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Fairbanks governments protest 'termination studies' mandated by state

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Posted: Wednesday, December 29, 2010 3:07 am | Updated: 1:22 pm, Wed Dec 26, 2012.

FAIRBANKS — Governments in Fairbanks have asked the Legislature to cut the burden when public employers eliminate positions from the payroll.

State law requires “termination studies” in many cases where public employers — cities, school districts, state agencies, etc. — look to rearrange or trim the payroll, according to the requests. The Legislature passed the rule in 2008 as part of a bigger change to state retirement plans, but the Fairbanks North Star Borough Assembly and the city of Fairbanks early this winter said the state appears to be applying the expensive rule unfairly across employers.

Borough Mayor Luke Hopkins and city Mayor Jerry Cleworth said, while the termination studies might cost a few thousand dollars, the potential financial impact is much larger — certain payroll changes can influence employers’ long-term financial obligations by millions of dollars.

“A legislative action is necessary to clearly identify the intent of when or if a termination study is appropriate,” the assembly wrote in a synopsis last month. A more detailed report from the borough points to a complex financial effect that elimination of a public position can have on employers’ costs. It suggests, for example, the loss of a full-time fire chief in Skagway carried the prospect of a $436,613 hit to city coffers over 30 years as its obligation to the Public Employees’ Retirement System changed.

Local leaders in Fairbanks have said a simple regulatory change — as opposed to a bill — could be enough. The state’s retirement director could not be reached for comment Tuesday, but Pat Cole, chief of staff for the city of Fairbanks, said state administrators have been receptive.

The report outlines local governments’ concern further.

Michael Lamb, the borough’s top finance officer, told the Daily News-Miner by e-mail that the termination study rule appears to make public employers use a formal study anytime they want to eliminate “a group or classification of employees.” A handful of local governments have already shelled out thousands of dollars each after proposing to eliminate or transfer a handful of public employees, the report said.

Fairbanks has not yet needed one, but Cole said the city worries it could be saddled with the responsibility under certain circumstances.

The borough said the issue has attracted strong interest from the Alaska Municipal League. Its report suggests the rule followed concern a 5-year-old shift in state pension plans — under-funded by billions of dollars — could drain participation in public retirement systems. That concern has not been realized, it said, adding the rule represents a heavier burden on smaller employers than larger governments.

Contact staff writer Christopher Eshleman at 459-7582.

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