Dear Senator,

I believe it was obvious to those who attended the Senate Ways & Means Committee Hearing Thursday, February 16, 2012 on SB 6563, that the bill was confusing, misunderstood and subject to different interpre­tations. Noticeably absent was an explanation of the legislative intent. This would leave one to believe that the only intent is to transfer the administration of the LEOFF I Retirement System and the 5.5 billion dollar fund over to the LEOFF II Board to use as they deem necessary. This fund could be used essentially to create additional LEOFF II benefits without any increased contributions.

The LEOFF I Board must identify funding to increase benefits. Merging the two funds would make the money in the merged fund available to increase LEOFF II benefits. Steve Nelsen, the Director of the LEOFF II Board and Matt Smith the State Actuary, have both publicly stated that under the merger the LEOFF I funds could be used to increase LEOFF II benefits.

The number one concern expressed by the stakeholders is that the new LEOFF Board as established in SB 6563 and HB 2350 is the existing LEOFF II Board renamed as the LEOFF Board. Please consider that the LEOFF II Board is an eleven member board with seven members who are members of the LEOFF II Retire­ment System. This number could increase to eight LEOFF II members, if in the future the second legislator who is appointed to the board is a LEOFF II member.

The current statute established the board as follows:

• Three LEOFF II firefighters
• Three LEOFF II law enforcement officers
• One of the above six LEOFF II members can be a retired member but does not stipulate LEOFF I or LEOFF II
• These six positions are appointed by the Governor from nominations submitted by WACOPS and the Wash­ington State Council of Firefighters, both LEOFF II union organizations
• Three employer members appointed by the Counties, the Cities and the Fire Commissioner’s Association
• Two legislators, one appointed by the Senate and one appointed by the House

Currently the representative appointed by the House is a member of the LEOFF II Retirement System. This could be viewed as a conflict of interests as this puts the legislator in a position to vote on personal pension benefits. If this is not a conflict, in the future a second representative could be appointed by the Senate who is also a LEOFF II member making the board eight LEOFF II members, three employer members with no LEOFF I representation. Currently, the Chair of the Board is a LEOFF II member and he is also the President and chief lobbyist of the Washington State Council of Firefighters, a LEOFF II organization. This is unlike the Select Committee on Pension Policy where one of the elected legislators serves as Chair with the Chair being rotated each year between the House and Senate.

There was a lot of discussion regarding the authority to establish contribution rates and assumptions. I think SB 6563 is very clear. The bill does not totally remove the legislative oversight from the governance of the new LEOFF System but it certainly reduces such oversight.

Section 3 (2): The existing statute has been amended to read:

Contributions for the law enforcement officers’ and firefighters’ plan 1 shall be established by the law enforcement officers’ and firefighters’ retirement board beginning July 1, 2013, as provided in this chapter.

Section (9) (A): Is amended to read:

Adopt actuarial tables, assumptions, and cost to methodologies in consultation with an enrolled actu­ary retained by the board. These actions shall not be subject to revision if they are certified as being reasonable by the state actuary.

SB 6563 states in Sec 13 (4):

Changes in the long-term economic assumptions, recognition of asset values that vary from the long-term investment rate of assumption, or limits on the extent to which the market value of assets can deviate from the actuarial value of assets used in actuarial studies on law enforcement officers’ and firefighters’ retirement system shall be adopted by the law enforcement officers’ and firefighters retire­ment board pursuant to RCW 41.26.720. Any changes adopted by the board shall not be subject to revision by the legislature if they are certified as being reasonable by the state actuary.

The amended Section 3 (2), Section (9) (A) and Section 13 (4) definitely removes the legislature’s oversight and removes O.M.B. and the legislature from the process. What is defined as reasonable in SB 6563?

If the board increases benefits and the majority of those benefits are paid for with the newly acquired LEOFF I Fund, but require a small increase in contributions, the board’s decision will be final.

Section 9 (B) i:

Increases benefits as approved by the board shall be presented to the legislature in January of each year. The increased benefits as approved by the board shall become effective within ninety days unless a bill is enacted in the next ensuing session of the legislature, by majority vote of each house of the legislature, repealing the action of the board.

This section puts the legislators in a position to have to reduce benefits as granted by the board and would subject the legislators to extensive lobbying pressure by all concerned.

In conclusion, I want to suggest that this bill if passed could be considered a contractual benefit and protect­ed under Bakenhus vs. City of Seattle Supreme Court Decision.

Respectfully,

Richard C. Warbrouck, President
Retired Firefighters of Washington