Legislature(1995 - 1996)

03/26/1996 08:10 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  SENATE BILL NO. 152                                                          
                                                                               
                                                                               
       An Act  relating to  geographic differentials  for                      
       the  salaries of certain  state employees  who are                      
       not  members  of  a  collective  bargaining  unit;                      
       relating   to   periodic   salary    surveys   and                      
       preparation of  an annual  pay schedule  regarding                      
       certain state employees; relating to certain state                      
       aid calculations based on geographic differentials                      
       for state  employee salaries; and providing for an                      
       effective date.                                                         
                                                                               
  Co-chairman Halford directed  that SB 152 be  brought on for                 
  discussion.   ALISON  ELGEE, Deputy  Commissioner, Dept.  of                 
  Administration, came before  committee.  She  explained that                 
  the bill  contains a  lower cost  of  living than  presently                 
  being  paid state  employees who  are not  represented by  a                 
  union or  covered by  collective bargaining.   A  relatively                 
  small group  would initially  be impacted.   However,  union                 
  contracts  now  before   the  Legislature  contain  reopener                 
  clauses that would  allow the state  to negotiate a new  pay                 
  differential  for  union members,  based  on passage  of the                 
  proposed bill.    Ms. Elgee  next  directed attention  to  a                 
  handout  demonstrating  differences  between   existing  and                 
  proposed differentials.    She explained  that  the  current                 
  differential is tied  to other statutes.   In developing the                 
  proposed bill, the  Governor attempted to impact  only state                 
  employees.                                                                   
                                                                               
  Sec.  1  maintains  magistrates  at the  existing  statutory                 
  level.    Ms. Elgee  said the  court  has been  conducting a                 
  review of  magistrate salaries  "and does  not believe  this                 
  section is any longer necessary."  Co-chairman Halford asked                 
  if the  cost to  the state  would be  raised  or lowered  by                 
  removal of Sec. 1.  Ms.  Elgee responded that costs would be                 
  lower if the  new differential  was applied to  magistrates.                 
  However,  the fiscal  note  does not  represent "any  of the                 
  court  system  employees."   It  covers  only  the executive                 
  branch.   The Legislature would  have to indicate its desire                 
  to apply the bill to court system employees as well.                         
                                                                               
  In response to a question from Co-chairman Frank, asking how                 
  the court system  proposed to  handle the differential,  Ms.                 
  Elgee termed the  magistrates "a real unique  little bunch."                 
  The  court  is   conducting  salary  review  of   "just  the                 
  magistrates."  They are the only group specifically  tied by                 
  statute  to the existing  differential.  As  a practice, the                 
  court  system has  followed  the statutory  differential for                 
  non-covered employees as well.                                               
                                                                               
  Ms. Elgee explained that Sec. 2 makes clear that the revenue                 
  sharing calculation currently tied to the existing area cost                 
  differential would continue.  That  would ensure that taking                 
  action  on  the proposed  bill  would produce  no unintended                 
  reduction  of  revenue  sharing  to  municipalities.     The                 
  Governor  did  not  want to  complicate  the  legislation by                 
                                                                               
                                                                               
  bringing  in issues  such as  aid to  municipalities.   That                 
  should be dealt with separately.                                             
                                                                               
  Sec. 3 applies specifically to the minimum payment level  in                 
  revenue sharing statutes.                                                    
                                                                               
  Sec. 4 lays out the proposed differential.   It has been ten                 
  years since a complete cost-of-living differential study was                 
  conducted for Alaska.   The 1985  study resulted in what  is                 
  known  as  the "union  differential."   Two  years  ago, the                 
  courts dictated that  the state abide by  existing statutory                 
  language that requires an annual salary survey.  Since there                 
  was no funding for the survey,  the department used $20.0 to                 
  contract with  the Runzheimer  Group to  prepare a  cost-of-                 
  living differential study.   Ms. Elgee noted  that the study                 
  produced odd results.   In preparing the proposed  bill, the                 
  administration used Runzheimer's work  as an indication that                 
  the cost-of-living  differential across the  state is coming                 
  down  but  did  not   utilize  it  as  the  basis   for  the                 
  administration's  proposal.   Ms. Elgee cited  study figures                 
  for cost-of-living differentials  at Nome  and Ketchikan  as                 
  evidence of apparent  inaccuracies.   In developing SB  152,                 
  the  administration utilized House  districts and looked for                 
  geographic similarities among the districts and common modes                 
  of transportation.                                                           
                                                                               
  Base levels (areas in which no geographic differential would                 
  apply) are Anchorage, Juneau, the Kenai Peninsula, Matanuska                 
  Valley, and  the Fairbanks  area.   For coastal  communities                 
  with ferry access but no road access, the bill proposes  a 5                 
  percent differential.  For interior  communities on the road                 
  system, the  proposal is  a 10  percent  differential.   The                 
  proposed  differential   is  20  percent  for   western  and                 
  northwestern communities.  The out-of-state differential has                 
  also  been modified.  In the  past, the differential applied                 
  to  all out-of-state  workers.   The  bill proposes  that it                 
  apply only to Washington state, and  that the state adopt an                 
  approach similar to that used  for foreign offices for other                 
  locations.    That  approach  is  specific  to   information                 
  relative to the cost of living in each  location.  Ms. Elgee                 
  cited need for flexibility to deal with unique circumstances                 
  such as salaries  for state  employees in Washington,  D.C.,                 
  where the cost of living is extremely high, as well as those                 
  temporarily stationed  in Louisiana pending  construction of                 
  the new state ferry.                                                         
                                                                               
  Co-chairman  Halford  asked  if   the  proposed  bill  would                 
  increase pay for  employees in Seattle  by 20 percent.   Ms.                 
  Elgee concurred that  it would increase pay  for non-covered                 
  employees,  but  it  would  reduce  pay  for  union  members                 
  residing  in  Seattle  by  approximately  10 percent.    Co-                 
  chairman Halford  voiced his  understanding that  the factor                 
  change increases Seattle  from 79.1  percent to 100  percent                 
  for non-covered  and 13  percent for union  employees.   Ms.                 
                                                                               
                                                                               
  Elgee clarified that  the bill proposes a  zero differential                 
  for Washington  state.   She concurred  that should  unions,                 
  through  collective   bargaining,  adopt  the   factor,  the                 
  foregoing would be the case.  Co-chairman Halford questioned                 
  reduction of pay  at Alaskan  locations while increasing  it                 
  for employees  in Seattle.   Ms.  Elgee responded,  "This is                 
  just  a  reflection of  what  we're seeing  in  the American                 
  Chamber    of    Commerce    studies    on    cost-of-living                 
  differentials."  It appears  that the cost of living  in the                 
  Seattle  area  is  comparable  to  the  cost  of  living  in                 
  Anchorage.                                                                   
                                                                               
  Senator Rieger presented  a handwritten amendment  to change                 
  the factor  for Seattle to  -10 percent.   Co-chairman Frank                 
  asked  that  the  committee  be   provided  a  copy  of  the                 
  Runzheimer report.  Ms. Elgee agreed  to do so, but stressed                 
  that it  has  little  value  since it  does  not  accurately                 
  reflect community-by-community cost of  living differentials                 
  for  Alaska.    She  said  she  would  also  make  available                 
  information  developed by  the American Chamber  of Commerce                 
  research  group,  which relates  to specific  communities in                 
  Alaska.                                                                      
                                                                               
  In response to a question  from Co-chairman Frank, Ms. Elgee                 
  explained  that  upon  passage  of  the proposed  bill,  the                 
  administration and unions  would go  back to the  bargaining                 
  table   to   renegotiate  the   cost-of-living  differential                 
  applicable  to  union  members.    Each  contract  currently                 
  contains its own area cost differential.  With the exception                 
  of PSEA, they all reflect  the differential outlined on  the                 
  handout.  Members questioned the administration's ability to                 
  engage  unions  in  such  negotiations  without  giving   up                 
  something and suggested that the  differential should be set                 
  in statutes and applied to all, union and non-union alike.                   
                                                                               
  Senator  Donley  directed   attention  to  Senator  Rieger's                 
  amendment  and noted ASMI claims  that it pays its employees                 
  in Washington state 18 percent below  the rate in Alaska and                 
  continues to obtain quality workers.  He then suggested that                 
  the reduction in the amendment should be -20 rather than -10                 
  percent.  Senator Donley further  directed attention to page                 
  3, line  3, and  voiced need  to change  the salary  portion                 
  ($30.0) to which the differential applies so that it applies                 
  to the whole salary range.                                                   
                                                                               
  In  response  to earlier  comments  regarding renegotiations                 
  with unions, Ms.  Elgee said that  the unions are "all  very                 
  well aware of  this legislation."   The administration  made                 
  clear  its  intent  to conform  area  cost  differentials to                 
  statutory  changes.    Reopeners were  negotiated  with that                 
  understanding.                                                               
                                                                               
  Co-chairman Frank referenced the $30.0 set forth at  page 3,                 
  subsection  (b)  and asked  if  the current  differential is                 
                                                                               
                                                                               
  applicable  to  the  entire  salary.   Ms.  Elgee  responded                 
  affirmatively, advising  that  bill  language  would  modify                 
  application  to cover only  "that portion of  salary that we                 
  would deem to be for the actual basic cost of living and not                 
  the  discretionary   portion  of  any   individual  salary."                 
  Senator Sharp suggested that the  $30.0 appears arbitrary in                 
  light of current low income and poverty numbers.                             
                                                                               
  Co-chairman Frank  raised  questions concerning  lack  of  a                 
  differential for Fairbanks, citing the  cost of heating fuel                 
  as an example  of costs  higher than those  in Anchorage  or                 
  Ketchikan.  Ms. Elgee explained that differentials reflect a                 
  market basket survey.  She  cited offsetting factors between                 
  communities.  Fairbanks  is included in national  chamber of                 
  commerce  surveys.    Information  provided  by  that  group                 
  indicates that the cost of living in Anchorage and Fairbanks                 
  is "almost identical."                                                       
                                                                               
  Senator Sharp voiced  interest in reviewing the  federal CPI                 
  for Seattle compared to Anchorage and Fairbanks.                             
                                                                               
  Senator Donley  requested an  assessment of  Alaska pay  for                 
  employees residing in Washington state versus  salaries paid                 
  state workers by the state of Washington.                                    
                                                                               
  Discussion among  members followed  regarding numbers  cited                 
  for North Pole, Alaska.                                                      
                                                                               
  Co-chairman Frank inquired regarding the dynamics associated                 
  with  achieving  parity   between  covered  and  non-covered                 
  workers when reducing differentials.  Ms. Elgee pointed to a                 
  one-year  transition.    At  the  time  of  passage  of  the                 
  legislation,  the  department   would  notify  all  impacted                 
  employees  who  would be  frozen in  current salaries  for a                 
  year.  Thereafter the  salaries would be reduced to  the new                 
  differential.   The feeling  was that a  year's notice would                 
  give  people  an  opportunity  to  readjust their  financial                 
  circumstances  or  look  for other  employment.    The state                 
  cannot afford a freeze, forever, given cutbacks in operating                 
  budget funding.                                                              
                                                                               
  Co-chairman Frank asked  why new  differentials rather  than                 
  merely  reopeners were  not negotiated  in  union contracts.                 
  Ms. Elgee said that the state has no substantive information                 
  allowing  for  renegotiation.     Passage  of  the  proposed                 
  legislation would put the administration in a position to do                 
  so.  Otherwise,  absent expenditure of $300.0  to $400.0 for                 
  an area-cost-differential study, the state has no basis.                     
                                                                               
  In response to further comments  from Co-chairman Frank, Ms.                 
  Elgee said  that for  ten years  non-covered employees  have                 
  enjoyed  a  differential  that  far  exceeds that  of  union                 
  employees.  Unions are not interested in "continuing to lead                 
  that   particular  action   without  modification   of  this                 
                                                                               
                                                                               
  schedule."  Contracts  have been ratified by  employees with                 
  the reopener in place.                                                       
                                                                               
  Senator Zharoff  raised a  question regarding  differentials                 
  for coastal communities with  ferry service.  He noted  lack                 
  of service by  the TUSTUMENA from October  through April and                 
  asked  that  the administration  review  the  consistency of                 
  service for individual communities.                                          
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 11:05 a.m.                        
                                                                               

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