Legislature(2001 - 2002)

05/10/2002 02:17 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 180(FIN)(efd fld)                                                                                      
                                                                                                                                
     "An   Act  implementing   pay  differentials   based  on                                                                   
     geographic  areas for  certain state  employees and  for                                                                   
     members of  the Alaska State Defense Force;  relating to                                                                   
     cost-of-living   differentials    for   state   aid   to                                                                   
     municipalities."                                                                                                           
                                                                                                                                
MARILYN WILSON,  STAFF, SENATOR DONLEY, testified  in support                                                                   
of the  legislation. Ms.  Wilson read  the sponsor  statement                                                                   
into the record:                                                                                                                
                                                                                                                                
     Committee  Substitute  for Senate  Bill  180 adopts  the                                                                   
     most recent  study to determine geographic  differential                                                                   
     payments  for cost-of-living  differences paid  to state                                                                   
     employees  who are not  union members. This  legislation                                                                   
     adopts the most current geographic  differential report.                                                                   
     The  current  statutory  formula has  not  been  updated                                                                   
     since June 1976 and unfairly  discriminates against some                                                                   
     state  employees while unfairly  benefiting others.  All                                                                   
     union state employees are  already under the new formula                                                                   
     based on  the most recent  1995 study. A  similar change                                                                   
     in  law was  passed  by the  legislature  in 2000.  That                                                                   
     legislation  contained  other changes  effecting  public                                                                   
     employees  and was  vetoed  by the  governor. This  bill                                                                   
     does not  contain the provisions  the governor  cited as                                                                   
     the reason for his veto of the 2000 bill.                                                                                  
                                                                                                                                
     The  geographic  differential   calculation  utilizes  a                                                                   
     percentage  above a  specific  measurement baseline.  In                                                                   
     Alaska,  Anchorage is  the only  federal measurement  of                                                                   
     the cost-of-living. Therefore,  Anchorage is used as the                                                                   
     baseline measurement for  determining the cost-of-living                                                                   
     in  the various Alaska  election  districts and  "out of                                                                   
     state"   locations.   This   legislation   will   affect                                                                   
     employees  in  the  executive branch  of  government  in                                                                   
     partially  exempt  service   or  not  covered  by  union                                                                   
     contract, and members of  the Alaska State Defense Force                                                                   
     whenever they are called to active service.                                                                                
                                                                                                                                
     Committee  Substitute   for  Senate  Bill   180  effects                                                                   
     employees hired on or after  the effective date. Current                                                                   
     employees will  remain under AS 39.27.020,  even if they                                                                   
     leave and  return to state employment after  AS 39.27.02                                                                   
     1 goes into effect.                                                                                                        
                                                                                                                                
     Committee  Substitute  for  Senate  Bill  180  purposely                                                                   
     holds harmless  other programs that use  these statutory                                                                   
     sections  for calculation  of  revenue sharing  cost-of-                                                                   
     living  adjustments.  It also  makes  no  change to  the                                                                   
     current differential  applicable to state  employees who                                                                   
     work in another state.                                                                                                     
                                                                                                                                
     Committee  Substitute for  Senate Bill  180 will  ensure                                                                   
     all  new state  employees receive  fair pay  adjustments                                                                   
     based on a new fairer cost-of-living analysis.                                                                             
                                                                                                                                
     Fiscal Notes  indicate that  immediate savings in  FY 03                                                                   
     will  be approximately $55,000,  increasing to  $370,000                                                                   
     by FY 08.                                                                                                                  
                                                                                                                                
Co-Chair Williams provided members with proposed committee                                                                      
substitute, work draft 22-LS0324/R, 5/10/02 (copy on file).                                                                     
                                                                                                                                
MIKE  TIBBLES,   STAFF,  REPRESENTATIVE  WILLIAMS,   provided                                                                   
information  on the legislation.  He explained  that  the new                                                                   
cost  of  living   differential  would  only   apply  to  new                                                                   
employees.  A new  employee  in  an area  where  the cost  of                                                                   
living  differential  was  higher would  receive  the  higher                                                                   
cost, but  the old employee would  not. It would  be possible                                                                   
for an employee  who had been working in an  area for several                                                                   
years  to  receive  less  than  a  brand  new  employee.  The                                                                   
proposed committee  substitute resolves  the equity  issue by                                                                   
providing  that   everyone  gets  the  old   cost  of  living                                                                   
differential unless  that area  went up; then  everyone would                                                                   
receive the increase.                                                                                                           
                                                                                                                                
Co-Chair  Mulder  MOVED  to ADOPT  work  draft,  22-LS0324\R,                                                                   
5/10/02. Representative Croft OBJECTED.                                                                                         
                                                                                                                                
Representative  Croft questioned if  the change would  depend                                                                   
on the  two employees staying  in the same area.  Mr. Tibbles                                                                   
noted that  the new  schedule applies  to all employees.  The                                                                   
old  schedule would  apply to  old  employees only  if it  is                                                                   
better.                                                                                                                         
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Ms. Wilson  explained that  the issue was  brought up  in the                                                                   
House  State Affairs  Committee.  She provided  members  with                                                                   
Amendment 1 (copy  on file). She observed that  the intent is                                                                   
to save money. The amendment would  exempt election districts                                                                   
11, 14,  16c and 17 from  the provisions of  the legislation.                                                                   
These  areas  would  receive   the  current  cost  of  living                                                                   
differential. Co-Chair Williams  noted that the amendment had                                                                   
not been moved. Co-Chair Williams OBJECTED.                                                                                     
                                                                                                                                
Representative Croft  questioned why 1961  election districts                                                                   
were used.  Ms. Wilson responded  that they are  the election                                                                   
districts  that  were used  in  statute. She  clarified  that                                                                   
Kotzebue, Bethel, and Barrow would be affected.                                                                                 
                                                                                                                                
Representative Harris WITHDREW Amendment 1.                                                                                     
                                                                                                                                
ALISON    ELGEE,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                   
ADMINISTRATION,  testified in support  of the legislation  as                                                                   
and  effort to  bring  equity to  the  state employee  salary                                                                   
schedule. She  explained that the last comprehensive  cost of                                                                   
living differential  study was done in 1985.  The legislation                                                                   
incorporates the  salary schedule for non-covered  employees.                                                                   
She  stated   that  the  Administration  would   support  the                                                                   
committee substitute,  but not the amendment  proposed by the                                                                   
sponsor.  The four  districts  that would  receive  increases                                                                   
under  the  proposed  committee   substitute  are:  Kotzebue,                                                                   
Kodiak, Bethel, and Barrow.                                                                                                     
                                                                                                                                
In  response to  a  question by  Vice-Chair  Bunde, Ms  Elgee                                                                   
explained   that,  under   the   legislation,  the   existing                                                                   
employees would be protected from  any loss of pay as long as                                                                   
they remain  continuously  employed; this  is similar  to the                                                                   
method  used  under  the  collective  bargaining  agreements.                                                                   
Vice-Chair  Bunde summarized  that  there  is equity  between                                                                   
union and nonunion employees,  but inequity between new hires                                                                   
and old.                                                                                                                        
                                                                                                                                
TAPE HFC 02 - 108, Side B                                                                                                     
                                                                                                                                
Representative  Croft  questioned  how  the  amendment  would                                                                   
affect  the four areas  that were  identified for  increases:                                                                   
Kotzebue,  Kodiak, Bethel,  and Barrow.  Ms. Elgee  explained                                                                   
that a new differential  would be adopted but  not applied to                                                                   
the four election  districts, which would increase  under the                                                                   
study.  Collective   bargaining   agreements  use   the  same                                                                   
differentials.  The legislation  would apply  the results  of                                                                   
the study, which determined that  there should be an increase                                                                   
in the four areas.                                                                                                              
                                                                                                                                
Co-Chair Mulder  questioned if the amendment  would result in                                                                   
greater savings to  the state of Alaska in the  long or short                                                                   
term.                                                                                                                           
                                                                                                                                
Ms. Elgee  explained that the  legislation would result  in a                                                                   
savings  of  approximately  $26   thousand  dollars  for  the                                                                   
executive  branch.  There would  be  an  initial cost  of  $8                                                                   
thousand  dollars under  the proposed  committee  substitute.                                                                   
She clarified  that the  proposed committee substitute  would                                                                   
be cost  neutral in the first  year. The cost savings  by the                                                                   
third  year would  be  almost identical  to  the House  State                                                                   
Affairs version.  By FY08  there would be  a savings  of $134                                                                   
thousand  dollars  in  the executive  branch.  The  amendment                                                                   
would retain  the old differential  in districts 11,  14, 16c                                                                   
and 17 and result  in greater savings. She  observed that the                                                                   
amendment would provide greater  savings in both the long and                                                                   
short terms.                                                                                                                    
                                                                                                                                
Co-Chair Mulder  provided members  with Amendment 2  (copy on                                                                   
file).  Ms.  Elgee  clarified  that  the  proposed  committee                                                                   
substitute  would   grandfather  in  existing   employees  in                                                                   
districts that  would see  a decrease in  the cost  of living                                                                   
differential. These  employees would continue to  get cost of                                                                   
living  adjustments  and  merit   increases  as  if  the  new                                                                   
differential had  not been adopted. Amendment  2 would freeze                                                                   
those employees  at their July  2002 salary level  until such                                                                   
time  as the  cost  of living  adjustments  applied to  their                                                                   
salary in conjunction with the  new differential was equal or                                                                   
greater than  the salary  that they had  been frozen  at. The                                                                   
amendment  would  apply  to  executive  branch  employees  in                                                                   
Fairbanks, Palmer,  Kenai, Sitka,  and Dillingham.  There are                                                                   
60  employees in  Fairbanks,  15  in Palmer  and,  10 in  the                                                                   
Kenai.                                                                                                                          
                                                                                                                                
Co-Chair Mulder  observed that the amendment  would establish                                                                   
a floor until they grew into the  floor. Then they would grow                                                                   
with the floor. He questioned the savings.                                                                                      
                                                                                                                                
Ms.  Elgee acknowledged  that  the savings  would be  greater                                                                   
than the  fiscal note  and stated  that the department  would                                                                   
have to recalculate the savings.                                                                                                
                                                                                                                                
Representative  Lancaster asked  if employees transferred  in                                                                   
and out  of the four  areas. Ms.  Elgee noted that  personnel                                                                   
transfers occur.  The majority  of the non-covered  employees                                                                   
in the  executive branch  are with the  Department of  Law or                                                                   
Alaska Public Defenders Agency.                                                                                                 
                                                                                                                                
CHRIS CHRISTENSEN, STAFF COUNSEL,  ALASKA COURT SYSTEM, noted                                                                   
that the legislation  would affect some  employees positively                                                                   
and some  negatively.  He observed that  240 court  employees                                                                   
would be  affected. He  observed that  170 employees  work in                                                                   
communities in  which the differential  would be  reduced and                                                                   
70 work  in communities  in which  the differential  would be                                                                   
increased. He stressed that the  union employees receive a 42                                                                   
percent  differential  in rural  areas  such  as Barrow.  The                                                                   
court  non-union  employees  are  being  paid  a  31  percent                                                                   
differential. He noted that the  previous version proposed to                                                                   
pay new  employees more than  existing employees.  He pointed                                                                   
out that  this would  have resulted in  cases where  range 12                                                                   
supervisors would  be paid less than new range  10 employees.                                                                   
The  previous  senate version  would  have saved  the  Alaska                                                                   
Court System $28 thousand dollars  in the first year and $235                                                                   
thousand  dollars   by  year  six.  The   proposed  committee                                                                   
substitute  would not  start saving money  until year  three.                                                                   
The first  year would cost  $70 thousand dollars;  the second                                                                   
year it  would save  $15 thousand dollar;  it would  save $40                                                                   
thousand  dollar  in  year  three;  and  over  $200  thousand                                                                   
dollars by year six. The proposed  committee substitute would                                                                   
treat  all   employees  fairly  by  grandfathering   existing                                                                   
employees.                                                                                                                      
                                                                                                                                
Vice-Chair Bunde observed that  there would be an urban/rural                                                                   
fairness issue. Mr. Christensen  acknowledged the urban/rural                                                                   
fairness  issue but  observed  that new  employees know  what                                                                   
they are getting  when they take the job. Tiered  systems are                                                                   
not unusual. The Senate version  would reduce the salaries of                                                                   
existing employees.                                                                                                             
                                                                                                                                
In  response  to  a question  by  Representative  Croft,  Mr.                                                                   
Christensen observed  that Amendment  1 would carve  out four                                                                   
rural areas that  would have received the  greatest increase.                                                                   
He pointed out that the sponsor  statement indicated that the                                                                   
intent was to  treat employees fairly, but Amendment  1 would                                                                   
discriminate against  employees by continuing to  pay certain                                                                   
employees too little.                                                                                                           
                                                                                                                                
Mr. Christensen  referred to Amendment 2. He  summarized that                                                                   
the intent  of the  amendment is to  make sure that  existing                                                                   
employees would continue  to get the new differential,  in an                                                                   
area where the  geographical differential would  go down, but                                                                   
would  not be  entitled to  COLA's or  merit increases  until                                                                   
they  catch up.  The provision  would not  apply to  internal                                                                   
promotion; the  provision would  only apply to  longevity and                                                                   
COLA increases.                                                                                                                 
                                                                                                                                
PAUL  LYLE,   FAIRBANKS,  testified  via   teleconference  in                                                                   
support of the  committee substitute. He urged  the Committee                                                                   
not to  adopt Amendment 1, which  would freeze their  pay. He                                                                   
maintained that the non-covered  employees are already behind                                                                   
in their  pay. He stressed  that it would  mean that  many in                                                                   
state service  would not receive another pay  increase during                                                                   
their  employment. He  stated that  the committee  substitute                                                                   
would be a fair treatment of employees.                                                                                         
                                                                                                                                
JOHN  ATHENS,  FAIRBANKS,  testified  via  teleconference  in                                                                   
support  of the committee  substitute.  He observed  that the                                                                   
differential  change  is  based   on  a  1985  study  by  the                                                                   
Department  of  Administration.  He  felt that  it  would  be                                                                   
unfair to reduce salaries of career  state employees based on                                                                   
a 1985 study.                                                                                                                   
                                                                                                                                
Representative Whitaker observed  that he would object to the                                                                   
amendments.                                                                                                                     
                                                                                                                                
Co-Chair Mulder  MOVED to  ADOPT Amendment 2,  22-LS0324\R.1,                                                                   
5//10/02.  He noted  that Fairbanks  has a  15 percent  COLA,                                                                   
which he  thinks is unjustified.  The new COLA is  4 percent.                                                                   
He felt that it would be fair  to hold those employees to the                                                                   
existing COLA  until they reach  the floor. He  observed that                                                                   
the legislation  would not generate real savings  without the                                                                   
amendment.                                                                                                                      
                                                                                                                                
Representative  Davies  argued   against  the  amendment.  He                                                                   
observed  that the  savings would  be delayed  for the  first                                                                   
couple of years, but that the  full savings would be realized                                                                   
as employees retire. He noted  that employees have been hired                                                                   
based on a  certain pay rate and  argued that it is  not fair                                                                   
to change  the amount  after employment.  He emphasized  that                                                                   
employees  have  made  financial  commitments  based  on  the                                                                   
anticipation  of  their  pay.  He spoke  in  support  of  the                                                                   
grandfather provision of the employees.                                                                                         
                                                                                                                                
Representative Whitaker spoke against the amendment.                                                                            
                                                                                                                                
Representative  Croft noted  that  the grandfather  provision                                                                   
would fade out  through attrition. He questioned  if the data                                                                   
is really based on a 1985 study.                                                                                                
                                                                                                                                
Ms. Elgee acknowledged that the  last full differential study                                                                   
was in 1985.  She observed that similar legislation  has been                                                                   
introduced  every year.  Representative  Croft stressed  that                                                                   
the data is not good enough to justify Amendment 2.                                                                             
                                                                                                                                
Vice-Chair Bunde spoke in support of the amendment.                                                                             
                                                                                                                                
Co-Chair  Mulder  argued that  employees  do  not base  their                                                                   
finances on anticipated raises  or COLA increases. He pointed                                                                   
out  that COLA's  are  adjusted periodically.  He  maintained                                                                   
that it would be fair to hold the floor.                                                                                        
                                                                                                                                
Representative Davies argued in  opposition to the amendment.                                                                   
He maintained  that the  fairest method  would be to  protect                                                                   
current employees  and set up  a standard for those  that are                                                                   
hired with the understanding [of the new differential].                                                                         
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Lancaster, Moses, Bunde, Williams, Mulder                                                                             
OPPOSED: Whitaker, Croft, Davies, Harris,                                                                                       
                                                                                                                                
Representative Foster and Hudson were absent from the vote.                                                                     
                                                                                                                                
The MOTION PASSED (5-4).                                                                                                        
                                                                                                                                
Co-Chair Mulder  MOVED to  report HCS CSSB  180 (FIN)  out of                                                                   
Committee with  the accompanying fiscal note.  Representative                                                                   
John Davies OBJECTED.                                                                                                           
                                                                                                                                
Representative Croft  stressed that the legislation  is based                                                                   
on  1985  data,  which  could  result  in  radical  different                                                                   
calculations. He  maintained that it would be  appropriate to                                                                   
do another study and implemented it quickly.                                                                                    
                                                                                                                                
Representative Lancaster  stated that he has  a philosophical                                                                   
problem with COLAs.                                                                                                             
                                                                                                                                
Vice-Chair  Bunde spoke  in support  of  the legislation.  He                                                                   
observed that  the cost of living  in Anchorage is  no longer                                                                   
significantly  higher than  other  west coast  cities in  the                                                                   
United States.                                                                                                                  
                                                                                                                                
Representative   Davies   spoke    in   opposition   to   the                                                                   
legislation. He  stressed the inequities and  maintained that                                                                   
it would be challenged in court.                                                                                                
                                                                                                                                
Co-Chair  Mulder argued  in support  of  the legislation.  He                                                                   
stressed that the  numbers still pertain and  that the intent                                                                   
is to save money for the state.                                                                                                 
                                                                                                                                
Representative  Davies stressed that  the primary  reason for                                                                   
the COLA  is to provide equity.  The savings to the  state of                                                                   
Alaska is only  $300 thousand dollars. He did  not think that                                                                   
the denial of someone's pay increase  for the next five years                                                                   
based on unsubstantiated data would stand up in court.                                                                          
                                                                                                                                
Co-Chair Mulder pointed out that the legislation protects                                                                       
rural Alaska.                                                                                                                   
                                                                                                                                
A roll call vote was taken on the motion to move CSSB
180(FIN)(efd fld) from Committee.                                                                                               
                                                                                                                                
IN FAVOR: Moses, Bunde, Williams, Mulder                                                                                        
OPPOSED: Lancaster, Whitaker, Croft, Davies, Harris,                                                                            
                                                                                                                                
Representative Foster and Hudson were absent from the vote.                                                                     
                                                                                                                                
The MOTION FAILED (4-5).                                                                                                        
                                                                                                                                
CSSB 180(FIN)(efd fld) was heard and HELD in Committee for                                                                      
further consideration.                                                                                                          

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