Legislature(2001 - 2002)
04/11/2002 08:06 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 180 - STATE EMPLOYEE/ DEFENSE FORCE PAY COLAS CHAIR COGHILL announced that the final order of business would be 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." Number 2460 MARILYN WILSON, Staff to Senator Dave Donley, Alaska State Legislature, presented SB 180 on behalf of the sponsor, the Senate Finance Committee, co-chaired by Senator Donley. She read the following sponsor statement: 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. The current statutory formula has not been updated since June 1976 and unfairly discriminates against some state employees while unfairly benefiting others. 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 election districts. 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 [affects] employees hired on or after the bill goes into effect. Current employees will remain under AS 39.27.020. 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 approximately $370,000 by FY 08. Number 2292 REPRESENTATIVE WILSON asked what the cost differential is based on. Number 2254 SENATOR DAVE DONLEY, Alaska State Legislature, co-chair of the Senate Finance Committee, sponsor of SB 180, answered that the Department of Administration put together the study, and he doesn't know how the most recent study was developed. All union employees in the state are covered under that study. The legislature did pass the adoption of that study for all state employees about three or four years ago, but it was vetoed by the governor. He pointed out that the statute uses the original redistricting plan at statehood. Number 2168 REPRESENTATIVE STEVENS asked when SB 180 takes effect. SENATOR DONLEY answered that it begins at the beginning of the next fiscal year. It is not retroactive. It would apply to the new non-union employees. The vast majority of state employees are already under the new cost-of-living differential. He commented that the good news is it starts to save the state money. Number 2106 CHAIR COGHILL asked Senator Donley to explain the amendment. SENATOR DONLEY explained that the Department of Administration proposed an amendment, but he didn't agree with all of it, so he adapted part of it. The original amendment from the department read [original punctuation provided]: Sec. 4. AS 39.27.020 is amended by adding a new subsection to read: (d) The pay step differentials in this section apply to a person who has been employed by the state prior to July 1, 2002 and remains continuously employed by the state in the same geographic differential location, unless the pay step differential in AS 39.27.021 would result in higher compensation in which case AS 39.27.021 applies. A person who begins state employment for the first time on or after July 1 2002, is subject to AS 39.27.021 whenever that person is employed by the state. [The original written amendment also included crossed- out wording from Section 4 of CSSB 180(FIN)(efd fld) that was being deleted in the amendment.] [The department's explanation follows:] This amendment does two things: 1) clarifies that the grandfathering protections of applying the old differential to existing employees only remain while the employee remains continuously employed in the same geographic differential area; instead of being based upon the initial date of hire of the employee. Under the language as it currently exists in SB 180, an individual who was employed by the state in 1990 for one year and has not worked for the state since that time could return to state employment under the old differential calculation. The construction of Sec. 4 in the current version of SB 180 would also mean that an employee who has spent their entire career of state employment in Anchorage, for example, would be entitled to the old geographic differential if they accept a transfer to Fairbanks. 2) Allows employees in districts where the geographic differential is amended upward to receive the benefit of the new differential. Number 2032 SENATOR DONLEY noted that he agreed with the department's concern that people would "form shop," whereby state employees who were grandfathered under the old, higher cost-of-living differential would be able to move to a new area where the old cost-of-living differential was higher than the new cost-of- living differential and thus increase their salaries. He had crafted language in his amendment to prevent that. He explained that he didn't agree with the second part of the department's amendment because it would change the bill from a "cost-savings bill" to a "cost-generating bill." SENATOR DONLEY reiterated that most state employees are under the new standard. Number 1929 REPRESENTATIVE JAMES expressed concern on the issue of fairness. Fairness is what drives her decision on everything, she stated. Saving money is important but not if it is not fair. She said she disagrees with the cost of living calculation when it says the cost of living is the same in Fairbanks as it is in Anchorage; it certainly is not. She would like to see exactly how the cost-of-living is calculated. She said she wouldn't object to this bill, but she was not pleased with it. She doesn't mind saving money, as long as it is being done fairly. She doesn't delineate between the exempt and the employees covered by collective bargaining. She said, "Fairness is fair." SENATOR DONLEY said that this bill is trying to do that. It is trying to put the maximum number of state employees under the same system that the vast majority of employees are under now. He said that he would also be interested in how the calculation is done, but it might take a little work. REPRESENTATIVE JAMES said she doesn't believe that the cost of living should be a negotiated issue with the union. It is what it is, and the number should show it. REPRESENTATIVE JAMES made a motion to adopt Amendment 1, provided by Senator Donley, which read [original punctuation provided]: Sec. 4. AS 39.27.020 is amended by adding a new subsection to read: (d) The pay step differentials in this section apply to a person who has been employed by the state prior to July 1, 2002 and remains continuously employed by the state in the same geographic differential location. A person who begins state employment for the first time or who previously had been employed by the state prior to July 1, 2002, is subject to AS 39.27.021 whenever that person is employed by the state. There being no objection, Amendment 1 was adopted. Number 1625 ALISON ELGEE, Deputy Commissioner, Department of Administration, testified that the administration supports SB 180 and has introduced similar legislation in the past. This bill brings the non-union employees, who are governed by the statutory geographic differential, into alignment with those employees covered by collective bargaining. In 1986, which was the last time a complete cost-of-living differential study was conducted, the unions all adopted the new differential. There have been efforts since that time to change the statutory structure to bring things into alignment, but those have not been successful. MS. ELGEE explained that there are four districts under this proposal where the cost-of-living differential would go up. The department has analyzed just the executive branch, but there are employees in Bethel, Kodiak, Barrow, and Kotzebue who would actually see an increase under the new differential. The other part of the amendment the department suggested was to allow those employees in those areas to benefit from the new differential from an equity standpoint. They would be paid the same as the employees in the same areas covered by collective bargaining or the same as any new employee who begins service after July 1. When the new differentials were adopted under the collective bargaining agreement, all employees went to the new differential if it benefited them, and their salaries were frozen from any loss if their differential went down. She asked the committee to consider that. MS. ELGEE said the cost analysis of only the executive branch - the court system has a different configuration of employees - showed that the cost in the first year is practically neutral in the projections. It costs about $8,000. By the third year, the anticipated savings would be identical under either version of the amendment, whether those employees in those rural districts are allowed to go up or not, because there is quite a bit of turnover in those districts. Number 1427 REPRESENTATIVE JAMES asked whether if it went up, there would be the same high turnover. MS. ELGEE replied that it might mitigate the turnover to a degree in some of the more remote sites, but in exit interviews, the reason why the turnover exists in those areas is more because of the working conditions. Number 1302 PAUL LYLE testified via teleconference on his own behalf, not on behalf of the Department of Law, where he works as an assistant attorney general. He expressed support for SB 180, especially for Section 4 as originally crafted in this bill: to grandfather state employees in Fairbanks into their current pay system and still allow them to get any increases that might come along in the future, should the legislature determine that that is appropriate. He had not seen Amendment 1, so he couldn't testify on it. [It was faxed to him.] Assuming that it retains the full grandfathering for employees currently in the geographic differential, he doesn't have any problem with the amendment. SENATOR DONLEY told Mr. Lyle that the amendment keeps the part in the bill that he was interested in. MR. LYLE said he certainly supported it, then. The bill will save the state money, but it will also help with retention. He urged the committee to support the bill. Number 1049 PAM HARTNELL testified via teleconference on her own behalf, not on the behalf of the Department of Law, where she works as an assistant attorney general. She explained that she is a long- time state employee and expressed support for the bill and the amendment with the grandfathering clause in it. It keeps faith with the expectations and the promises that were made to professional people who have worked for the state for a long time. She agreed that it would help with retention of long-time employees. She urged the committee to support the bill. Number 0941 CHRIS CHRISTENSEN, Deputy Administrative Director, Office of the Administrative Director, Alaska Court System, testified that the Alaska Court System takes no position on this legislation. It is generally agreed that the geographic salary differentials set forth in statute have gotten "out of whack" with actual cost-of- living differences. This affects some court employees positively and some negatively. The court system is currently the largest entity in state government without a labor union. Therefore, the court system has the largest number of employees impacted by this legislation. There are approximately 240 court employees who live in a community with a geographic salary differential; 170 of them work in communities where the current differential will be reduced by this legislation, and 70 of them work in communities where the current differential will be increased. He said that the Senate thought that since current employees have assumed financial obligations, such as house and car payments, it would be unfair to reduce the level of pay that those employees had come to expect. Number 0818 MR. CHRISTENSEN pointed out that the current version of SB 180 also does something that he said the court system thinks is extremely unfair: it grandfathers in those employees who work in communities where the salary differential goes up. For example, the current salary differential in Barrow is about 31.5 percent. This is about 10.5 percent less than the amount of the union contracts and substantially less than the actual cost-of-living differential. He noted that SB 180 will increase the differential by 10.5 percent for new employees to a total of 42 percent, but it leaves current employees under the existing differential. This means that new, untrained employees in Kodiak, Barrow, Bethel, and Kotzebue will be paid more than the experienced employees who are already there. In some cases, new employees will be paid the same amount as their supervisors. Number 0731 MR. CHRISTENSEN said he has heard that this is not really a very big deal because existing employees get longevity increases and are thus making more than new hires. He disagreed with that argument for two reasons. The first reason is simple fairness. In Barrow, Bethel, and Kotzebue, for example, the differential is 10 to 10.5 percent. That is the difference between a range 10A and a 10C. A new range-10 employee would make as much as a person in his/her third year at a range 10 who had already been trained and performed the job satisfactorily. It also means that a new range-10 subordinate would be making the same amount as a range-12 supervisor. The second reason is that the high rate of turnover in rural Alaska means the court system doesn't have a lot of employees with enough longevity to make as much as a new hire. Number 0662 MR. CHRISTENSEN noted that in Barrow, Nome, Bethel, and Kotzebue there are twelve range-10 employees, who even with their current level of longevity will still make less than any newly hired range 10 employee. In those four communities, there are seven range-12 employees, who even with longevity will be paid less than any newly hired range-12 employee. Number 0575 MR. CHRISTENSEN pointed out that the initial savings of the current version of the bill are a false savings. His current employees who believe they're being treated unfairly have one option: to unionize. He explained that back in the mid-90s they had a labor union for three years. It was started when the legislature funded a pay raise for all the union employees in state government but did not fund the same pay raise for all the non-union employees. The employees decertified the union three years later when the legislature gave the non-union employees the same raises the union employees were getting. Number 0497 MR. CHRISTENSEN said he is not saying that the union is a good or bad thing. He is just saying a union is an expensive thing. He asked the committee to adopt the amendment that was proposed by the administration to treat his rural employees fairly. He noted that doing so will allow the state to save ever increasing amounts of money beginning the third year after the legislation is passed. Number 0418 REPRESENTATIVE WILSON commented that it is very bad for morale when the newly hired employees make more than those with experience. This is a very important point because it is a big issue of fairness. Number 0340 SENATOR DONLEY asked Ms. Elgee to confirm that the last time salaries were increased, the certified and non-certified [non- union] employees were treated the same way. MS. ELGEE explained that in that piece of legislation, the differentials were the same as those proposed in SB 180; the transition language was slightly different. People's salaries were frozen instead of being grandfathered in. SENATOR DONLEY said the problem with that was the folks under the old one in the "higher areas" didn't think that was fair because they didn't get raises until their current salaries "caught down" to where they would be under the new geographic differential. To be fair to those folks, they were allowed to continue to grandfather in and continue to get raises from where they were, and that's what created the problem to the other folks that were on the down side. This bill resulted to try to accommodate the people who testified today. Given the current budget situation, he said he doesn't believe the legislature should be passing bills that are going to cost the state more money, especially if the new geographic differential is going to save the state money. SENATOR DONLEY said that he empathized with the four areas that would stay where they are. He said that nobody will take a pay cut; they will continue to get their merit increases, and the difference will work out over time. He would hate to see a bill intended to save money, cost the state more money. He noted that the union employees weren't able to elect which option would benefit them the most. Number 0064 REPRESENTATIVE JAMES asked Senator Donley how he would feel if he were one of those employees. People know what's fair, she told him. TAPE 02-40, SIDE A Number 0046 SENATOR DONLEY commented that this wasn't the original piece of legislation; it would have saved a lot more money and would have been exactly the same as what the union employees have. He had worked on an agreement with the Senators from Fairbanks, and this was the compromise that was reached that still saves the state money and pays this in over time. REPRESENTATIVE JAMES reiterated that she still sees a fairness issue on it. SENATOR DONLEY remarked that he doesn't think it's fair that currently, 80 percent of state employees who are unionized and 20 percent who are not unionized are under another system. The existing system is not fair either. As far as the argument that the union employees got something that the non-union employees didn't get, he suggested that most of that had to do with medical benefits. Medical benefits are a big cost-driver in negotiations, and the non-union employees benefit from the negotiations of the union employees in that area. They are not paying union dues, but they are always granted the same medical insurance that the union people go out and fight for. The non- union employees are actually beneficiaries of the union efforts. They aren't really being hurt at all. Number 0337 SENATOR DONLEY reiterated that this is not his first choice, but it is a reasonable compromise that he can support. Number 0460 MR. LYLE said he read the amendment and is pleased with it. He argued that partially exempt employees are not treated the same way as union people. One of the reasons why the grandfathering has been requested is because the partially exempt employees don't have the opportunity to negotiate increases. That is entirely up to the legislature. He said they know that those increases are not going to be forthcoming, and they understand that. But if there is some thought of going back to a freeze, they would be against that, because unions have an opportunity every three years or so to negotiate increases, and partially exempt employees do not. Although there seems to be an opinion that partially exempt employees always get those increases, that is not correct. Partially exempt employees were decoupled from the union on several increases. He expressed support for some changes but not if some people's pay would be frozen. REPRESENTATIVE JAMES moved to report CSSB 180(FIN)(efd fld), as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HCS CSSB 180(STA) was reported out of the House State Affairs Standing Committee. REPRESENTATIVE CRAWFORD expressed concerns about some of the things Mr. Christensen brought up, and said he would like to see them addressed before this goes to the House floor.
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