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House | June 4, 2014 | Committee Room | House Personnel

Full MP3 Audio File

Committee to order. First of all, some housekeeping measures. I’d like to recognize and thank our pages who are helping us today. We have today Spencer Carney from Nash County who is unfortunate enough to be from Representative Jeff Collins. Rand Johnson from Wake County, whose sponsor is Alan McNeill. Cameron Rogers from Vance County, sponsor is Representative Baskerville, and Shay Sheffield from Gilford County whose sponsor is Representative John Faircloth. I’d like to thank our Sergeants at Arms, Young Bay, Martha Gaviston, David Collins, Carl Morello, and as always I’d like to thank our clerk and staff. Obviously without them, these meetings wouldn’t happen. If you look at your agenda today, we have three bills on the docket. As soon as I re-find my agenda. The first one is House Bill 1193, and I believe Representative Ross is going to be our presenter today. So Representative Ross I will ask you to come forward. [SPEAKER CHANGES] Thank you, Mr. Chairman. [SPEAKER CHANGES] Oh, excuse me. This is a PCS. Do I have a motion to put the PCS on the floor? Representative Langdon, thank you. All right, Representative Ross, you can go ahead. [SPEAKER CHANGES] Thank you. Members, the first bill, House Bill 1193, is simply a technical corrections bill. We see these about once a year. These are technical corrections to different provisions in some of the laws in reference to the pension. Some of these will affect dates. Others will I think some of these are typo changes, they’re just a lot of little technical corrections. And others will help our statutes conform more to federal regulations and some of ?? laws. I’ve got staff here if anybody has any technical questions about the technical corrections. [SPEAKER CHANGES] Thank you, Representative Ross. I will say too if you notice, this looks like a pretty long bill and looks like there’s been a lot of changes but if you’ll notice, each change is repeated several times throughout the bill, because we have several retirement plans in the overall state pension and retirement plan. So you’ll see the same technical corrections over and over again and throughout this bill. Does anyone have any question or discussion regarding our technical corrections bill? Representative Turner. Excuse me, Representative Langdon. [SPEAKER CHANGES] I was just going to say I have a motion. [SPEAKER CHANGES] All right. Ladies first. Representative Turner, I saw her first. Thank you. [SPEAKER CHANGES] I move for favorable report. [SPEAKER CHANGES] This will be referred to appropriations. [SPEAKER CHANGES] Favorable report for the PCS, unfavorable to the original, and moving to appropriations. [SPEAKER CHANGES] That is correct. Thank you for that motion, Representative Turner, and for being a true gentleman, Representative Langdon. You’ve heard the motion. Representative Brawley. [SPEAKER CHANGES] This is just technical changes and it affects the budget, 15 million dollars? [SPEAKER CHANGES] David, are you the expert on that part? [SPEAKER CHANGES] Yes, David Vanderweide for the fiscal research division. There is no material fiscal impact. There are some summary tables in the ?? retirement note, you may be looking at. Those aren’t the effects of the bill, that’s just information about the retirement system’s effectiveness. [SPEAKER CHANGES] Thank you for that question though. [SPEAKER CHANGES] Thanks for that answer. [SPEAKER CHANGES] You’ve heard the motion for a favorable report on the PCS, unfavorable to the original and it will go from here to the appropriations committee. All in favor, please say aye. All opposed no. It’s the opinion of the chair the ayes have it. Thank you Representative Ross. Our next item of business is House Bill 1194, and once again I want to recognize Representative Ross to explain this to us. [SPEAKER CHANGES] Thank you, Mr. Chairman. Members, this is another bill very similar to the last bill. Rather than calling this one technical corrections, these are more administrative corrections. Again, this changes dates and some provisions to conform with other parts of the plan. Again, it’s nothing that changes any major provision of the plan, or how it operates. These are administrative provisions that again that we get these admin changes about once a year. So I’ll open this one for

For the staff also for any questions on this bill. [SPEAKER CHANGES] Have any questions or discussion from the committee? Yes Representative Moffitt. [SPEAKER CHANGES] At the appropriate time. [SPEAKER CHANGES] Okay. I haven’t had anybody at all approach me about either one of these two bills but is anybody from the public interested in saying anything at all about this bill? I didn’t think so, but I just wanted to make sure. Any committee member? All right. Representative Moffitt, you’re on. [SPEAKER CHANGES] This is not a PCS, is it? [SPEAKER CHANGES] No it is not but it will still travel from here to the appropriations committee. [SPEAKER CHANGES] Thank you, Mr. Chair. I move for a favorable report with referral to appropriations. [SPEAKER CHANGES] For the motion, all in favor please say aye. All opposed say no. It’s the opinion of the Chair that the ayes have it. Thank you very much. And our third bill of the day is House Bill 1195. And once again, we’re going to have Representative Ross on the spotlight. [SPEAKER CHANGES] Thank you Mr. Chairman. Members, this bill is a little different. This one comes to us from the work that was done in a research study committee that took place and is currently taking place within the House. What this bill does is there were several areas within the plan that were identified as needing some revisions and needing change. One of the areas that we looked into was the area of spiking, or pension spiking. This is a little bit technical as to how this works, but basically highly compensated employees within the system are in some cases able to go in and gain the system near retirement by taking things that are typically not necessarily compensation and rolling it into the final benefit calculation for retirement. What it does is it gives an actuarial figure for retirement that does not necessarily represent the true employment picture or the true salary picture for that employee over the main stream of their employment. And it gives kind of an untrue picture of what the pension benefits should be. It inflates it. The problem is that it costs everyone else in the system because when that happens, it comes from the general funds of the pension. So while it’s not rampant, it probably happens in maybe 200 cases a year, this bill addresses that issue by putting a contribution-based cap. In addition to that, this bill only applies to employees that have salaries in excess of $100,000. So I have again, I have staff that if there are any technical questions, but this will correct this problem and should make the plan better for all the employees that participate. [SPEAKER CHANGES] Representative Ross, did you want to touch just briefly on the other two provisions of this bill, or would you prefer the staff did that, or I did that, or someone else? There are two other things mentioned in the title that may cause some question to our members. The return of contributions with interest and the five year vesting. [SPEAKER CHANGES] Yes. There were two other provisions that actually came out of the study committee, and both of these have gone both through the study committee and then the joint committee that reviewed the work that we did. One of the things that we have added and actually I thought this was a separate bill, but there is a return of contributions for employees that are not here up to the five year period. And then the vesting, North Carolina went a few years back to a ten year vesting schedule. This is really out of the mainstream for both corporate plans and also private plans. If you look at our neighboring states, Virginia, Tennessee, South Carolina, none of the neighboring states have a plan that approaches anything near ten year vesting. It’s a little bit of an unfair advantage to us in trying to hire especially in the area of teachers. We’re trying to hire the best, and this is one of the things they look at.

how long does it take me to vest into the pension plan. One of the things that we found in doing the research was that there actually was very little savings to the plan at all. I think when this was done, I was not here then, but apparently there was a lot of expectation that this would save a great deal of money within the plan. It does not. It's less than, probably 1/2 to 1, 1/2 of 1% or even less than that. And actually it doesn't save any money, if you work through the numbers, until about 2020. So it's just not beneficial on a cost basis. This is something that I think would help us in hiring employees, in retaining employees, especially with teachers and it's something that we felt, as a committee, we should go back to five years. [SPEAKER CHANGES] Alright, thank you, Representative Ross. Representative Hurley. [SPEAKER CHANGES] Thank you, Mr. Chair, just curious here. This actuarium[??] thing is in taking the place of a fiscal note, or? And has Treasurer's office weighed in on this? [SPEAKER CHANGES] Yes, they're in full support. [SPEAKER CHANGES] Did you to answer the question, David? Does this, the first question she asked? [SPEAKER CHANGES] Yes, David Vanderweide of Fiscal Research. The legislative retirement note is essentially taking the place of a fiscal note for any retirement related legislation. [SPEAKER CHANGES] Did you get your question sufficiently answered, Representative Hurley? Thank you. Other questions or comments from the committee? Yes, Representative Turner. [SPEAKER CHANGES] Thank you, Mr. Chairman. I'm happy to see this bill. This is a real recruitment tool for state employees who have been frozen, maybe even, well the same amount of time as teachers. We forget those state employees. We don't have the salary to offer but they were very disappointed when we had to wait ten years to be vested. So five years will be a real improvement. Thank you. [SPEAKER CHANGES] Thank you. Thank you. Other comments or questions from the committee? I'm going to just ask for a show of hands. Is there anybody in the balcony back there, or whatever you want to call it, in the peanut gallery that wants to speak out in opposition to this bill? Anybody at all? Okay, that being the case any of you Representatives from the Treasurer's office I'll be glad to give you like two minutes, if you'd like, if we haven't said enough, if there's anything that should be said about this bill that hasn't been said so far. Do you think we've covered it sufficiently or not? Sam, I'll leave that up to you if you'll just tell everybody who you are. [SPEAKER CHANGES] Sam Watts from the Department of State Treasurer. We've worked extensively with Representative Ross and Representative Collins and Representative Moffitt tangentially on some of this and the league and the county commissioners and what we think we have is a really good approach on pension spiking that targets in on the real problem, which are just a very small number of people who have the ability to gain the system, as Representative Ross said. So we're happy to support the department behind the pension spiking bill, pension spiking provisions. The vesting is something that's important to us as a state agency. Thank you, Representative Turner, for bringing that out because it's been difficult for us to recruit people because of the besting period as well. So we're happy to support the study committee's work on that. In the return of contributions with interest, I will point out, we're the only state int he country that requires new employees to give the state an interest free loan from the first five years of their employment. So we think that's a positive change as well. [SPEAKER CHANGES] Thank you. I will just say the reason I asked the questions in the order in which I did is because I have not received any opposition on this bill. We've been working on this bill for quite a while and pension spiking can still occur after this passes. I want you to understand that. But the parties responsible for doing that will have to make the money up to the state pension plan. So if a city or county government or agency or whatever wants to pension spike, they're free to do it, they just have to ante up the money to do it. Having said that, two of the responsible parties or those that represent two of the responsible parties, the League of Municipalities and the County Commissioners' Association, are in full support of this bill. So I wanted you to know that going in. There's been no organized opposition to this bill that I have heard of and as you heard by the silence today I think that holds true. Representative Michaux, did you have a question? No? Any other questions or comments from anyone? If not, Representative Brawley, I believe, has a motion. [SPEAKER CHANGES] Yes, and if I might make a comment before making a motion, Mr. Chairman. Federal law requires private sector to be vested within six years so everybody

in the private sector he was invested within six years anyway and I think this was a good move on this. The other thing is that while everything's changing some things remain the same. Back in the 90's we addressed spiking and this is a great improvement over that bill and with that, Mr. Chairman, I would move that you give House Bill 1195 to the ?? [SPEAKER CHANGES] To appropriations, referral. [SPEAKER CHANGES] To refer to appropriations. [SPEAKER CHANGES] Thank you very much for that motion. You've heard the motion for a favorable report on House Bill 1195 referred to appropriations. All in favor please say aye. All opposed no. In the opinion of the Chair the aye's have it. Thank you very much. This meeting is adjourned.