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No. 14                                                                                                May 21, 1999

Bill Would Create Opt-Out of Public Pensions Systems

HB 199 (Cates) is a bill which proposes substantial changes to participation in Ohio's Public Retirement Systems. Under provisions of the bill all new employees or employees with less than five years of service, who are now required to participate in a public retirement system, would be given the option of opting out of that public system and into an optional system. Those optional systems would be provided by private sector companies approved by the Director of the Ohio Department of Insurance. Each public employer, including cities and villages, would have to offer at least three optional plans to employees eligible for this opt-out plan.

There is a significant difference between the public and private pensions plans involved in this change, other than their sponsorship. Ohio's public systems are defined benefit plans which accepts the risk on contributions made. They offer set benefits at retirement and accept the risk that their contribution rates and portfolio performance will be high enough to meet the demand of those benefits. On the other hand, the optional plans to be offered would be defined contribution plans. Under those plans, the contributions are set and benefits are defined by whatever the portfolio produces.

Currently this bill is undergoing hearings in the House Health, Retirement and Aging Committee. It is also pending in the Ohio Retirement Study Committee while that committee completes the required actuarial study imposed upon all retirement bills.

The League, along with a broad list of other groups (e.g. Ohio AFL-CIO, County Commissioners of Ohio, AFSCME, all the Ohio retirement funds, Ohio Education Association, Fraternal Order of Police, Buckeye Association of School Administrators) has voiced its concerns about this change in Ohio public retirement law.

As the bill is currently written, the cost to the employer is unknown. While the employer is required to continue to pay the public system 6% of payroll for all employees who opt-out of the public system, the employer contribution is not set, but probably will be set by collective bargaining agreements. Adding to that cost will be the pressure to add other coverages included by the public systems, but not covered by the private systems, such as disability, health care coverage in retirement and benefits for a surviving spouse. This uncertainty and the possibility of significant new retirement costs to our members is of great concern to the League.

Additionally, in order to qualify as a governmental retirement system and exempt employees from Social Security, these new optional plans will have to be actively "managed" in some way by each municipal government. While this will be a greater cost to all of our members, it seems to us it will be a cost to our smallest governments, that might hire a new employee every two years, that makes absolutely no sense.

Finally, the League is concerned that this siphoning off of public employees will in the long run weaken the stability of Ohio's existing public systems. The good markets of the past few years have been extremely helpful in keeping our strongest systems strong and shoring up potential long-term problems in the systems that were not as stable. The 6% employer contribution mandated in the bill for employees who opt-out is not an actuarially-figure that will insure every funds stability. Without that figure being justified and uncertainty over what the portfolio performance and the contribution rates may be in the future, the plan embodied in HB 199 is not, in our view, one that ought to be adopted for Ohio.

Obviously, this is a very important issue for many municipal officials, both in that you must deal with the cost of our public retirement systems and are members of one of those systems. Please, let you local legislators know your views and concerns about HB 199.

Bills Propose Changes Ohio's Estate Tax Law

As municipal leaders, we want to keep you apprised of legislation introduced in the General Assembly that will change Ohio's current estate tax law. We bring these bills to your attention because many of them, if passed, may effect your operating budgets by reducing the revenues you receive from the estate tax. The following are brief descriptions of the bills currently being considered, what they would do and where they are in the legislative process.

SB 108- Sen. Robert Latta (R-Bowling Green). This bill reduces the estate tax by 36% and eliminates the states share of revenue from the tax. The bill has received two hearings in the Senate Ways & Means committee, with a third scheduled for next week.

HB 31- Rep. Gregory Jolivette (R- Hamilton). The legislation would change the rate at which interest accrues on refunds of overpaid estate taxes, from 3% above the average yield on short-term U.S. government obligations, to the rate earned on the fund from which the refund is paid. The bill is currently in the House Ways & Means committee where it has received three hearings.

HB 72- Rep. Kevin Coughlin (R- Cuyahoga Falls) As introduced the bill would repeal the estate taxes effective for decedents dying on or after July 1, 2000. The bill is being heard in the House Ways & Means committee.

HB 260- Rep. Pat Tiberi (R- Columbus) This bill would eliminate the estate tax for estates under $650,000, eventually rising to $1 million in 2006. The proposal would also earmark all revenue from the remaining estate tax to municipalities and townships. The bill has received three hearings in the House Ways & Means committee.

HB 267- Rep. Gene Krebs (R- Camden) Although this is bill is the "Farmland Preservation" bill, there is language included that would reduce the Ohio estate tax for certain farmland under specified circumstances. The bill is in the House Local Government & Townships committee where it has received four hearings.

HB 289- Rep. Johnnie Maier (D- Massillon) The legislation would grant an exemption from the estate tax for the real property of a family farm that will continue to be in operation as such by the qualified heirs of a decedent. The bill also imposes a recapture tax if the exemption is elected, but the property is later transferred to someone who is not a member of the decedents family, or if the property ceases to be used as a farm. The bill has received two hearings in the House Ways & Means committee.

Electric DeReg Passes Senate.

As expected, a vote on SB 3, the electric deregulation bill, was taken on the Senate floor this week. The measure passed, along partisan lines, with 20 Republicans voting for the bill and 12 Democrats voting against it.

On Thursday, hearings on the Senate measure, sponsored by Senator Bruce Johnson, began in the House Public Utilities Committee. Chair of that committee, Representative Priscilla Mead announced during the hearing that she hopes to have the bill voted out of the panel during the second week of June. Such a timeframe would give the House time to pass the bill and allow for a conference committee, if necessary, between the Houses to iron out differences prior to the summer recess of the General Assembly.

Workers' comp grants available July I

James Conrad, Administrator, Bureau of Workers’ Compensation has announced the availability of matching grants for both private and public employers.

BWC encourages employers to take advantage of our new Safety GEAR (Grants for Education, Assistance and Research) program which will begin July 1 of this year.

The Safety GEAR program provides matching fund grants to employers to defray the cost of instituting BWC's Drug-Free Workplace Program, as well as fund research and prevention of repetitive stress disorders (RSDs), such as carpal tunnel syndrome.

Private employers will be eligible for a 2-to-1 matching grant, up to a maximum of $2,500, meaning a total of $7,500 ($2,500 from the employer and $5,000 from BWC). These funds must be used for educational training and materials for implementing BWCs Drug-Free Workplace Program.

Public employers will be eligible for a 2-to-1 matching grant up to a maximum of $5,000, meaning a total of $15,000 ($5,000 from the employer and $10,000 from BWC). The bureau is specifically targeting schools for this program. Again, these funds must be used for educational training and materials as they relate to the Drug-Free Workplace Program.

BWC's nationally recognized Drug-Free Workplace Program is a flexible, multi-tiered premium discount program for employers who volunteer to make their workplaces substance-free. The program is built around four key elements: employee and supervisor education, employee assistance programs, workplace safety measures and structured testing.

As another part of the Safety GEAR program, BWC will provide funding for the research and prevention of RSDs, such as carpal tunnel syndrome.

To find out more about BWC cost-saving programs, especiatly GEAR. Check out their website at <www.ohiobwc.com> or call 1-800-OHIOBWC.

SENATE INSURANCE, COMMERCE & LABOR, 10 a.m., North Hearing Rm.

HB 101 LABOR REQUIREMENTS (Young) Prohibits public authorities from imposing certain labor requirements as a condition of performing public works. (1st Hearing)

SENATE HIGHWAYS & TRANSPORTATION, After Session, North Hearing Rm., Chr.

SB 137 PORT AUTHORITIES (Oelslager) Comprehensively revises the powers and duties of port authorities (4th Hearing).

HOUSE PUBLIC UTILITIES: 911 SUB., 10 a.m., Rm. 018

HB 310 9-1-1 SERVICE (Mead) Provides for enhanced wireless 9-1-1, including requirements for its operation, administration, funding, and regulation and makes other changes. (2nd Hearing)

HOUSE CIVIL & COMMERCIAL LAW, 10:30 a.m., Rm. 121

HB 295 Y2K LIABILITY IMMUNITY (Terwilleger) Provides immunity from liability to the state and to political subdivisions from harm relating to the Year 2000 computer problem. (3rd Hearing)

HOUSE ETHICS & STANDARDS, 11 a.m., Rm. 113

SB 78 PUBLIC RECORDS (Oelslager) Generally grants members of the public the option of choosing the medium in which they will receive copies of public records. (1st Hearing)

SENATE WAYS & MEANS, After Session, South Hearing Rm.

HB 76 LOCAL DEBT LIMIT (Brading) Exempts from the calculation of a subdivision's debt limit a specified portion of the principal amount of securities issued for permanent improvements if payments in lieu of taxes are pledged to repay those securities. (1st Hearing)

SB 108 ESTATE TAX (Latta) Reduces the estate tax by 36% over five years and phases out the share of the estate tax paid to the state. (2nd Hearing)

HOUSE PUBLIC UTILITIES, 3 p.m. or After session, Rm. 313

SB 3 ELECTRIC DEREGULATION (Johnson) Provides for competition in retail electric service. (2nd Hearing)

HB 5 ELECTRIC DEREGULATION (Mead) Declares that the public policy of the State of Ohio is to effect the restructuring of the electric industry pursuant to specified goals permitting effective competition in the provision of retail electric service to all Ohio consumers. (8th Hearing)

HOUSE LOCAL GOVERNMENT & TOWNSHIPS, 4 p.m., Rm. 121

HB 298 SMOKING RULES (Schuler) Requires that any orders or rules enacted by a board of health related to smoking be adopted by the legislative authority of a municipal corporation or township before those orders or rules are effective within the boundaries of that political subdivision. (3rd Hearing)

HB 303 UNFUNDED MANDATES (Buchy) Creates the Local Government Mandates Commission and makes other changes. (2nd Hearing)

SENATE STATE & LOCAL GOVT. & VETERAN'S AFFAIRS, 4:30 p.m., South Hearing Rm.

HB 189 MUNICIPAL POPULATION COUNT (Taylor) Excludes persons under detention in a detention facility from persons counted to determine the population of a municipal corporation. (1st Hearing)

HB 40 CONTRACT PREFERENCE (Jolivette) Requires certain political subdivisions to provide a preference, under specified circumstances, when comparing bids for the awarding of public contracts. (2nd Hearing)

HOUSE PUBLIC UTILITIES, 8:30 a.m., Rm. 313

SB 3 ELECTRIC DEREGULATION (Johnson) Provides for competition in retail electric service. (3rd Hearing)