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House | May 20, 2014 | Committee Room | House Finance

Full MP3 Audio File

I'd like to call this meeting of House Finance to order. I'd like to recognize our pages, Margaret Honeycutt, Kayla Dawson, Corey Gross, and Kendra Heartsfield. If I pronounced that incorrectly I apologize. I'd like to thank or Sergeant at Arms Mr. Seals, Mr. Lee, Mr. Clampett, and Mr. Brandon. Thank you all for being here. At this time I'd like to recognize Representative Grier Martin. [SPEAKER CHANGES] Thank you very much Mr. Chair. I just want to introduce to the committee, I have a senior in high school who's shadowing me today, his name is George Elvira. He is from Harnett County. He decided he wanted to follow, actually, a competent legislator so he's shadowing me instead of Representative Lewis but I hope ya'll welcome, he hopes to, he's headed off to Marysville[?] College and hopes to pursue a career as an army infantry officer. You will learn a great deal from this committee. [SPEAKER CHANGES] Mr. Chairman, Mr. Chairman. [SPEAKER CHANGES] Representative Lewis. [SPEAKER CHANGES] I appreciate you recognizing those of us who, maybe cannot appear on the cover of GQ. [SPEAKER CHANGES] It's a pleasure. [SPEAKER CHANGES] To espouse our great modesty, but I would like to also welcome the young man from the Harnett Central High School and he just proves that those of us in Harnett County are able to overcome great adversity. [SPEAKER CHANGES] We're pleased, again, to have him here. At this time we will take up HB 1034. Representative chairwoman Howard. [SPEAKER CHANGES] Thank you, Mr. Chairman and members of the committee and, we have worked on HB 1034 for many, many months. The legislation actually stems out of program evaluation and we had members of the program evaluation committee, many members are members of the committee, and in order to get into more depth with this topic we also had a subcommittee via program evaluation and again, many members of, several members of this committee were members of that subcommittee. I'm gonna ask Ryan, Mr. Chariman, Ryan Blackledge, to go through the bill with us. Before we start I will say that I believe we have an agreement with all of the folks involved. That is the treasurer's office, the Department of Insurance, the Fireman's Association, and the Chief's association, and the North Carolina Association of Firemen. I think everybody, and I hope I'm not misspeaking this morning, but I believe everybody has come to an agreement and we have worked out all of the glitches. So, Mr. Chairman, with your permission I'll ask Ryan to go through the Bill with the committee. We do have a summary and, of the, and we do have a proposed committee substitute, Mr. Chairman I would move that that be before you for the purpose of discussion. [SPEAKER CHANGES] Members, you've heard the motion for Representative Howard to have the PCS reports for discussion, all in favor say "I," all opposed, motion carried, thank you. Mr. Blackledge. [SPEAKER CHANGES] One Mr. Chair, members of the committee, my name is Ryan Blackledge with bill drafting, also staff to the program evaluation committee that worked on this. As Representative Howard said this does come out of a lot of study from program evaluation. There are actually four studies that came out the bill with the four different areas of the bill that I'll get in to. For my presentation, because a lot of you haven't heard this before, I'm gonna give a little bit of background on some of the different funds and some of the different benefits that are provided to firefighters and rescue workers and then I'm gonna say how the bill changes some of those and also, when I go through that, I'll mention the differences between the PCS before you today and the bill as it was originally filed and it was originally recommended by program evaluation. Now, there are, there were four studies and the bill is divided up into four different sections. The first section corresponds to the first study that came out, the second section the second study and so on. The first section deals with firefighter relief funds. Relief funds exist both as local pools of money and there's also a statewide firefighters relief fund and within statute there's some

there's some ways that local fund boards can spend those monies and there's a statutory formula which determines how much each fire department gets of those funds, and then there's also the state fund which can be used for certain purposes. The second study from PED dealt with worker's compensation. As you know, worker's compensation, if you get hurt on the job you can get payments and get taken care of. If you're a volunteer, though, you're not getting paid so that doesn't fit into the typical worker's comp framework. So what is done for volunteer firefighters is, if they get hurt while working as a volunteer firefighter and can't go back to their job and can't return to their duties as a fireman, they receive compensation through a worker's comp plan. The third study dealt with a supplemental pension fund. Right now there is a pension fund that if firefighters, rescue squad workers, pay into $10 a month for 20 years and have reached the age of 55 and have retired then they can collect $170 per month. Third, there is also a grant fund, actually two grant funds, for fire departments and also for rescue squads where they can get grants, it's administered by the Department of Insurance, but they can get those grants and use them to purchase equipment and supplies. Alright, so that's the background. There's the four main areas that the studies covered and now I'm gonna go in to what actually has been changed in detail about those. If you'd like to follow along I'm gonna be reading from summary, I'm gonna be going through the various bullet points. So if you follow along that can help you. At the very bottom of page one you'll see that first bullet point. It increases from one to two percent the portion of certain tax proceeds the Department of Insurance retains for administering, administering the local relief funds. Within this bill, the department is given additional responsibilities for reports for maintaining a database of the funds, local relief funds, how they were spent, and so they are given additional amounts from the tax proceeds. Up until a year or so ago that was two percent, it was brought down to one, with this additional responsibility being put on the department it brings it back up to two percent. If you turn the page to the top of page two the PCS and the original bill also provides guidance on minimum and maximum amounts for the local relief funds. One of the things that the PED study found was that some local departments were holding on to funds and not spending them. They were just holding on, some of them thought they could only spend the interest on those funds like it as some sort of endowment. Of course, the amount of money in some of these funds is very, very small so you don't get much interest, money isn't spent, and the recommendation of my PED was to provide some guidance for what a maximum fund balance should be. So that is provided within the bill. There's also a minimum within the list of allowable expenditures, basically if you look under the first half there are about eight in the list. The first four can be done without the permission of the Fireman's Association, the next half you have to have the permission of the Fireman's Association and you would have to make sure that your fund balance was above that minimum amount. Now what happens if they exceed the maximum amount? Well, if a local department exceeds the maximum amount then their portion, when there's the next annual allocation, is put back into the big pot and it's reallocated to the department's who don't exceed the maximum amount. The second point on there, it's, the bill explicitly says that everyone who is managing these local funds and the folks who are also managing the state-wide funds are to act as prudent trustees, prudent managers of those. There's a particular chapter in the statutes, the Uniform Prudent in Institutional Funds Act, which says how folks are supposed to invest funds. It basically just says they to do it in a prudent way, they have to carefully think about where they're going to invest them. This deals with one of the issues in that there was concern about some of the investment that was being done so this just clarifies that it has to be done in a prudent way. That third bullet point on the top of page two mentions line of duty benefits to firefighters who departments are not members of the North Carolina Fireman's Association. Right now, in order to get line of duty benefits, and that is of course if you pass away int he line of duty, those benefits go to members of departments who are then members of the state-wide Fireman's Association. Some departments are not members oft he Fireman's Association and right now they're money that they would receive if they were departments instead goes to the state-wide fund. What the bill does is it says from that money that's going to the state-wide fund, instead

use that to pay line of duty death benefits to the members of departments that aren't members of the state-wide group. Does that make sense? Okay. The fourth item on there makes an adjustment to the list of allowable expenditures for local firefighter relief funds. You recall I mentioned there's a list of, it's about seven or eight things, and it makes some adjustments to those. The next bullet point requires additional reporting of local firefighter relief funds. One of the issues that PED determined in it's study is, for a lot of the expenditures there just weren't adequate records, adequate reporting on how that money was spent, which makes auditing those funds very difficult. It makes it difficult to know that the state funds that are being given to these local groups is being spent in accordance with statute. So there's some additional reporting requirements, those then go on to the Department of Insurance who has to maintain a larger database with all that information. Additionally there's a provision in here that repeals certain local laws that are inconsistent with expenditures that are allowed under that list that I've mentioned several times. There are a lot of local bills out there that would do things like give permission to purchase supplemental insurance or supplemental retirement plans, those are now covered under general law so there are a lot of old things that were allowed at one point, now apply generally and so those older ways of doing it are repealed in here. Alright, that's section one, that was the relief fund. Section two deals with worker's comp. If we look on the summary you'll see section two and some couple and three bullet points there. One thing it does is it allows what is already happening with respect to the state-wide associations. Right now the state-wide associations are participating in the worker's comp fund. The statute says that it's only for the firefighters. So technically, according to law, they shouldn't be in there. If you look at the claims experience though it's an overall net benefit to have those associations involved int he workers comp fund and so there was a statutory change to allow them to continue to be participants within the worker's comp fund. Also in section two, there's a requirement that there be an annual actuary study of the worker's compensation fund. One of the issues with the worker's comp fund is the question of whether or not it will be adequate to fund things in the future, whether the premiums for the participants, whether those premiums are adequate to fund it. So there's a requirement for a detailed study. One note, the PCS differs from the original bill in that the PCS pushes the requirement oft hat study back to 2016. The original requirement was to have a study by 2015, so a little bit more time to get the study together. I will interrupt myself and back up just to clarify, on section one there was something that was taken out. Within section, excuse me, no, let me say in section two. For section two, at one point within worker's comp there was a sentence that said if the fund is inadequate than the board that administers the worker's comp fund will have to perform basically a special assessment on the participating departments in order to make up any shortfalls. That sentence has been taken out. Finally, within section two, final bullet point, there's a detailed list of requirements that the State Fire and Rescue Commission must use when renewing it's contract with the worker's compensation third party administrator. There are a lot of things that weren't in that contract that PED thought should be included and so there's about two and a half pages of what should be covered in there to ensure there's adequate oversight and enough information for the state. Now, section three deals with supplemental pension. Supplemental pension is indeed supplemental, it's not any regular pension, and it's that amount if they pay ten dollars a month for 20 years firefighters and rescue squad workers can collect 170 dollars at 55 and at retiring. What section three does is it does away with the retirement requirement. Right now, after you've paid in for 20 years and have reached 55 then, after you've paid for 20 years you don't pay any more. So if you started paying in at the age of 20, pay to 40, you would stop paying at 20 and would continue to go on and there was a change made to say that if you get up to 55 there's no need for you to retire because a lot of the volunteer firefighters will go on to work for fire departments after that. So it says that once you've paid your 20 years and you reach 55 you can go ahead and start collecting supplemental pension. That does have a fiscal cost, that fiscal cost is paid for

... by making a reduction to the grant funds that we’ll talk about a little bit in Section 4, but it makes a reduction in the money going to those grant funds, sends the money over to the general fund, and then there’s some appropriations from the general fund of 1.4 million dollars recurring to pay for the cost of allowing people to start collected the pensions a little bit earlier. There’s also a belief that within that pension fund there’s going to be some overall savings because the Department of state Treasure is going to be making some adjustments to how they calculate who is going to be eligible. Right now they’re not assuming that people are going to fall off, but it is possible that there are going to be volunteers that are going to stop being volunteers and will never collect, so there’s going to be an adjustment to that there. Finally, Section 4 deals with the grant funds. As I mentioned, there are grant funds administered by the Department of Insurance. What it does is it says that departments that have 50 thousand or less of income can get a lower match rate. One of the issues is that there’s some very small departments out there that don’t have much money and can’t meet the 50/50 match rate to participate in the grant funds, so there’s a lowering of that to 25/75. There are also some additional reporting requirements from the Department of Insurance, there are some additional oversights on how the Department of Insurance watches those funds and how they’re spent, provisions for what happens to equipment if a department dissolves, and also what happens if the equipment is taken out of service – what the Department of Insurance does in that case. Mister Chair, that was a pretty quick run-through. I know it’s 17 pages. If anyone has any detailed questions, I’ll be happy to answer them. [SPEAKER CHANGES] Thank you. Chairwoman Howard? No. Representative Warren? [SPEAKER CHANGES] ?? [SPEAKER CHANGES] Thank you, Mister Chair. Perfect time, I’d like to make a motion that we give a fair report on this but with permission for staff to make any grammatical or technical changes as needed. [SPEAKER CHANGES] Thank you. Any further questions from the Committee? Representative Jones. [SPEAKER CHANGES] Thank you, Mister Chairman. I just wanted to say briefly, I’m here at your 9 o’clock position, so I just wanted to take the brief opportunity to thank the volunteer firefighters in this state for what they do for us. They provide an invaluable service, and in doing so, they not only provide a much needed service but I know they save taxpayers of this state money in doing so. From what I can see, this is a very positive Bill for them. It is a long Bill. I just, I guess I would ask the question, is there anything in this Bill that you could identify that somebody might come back to me later and say “I can’t believe ya’ll did this, ya’ll voted for this”? So is there anything embedded in 17 pages that the volunteer…? [SPEAKER CHANGES] That happens all the time. [SPEAKER CHANGES] … firefighters going to come back and say “You shouldn’t have done it”? [SPEAKER CHANGES] I concur with Mister Setzer – that happens all the time. You can do the best you can and we still may have a blooper, but as far as I know, Representative Jones, we have… as I stated, everybody has given a sign-off on this, and with the Chair’s permission, I would ask that the Fireman’s Association, Tim Bradley – I believe he’s in the back of the room, and Mister Chairman…? [SPEAKER CHANGES] Absolutely. Mister Bradley, please step forward. [SPEAKER CHANGES] Thank you Mister Chairman, Chairman Committee. We appreciate the work done by the ?? with the PED staff, the research and tweaking that was done on four major fire service programs. We support the Bill. We believe it promotes the use of local relief funds. We believe it makes the issuance of grants fairer and allows smaller departments to get a better match for their money. We also believe that it makes the pension fund more fair. We have suggested a few technical changes that I believe the body has made the motion to allow those to be made as it moves forward, which will take care of some unforeseen problems that as we worked through the draft we didn’t see. Most of them are date changes. The most significant one deals with some technical requirements in the supplemental retirement to ensure they can continue to do those as the law allows, but we do support the Bill with those technical changes and appreciate the hard work that ?? did, the PED division and Representative Howard for allowing us to participate along the way. [SPEAKER CHANGES] Thank you.

[BEGINNING OF RECORDED MATERIAL] Please, for a moment, does any members have questions for mister Bradley? Thank you, represent Tine. [SPEAKER CHANGES] Thank you mister chairman, um, I have had some emails from local departments, and I think there may be a misunderstanding so I want to make sure that I can explain the two of them properly. There was mention that there is a limit in section one in regards to the amount per firefighter that they can retain before they, and the only penalty is that they don't have to give it up is my understanding, they will not have anymore of the state, the department of insurance collected money from the premiums the next year, until they go below that amount. What is that per fire fighter amount that's the max? [SPEAKER CHANGES] I would like to draw your attention to page seven, section one D, and just to note, there is a delayed effective date on this particular section, it's effective July 1/20/2015 so local departments do have some time to spend their money. But you can see there is a new statutory section put in maximum fund balances and it's twenty five hundred dollars, 2500 per member on the departments roster is the max. Follow up mister chairman? Follow up? [SPEAKER CHANGES] And I'm correct that the only penalty is that they do not receive additional funds the following year from the department of insurance, is that correct? [SPEAKER CHANGES] Yes sir, you are correct. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Representative Hull. [SPEAKER CHANGES] Thank you mister chairman, and I guess this question is for staff or for representative Howard and I heard mister Bradley say he submitted some technical changes to be included and wanted to know are they currently included in this bill, and if not, is there a reason they are not before this morning so we'll know what they are and what the impact is? [SPEAKER CHANGE] We didn't get the notice until late yesterday and we were trying to get the bill ready to come up this morning, so we have an agreement with the senate that they will handle the, and they are technical, purely technical, and then it will come back to us for concurrence if there is an issue but I understand they are purely technical changes. [SPEAKER CHANGE] Representative Carney. [SPEAKER CHANGE] Thank you mister chair, I just wanted, I served on the sub committee of the full committee and I will tell you, and I said this on the committee and sub committee and I'm saying it again here. I've been here 12 years and some bills have been fully vetted, this bill I give my total hats off to chairman Howard for being very open and transparent. Everybody involved in this bill that had any, any piece of it under their purview were included. Staff worked diligently trying to bring everybody's concerns to the table. I'll reiterate what chairman Howard said, it really was one of those times that everybody was really heard, their issues were addressed and worked through. yeah, there are always some areas where moving forward we need to tweak, but there were a lot of unanswered questions, concerns. Well, clarifying language really is what we really had to come up with because of different entities, volunteer and paid, having concerns about what the statute said and they've been clarified. And yeah, I guess moving forward there will be changes down the road as we work through the process but thank you for extending that date and I recommend that we support this. [SPEAKER CHANGE] Thank you, at this time do we have anyone in the audience that would like to address this bill? Seeing none, any further questions from the committee? Representative Warren, you are recognized for your motion. [SPEAKER CHANGE] Thank you mister chair, I would recommend that, or I would like to make a motion that the committee give a favorable report to HB 1034 with permission for staff to make any technical and grammatical changes as necessary with referral to state personal. [SPEAKER CHANGES] Members of the committee you heard motion on the floor, is there any further discussion or debate? If not all in favor-- yes mam. [SPEAKER CHANGE] Mister chairman, would representative Warren strike the last three lines of words in his motion that we will send it, I believe we are moving to send this bill straight to the floor. [SPEAKER CHANGE] ??Amended, I will do that, yes mam. [SPEAKER CHANGE] Unfavorable to the original bill? [SPEAKER CHANGE] Yes sir, thank you. [SPEAKER CHANGE] Members of the committee you've heard the motion on the floor, is there any further discussion? If not, all in favor say aye. [SPEAKER CHANGE] Aye. [SPEAKER CHANGE] All opposed? Motion carried. [END OF RECORDED MATERIAL] .

We have one bit of housekeeping I'd like to do that I omitted. Members, you've had an opportunity to read the minutes from the previous meeting? Representative Brawley moves for the approval of the minutes from the previous meeting, any further discussion? Yes, sir. If not all in favor say "I," all opposed, motion carried, and I would like to thank the members of the committee for being here today. The next bill on the calendar will roll into our next meeting. Meeting's adjourned.