Legislature(2009 - 2010)

04/16/2009 05:11 PM FIN

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 1(FIN)                                                                                                 
     "An Act increasing the minimum hourly wage; and                                                                            
     providing for an effective date."                                                                                          
Co-Chair  Hawker announced  that  public testimony  for SB  1                                                                   
would  commence.  He  felt  that   the  proposed  tip  credit                                                                   
amendment was appropriate for the legislation.                                                                                  
MARIE DARLIN, AMERICAN ASSOCIATION  OF RETIRED PERSONS (AARP)                                                                   
CAPITAL CITY  TASK FORCE,  testified in favor  of SB 1.   She                                                                   
highlighted points  from the letter  submitted by  AARP (copy                                                                   
on file).  She expressed concern  for older Alaskans  working                                                                   
part-time   at  the   minimum  wage.   She  articulated   the                                                                   
importance  of  a  living  wage  for  elderly  Alaskans.  She                                                                   
pointed  out to  the  committee that  the  number of  elderly                                                                   
workers earning  the minimum  wage was  growing in  size, and                                                                   
that policies  should be implemented  to insure  that elderly                                                                   
employees  are  earning  enough  to  cover  essential  living                                                                   
5:18:27 PM                                                                                                                    
DALE FOX,  PRESIDENT, ALASKA  CABARET, HOTEL, RESTAURANT  AND                                                                   
RETAILERS  ASSOCIATION   (CHARR),  ANCHORAGE   testified  via                                                                   
teleconference.  He stated  that CHARR  supports the  minimum                                                                   
wage   increase,   provided  the   legislation   includes   a                                                                   
comprehensive tip  credit proposal. He detailed  several ways                                                                   
in which  the tip credit  would help employers.  He explained                                                                   
that  the proposed  tip credit  would  provide incentives  to                                                                   
businesses   that   provide   an   environment   for   highly                                                                   
compensated  tipped  employees.  He  stressed  that  the  tip                                                                   
credit proposal  that CHARR  suggests differs from  similarly                                                                   
titled  laws in  other states.  For example,  the tip  credit                                                                   
proposed  by CHARR  would not  reduce  the tipped  employee's                                                                   
wage of  $7.25. The  tipped employee  would  need to make  at                                                                   
least $14.50  per hour in order  for the employer  to qualify                                                                   
for the credit.                                                                                                                 
Co-Chair  Hawker  commented  that  the  legislature  was  not                                                                   
prepared  to   move  forward   on  the  CHARR   tip  proposal                                                                   
5:21:49 PM                                                                                                                    
ROBERT MCCORMICK, FINANCIAL MANAGER,  GLACIER BREW HOUSE/ORSO                                                                   
RESTORANTE,  ANCHORAGE,  testified   via  teleconference.  He                                                                   
stated that  the majority of  his employees make  the minimum                                                                   
wage.  In addition  to paid  wages, the  employees also  earn                                                                   
tips. In  2008, tipped employees  averaged as much  as $13.99                                                                   
per hour  in tips. When added  to the average hourly  wage of                                                                   
$7.83, the total  hourly wage was 21.83. He  stated that only                                                                   
the highest  paid restaurant workers  would benefit  from the                                                                   
legislation.  He explained  that the tip  credit proposed  by                                                                   
CHARR  would affect  only persons  making $7.25  per hour  or                                                                   
more in tip  income.  He opined that the  restaurant industry                                                                   
has been  burdened by  challenges brought  on by the  current                                                                   
economic  crisis.  He  stressed  that  if  the  minimum  wage                                                                   
increase is  to be  considered it must  include a  tip credit                                                                   
5:24:57 PM                                                                                                                    
Representative   Gara   shared   that   he   understood   the                                                                   
difficulties  faced by the  restaurant industry.  He reasoned                                                                   
that it made sense to adjust the  minimum wage to reflect the                                                                   
rising  cost  of   living.  He  noted  that   the  prices  on                                                                   
restaurant menus  have risen while  the wage paid  to servers                                                                   
has not.                                                                                                                        
Mr. McCormick  contended that  the average percentage  tipped                                                                   
employees receive  for their service  is based on  sales, and                                                                   
therefore,  rises with  inflation.  He felt  that because  of                                                                   
this, the  raising of the  hourly wage would  be unnecessary.                                                                   
Representative Gara  asked if Mr. McCormick's  employees were                                                                   
currently making the  same wage of $7.15 per hour  now, as in                                                                   
2006. Mr. McCormick said that was correct.                                                                                      
5:27:51 PM                                                                                                                    
BILL  BUBBEL,   OWNER,  PUMP   HOUSE  RESTAURANT,   FAIRBANKS                                                                   
testified via teleconference.  He inquired about the proposed                                                                   
amount  of  the  minimum  wage  increase.    Co-Chair  Hawker                                                                   
replied that the legislation would  raise the minimum wage by                                                                   
$.50 after January 1, 2010.  Mr.  Bubbel felt that the amount                                                                   
was  acceptable. He  stressed  that Department  of Labor  and                                                                   
Workforce Development  (DOL) statistics, which  state that 22                                                                   
thousand Alaskans are currently  earning minimum wage, do not                                                                   
take  into  account  tipped  employees.   He  felt  that  the                                                                   
statistics  on restaurant  employee earnings  were flawed  in                                                                   
various ways.  He explained that  restaurant employers  pay a                                                                   
10  percent  tax on  employee  tips.  For example;  when  his                                                                   
employees  earn a total  of $400,000  a year  in tips,  he is                                                                   
responsible for paying  $40,000 in taxes on  those tips. This                                                                   
is comparable to  a yearly wage that he was unable  to pay to                                                                   
another employee.  The tip  credit is a  way to mitigate  the                                                                   
extra  expense to  employers.  He expressed  concern for  the                                                                   
possibility of a financially unsuccessful  tourist season. He                                                                   
reiterated  Mr. McCormick's  rhetoric about  the rise  of tip                                                                   
percentage with inflation.                                                                                                      
5:32:40 PM                                                                                                                    
JACK  AMON, OWNER,  MARX BROTHERS  CAFÉ, ANCHORAGE  testified                                                                   
via  teleconference.   He  stressed   that  most   restaurant                                                                   
employees already  make well over the minimum  wage. He added                                                                   
that for all  financial purposes, tipped earnings  are wages.                                                                   
He shared  that he average  earnings for tipped  employees in                                                                   
the restaurant industry  are $25,000 to $40,000  per year. He                                                                   
stated that the  structure of minimum wage laws  in the state                                                                   
unfairly  restrict  the restaurant  industry  from  receiving                                                                   
compensation for  tipped employees.  He felt that  the intent                                                                   
of the bill was unfair and contrary to law.                                                                                     
5:34:42 PM                                                                                                                    
Representative  Gara pointed  out that  the minimum  wage has                                                                   
not gone up in  six years.  Mr. Amon questioned  the logic of                                                                   
forcing  the restaurant  industry  to  pay a  higher  minimum                                                                   
wage.  Representative  Gara  countered   that  only  the  tip                                                                   
portion of the employee salary has risen with inflation.                                                                        
5:36:07 PM                                                                                                                    
BRUCE BURNETT,  OWNER, TGIFRIDAYS,  ANCHORAGE, testified  via                                                                   
teleconference.  He stated  that none  of his employees  make                                                                   
less than  $9.00 per  hour. He said  that the bartenders  and                                                                   
waiters that  work for  him make $30.00  to $40.00  per hour,                                                                   
including  tips. He  felt  the tip  credit  was necessary  to                                                                   
balance a raise in the minimum wage.                                                                                            
5:39:24 PM                                                                                                                    
Representative Kelly summarized  that Mr. Burnett didn't want                                                                   
the  government  controlling  employer  ability  to  set  pay                                                                   
scales  for their establishments.  Mr.  Burnett felt  that he                                                                   
amount employers would be asked  to spend on the raises could                                                                   
be excessive.                                                                                                                   
5:40:57 PM                                                                                                                    
FRED  ROSENBERG, OWNER,  RED ROBIN,  ANCHORAGE testified  via                                                                   
teleconference.  He echoed the  previous testimony.  He spoke                                                                   
in support  of raising the  minimum wage, but  emphasized the                                                                   
need for  a tip credit. He  said that the federal  government                                                                   
recognizes  all wages  as income. Waiters  in his  restaurant                                                                   
average $22 per  hour in reported tip income,  in addition to                                                                   
the hourly wage. The tip credit  is recognized in forty-three                                                                   
states across the country as way  to balance the wages of all                                                                   
restaurant employees.  It provides  the employers with  a way                                                                   
to pay non tipped employees a comparable wage.                                                                                  
5:44:12 PM                                                                                                                    
BOB  WINN,  CHARR, ANCHORAGE  testified  via  teleconference,                                                                   
agreed  with the  previous testimony.  He felt  that the  tip                                                                   
credit  was   crucial  to  ensure   the  survival   of  small                                                                   
businesses in the current economic climate.                                                                                     
Representative Gara commented  that as a restaurant owner, he                                                                   
is  aware  that  restaurant profit  margins  are  not  large;                                                                   
however,  as  a  policy  maker,  he  is  advocating  for  the                                                                   
5:47:45 PM                                                                                                                    
TRINA  JOHNSON,   OWNER,  LAMEX,   ANCHORAGE  testified   via                                                                   
teleconference.  She  agreed with  the  previous  testifiers.                                                                   
She shared  her experience  in the  restaurant industry.  She                                                                   
said that the minimum wage increase  of five years ago forced                                                                   
her  to close  one  of her  restaurants.  She  referred to  a                                                                   
letter she  submitted to  the committee  (copy of file).  She                                                                   
related that  she no longer is  able to provide  any benefits                                                                   
to her  employees. She testified  strongly in support  of the                                                                   
addition of a tip credit to the legislation.                                                                                    
5:51:23 PM                                                                                                                    
Co-Chair  Hawker solicited  further  public testimony.  There                                                                   
being none, public testimony was closed.                                                                                        
Representative  Gara   shared  his  decision  not   to  offer                                                                   
Amendment 2, which  had been handed out to  the committee for                                                                   
discussion. He  referred to  the Legislative Research  Report                                                                   
on the  deletion of the  inflation proofing provision  on the                                                                   
minimum  wage (copy  on file).  He explained  that under  the                                                                   
Murkowski  administration  the inflation  proofing  provision                                                                   
was deleted from the minimum wage,  stalling the minimum wage                                                                   
at  $7.15  per  hour. Had  the  provision  remained  and  the                                                                   
minimum wage  kept up  with inflation it  would now  be $8.50                                                                   
per hour.  He maintained that  there would be  no significant                                                                   
employee  impact if  wages were  raised a maximum  of 10  per                                                                   
cent a year.  He spoke in  favor of raising the  minimum wage                                                                   
to  make  up  for the  inflation  losses  that  workers  have                                                                   
incurred since  2003. The amendment would have  increased the                                                                   
minimum wage  by 70 cents per  year for the next 2  years. He                                                                   
pointed out that 10,000 people  earn less than $8 per hour in                                                                   
the state. He  thought fair pay for hard work  was important.                                                                   
He  related  that   the  wage  increase  was   necessary  for                                                                   
employees that might not be courageous  enough to demand wage                                                                   
increases,  which are  necessary to  offset the  rise in  the                                                                   
cost of living.                                                                                                                 
5:54:51 PM                                                                                                                    
Representative  Fairclough  voiced  support for  the  minimum                                                                   
wage   increase.   She   requested  an   expansion   of   the                                                                   
conversation to include global  business issues. She informed                                                                   
the committee  that the United  States is currently  indebted                                                                   
to  China  for  $3 trillion.  She  asserted  that  people  in                                                                   
America  can't  afford to  buy  American made  products.  She                                                                   
stressed that  increasing labor  costs would force  companies                                                                   
to raise  prices on  goods and  services. She emphasized  the                                                                   
importance  of  supporting a  tip  credit  in order  to  save                                                                   
American jobs.   She felt the minimum wage  increase, without                                                                   
the tip credit, was inappropriate  given the current economic                                                                   
5:58:24 PM                                                                                                                    
Vice-Chair  Thomas spoke  of his experience  as a  commercial                                                                   
fisherman. He felt with the current  price of fish being low,                                                                   
an increase  in the  minimum wage  could harm the  commercial                                                                   
fishing industry.  He expressed  alarm that 10,000  people in                                                                   
the state  were making  less than  minimum wage. He  asserted                                                                   
that DOL distributes  a substantial amount of  money to train                                                                   
Alaskans  for  jobs  that  pay above  the  minimum  wage  and                                                                   
wondered  why   there  were  so   many  low  paid   residents                                                                   
throughout the state.                                                                                                           
6:00:25 PM                                                                                                                    
Representative  Crawford  commented  that the  proposed  $.50                                                                   
rise of  the minimum  wage was inadequate.  He felt  that the                                                                   
lack of  benefits and  low wages  presented to the  workforce                                                                   
were appalling. He spoke against  the tip credit and stressed                                                                   
that the minimum wage should be  higher. He also stressed the                                                                   
need  for employees  to  receive  health care  benefits  from                                                                   
their   employers.   He  expressed   frustration   with   the                                                                   
6:03:43 PM                                                                                                                    
Co-Chair  Hawker referred  to a document  distributed  to the                                                                   
committee   by   Representative   Gara's   office   entitled,                                                                   
"Estimate  Alaska  2007  Employment  by  Industry  and  Below                                                                   
Certain Wages" (copy on file).  The numbers, provided by DOL,                                                                   
show  that approximately  9,000  workers  in  the state  earn                                                                   
$7.75 per hour. About 22,000 earn less than $8.75 per hour.                                                                     
Representative  Gara commented that  Alaska used to  have the                                                                   
highest minimum wage  in the country, and now  has the lowest                                                                   
minimum wage on the West Coast.                                                                                                 
Vice-Chair Thomas requested that  DOL provide a report on how                                                                   
many of  Alaska's unemployed  workers  have been offered  job                                                                   
6:05:23 PM                                                                                                                    
Co-Chair Hawker  noted the zero  fiscal note represented  the                                                                   
impact  to the  State  of Alaska  as an  entity,  but not  to                                                                   
private employers.                                                                                                              
6:05:31 PM                                                                                                                    
Representative  Kelly expressed  disappointed that  there had                                                                   
not been  more support  for including the  tip credit  in the                                                                   
Vice-Chair  Thomas MOVED to  report CSSB  1 out of  Committee                                                                   
with individual  recommendations and the  accompanying fiscal                                                                   
note.  There being NO OBJECTION, it was so ordered.                                                                             
CSSB 1 (FIN) was REPORTED out  of Committee with the attached                                                                   
zero  fiscal  note  and  the  recommendations  of  individual                                                                   
6:07:36 PM                                                                                                                    

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