that additional PERA costs due to the elimination of certain PERA membership exemptions used by the city came to about $36,000, in addition to the 0.35 percent increase to the rest of the workforce, resulting in a nearly $50,000 net increase in PERA costs for the city. She referred to the PERA proposed administrative bill, page 3, line 16, regarding the high school student exclusion. Ms. Elliot testified in support of this proposed change, which would save the city about $13,000. She also requested that the underscored language on lines 15 and 16 also be eliminated, representing another $13,000 in costs.

Mr. Nyle Zikmund, Spring Lake Park-Blaine-Moundsview Fire Chief, Legislative Chair for the Minnesota Fire Chiefs Association, and President of the Minnesota Area Relief Association Coalition, presented information on the proposed study. Mr. Zikmund provided two handouts, reviewed the history of work done to date, and responded to questions from members.

Adjournment
The meeting adjourned at 11:50 a.m.