Legislature(2001 - 2002)

04/17/2001 09:14 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SENATE BILL NO. 180                                                                                                        
     "An  Act implementing  pay  differentials  based on  geographic                                                            
     areas  for  certain state  employees  and  for members  of  the                                                            
     Alaska  State Defense  Force;  and providing  for an  effective                                                            
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
PAUL LYLE, partially exempt  State of Alaska Employee, testified via                                                            
teleconference   from  Fairbanks  on  his  own  behalf,   that  this                                                            
legislation is  preferable to previous proposals,  since it does not                                                            
reduce the pay  to partially exempt employees currently  receiving a                                                            
geographical differential.  He requested the Committee amend Section                                                            
10 (b)  the portion  regarding  freezing the  salaries of  partially                                                            
exempt employees.  He did not think  it reasonable partially  exempt                                                            
employees should  work for ten years  before receiving a  pay raise.                                                            
He assured that  he considered himself well compensated  and that he                                                            
made  a career  choice  to  work as  a  partially  exempt  employee.                                                            
However, he asked  that employees continue to receive  pay increases                                                            
in accordance  with the provisions  in effect  when they were  first                                                            
hired. He spoke  of the need to support  families and the  influx of                                                            
younger  employees  as well  as the  need  to provide  incentive  to                                                            
attract employees to remote locations.                                                                                          
PAM HARTNELL,  partially exempt State of Alaska employee,  testified                                                            
via teleconference  from Fairbanks  on her own behalf to  say, "this                                                            
is an issue of fairness."  She elaborated that while other employees                                                            
receive pay  raises, partially exempt  employees' salaries  would be                                                            
frozen. She  asked that this provision  in the bill be changed.  She                                                            
reiterated many of the points raised by the previous witness.                                                                   
Co-Chair  Donley  presented   the  bill  saying  it  implements  the                                                            
geographic  pay differential currently  in place for all  collective                                                            
bargaining  employees  of  the  state  for  certain  non-collective                                                             
bargaining  employees. He  referred to the  existing cost of  living                                                            
variance, pointing  out that it has not been changed  since 1976. He                                                            
said an  updated cost of  living variance  has been implemented  for                                                            
the majority of state employees.                                                                                                
Co-Chair Donley asserted  that this legislation treats employees who                                                            
are not covered  by a collective bargaining unit almost  the same as                                                            
those who are  covered, using a grandfather clause  to implement the                                                            
newer geographical  pay differential ratio. He pointed  out that the                                                            
non-covered  employees  have  had  the  benefit of  a  "higher  than                                                            
truthful"  geographical  pay differential  for many  years and  have                                                            
been paid more than covered  employees performing the same functions                                                            
in other  areas of  the state  where the  actual cost  of living  is                                                            
Co-Chair  Donley  affirmed the  need  to treat  long-term  employees                                                            
fairly and opined that  this bill does "more than treat them fairly"                                                            
because  the  non-covered  employees   continue  to  receive  higher                                                            
salaries  than  they  would  under  the  updated  geographical   pay                                                            
differential.  He said this  adjustment is  fair to those  employees                                                            
who  have   been  paid   according  to   the  updated  geographical                                                             
Co-Chair  Donley  noted that  some exempt  employees  would  receive                                                            
higher pay  based on the  geographical  differential changes,  while                                                            
others would  be "held harmless" and  would not receive a  raise. He                                                            
stressed that  new employees would  be paid at the new geographical                                                             
differential ratio,  which would result in "significant  savings" to                                                            
the state over a period of time.                                                                                                
Co-Chair Donley addressed  the fiscal notes, showing that the Alaska                                                            
Court System fiscal note  shows increased expenses for the first two                                                            
years  after  the  legislation  becomes  effective,  then  decreased                                                            
expenses escalating in  future years. He described the Department of                                                            
Administration  fiscal   note reflecting   expenses  for  all  state                                                            
agencies showing  savings to the state in excess of  $100,000 in the                                                            
first year, doubling in  the next year and continuing to grow in the                                                            
out years. He  expressed this savings is a result  of action that is                                                            
"fundamentally  fair" in treating all state employees  the same with                                                            
regard to geographical pay differentials.                                                                                       
CHRIS  CHRISTENSEN,  Deputy Administrative  Director,  Alaska  Court                                                            
System,  testified  to the  fiscal  note  stating that  the  largest                                                            
impact would  occur in  Fairbanks, with  a ten-percent differential                                                             
and Palmer,  with 3.5  percent. He  pointed out  that the  increased                                                            
expenses  would be realized  in smaller communities  such as  Bethel                                                            
with a ten-percent  increase, Barrow and Kotzebue  with 10.5 percent                                                            
increase and Nome with  a 2.5 percent increase. He informed that the                                                            
Alaska Court System takes  no position on this legislation and noted                                                            
that half  of the  employees would  be unaffected  because they  are                                                            
located in Anchorage.                                                                                                           
Senator Olson  asked the witness the  effect this would have  on the                                                            
ability to fill vacancies in rural courts.                                                                                      
Mr. Christensen  told of  the difficulties  in filling vacancies  in                                                            
courts  located in rural  communities.  He gave  one reason as  some                                                            
borough governments,  such as in Barrow, pay a significantly  higher                                                            
salary  than  the   state.  He  therefore  predicted   that  if  the                                                            
geographical   pay  differential   were   to  increase   for   these                                                            
communities,  it could  be easier  to hire for  those positions.  He                                                            
pointed  out however,  that  there could  be some  repercussions  by                                                            
those employees  in non-rural  communities  who have their  salaries                                                            
frozen through this legislation.                                                                                                
Senator  Wilken  referred  to  information  showing  job  growth  in                                                            
different   fields  across   the  state   that  was   used  in   the                                                            
consideration  of other legislation.  He suggested this information                                                             
could be helpful  in considering this  legislation and requested  it                                                            
be provided to the Committee.                                                                                                   
Senator  Wilken said  he appreciated  the  intent  to make  systemic                                                            
changes to  the state employee salary  procedures but was  concerned                                                            
that the small  amount savings could come at the expense  of "people                                                            
who have built  their lives around their paychecks  as almost all of                                                            
us  do." He  recommended  investigating  the  cost of  applying  the                                                            
updated  geographical   pay  differentials   only  to  newly   hired                                                            
employees and  retaining the existing  salary structure for  current                                                            
Senator  Hoffman  asked for  an  explanation  of the  Department  of                                                            
Administration fiscal note.                                                                                                     
ALISON ELGEE,  Deputy Commissioner,  Department  of Administration,                                                             
explained that  the fiscal note gives  consideration to the  assumed                                                            
five-percent  annual  rate of  turnover as  a result  of the  frozen                                                            
salaries  for current employees.  She said  with this turnover,  new                                                            
employees  are hired at lower  salaries. She  added that the  fiscal                                                            
note also makes  future assumptions  for the current employees  when                                                            
their salaries are no longer  frozen and they receive pay increases.                                                            
She estimated  that by  FY 07, this  legislation  would result  in a                                                            
maximum net  savings of $446,000.  She told  of the various  funding                                                            
sources involved.                                                                                                               
Ms.  Elgee pointed  out  that  the governor  is  in support  of  the                                                            
legislation  and she noted that he  has actually introduced  similar                                                            
legislation  in the past. She relayed  his assertion that  the issue                                                            
is a matter of  equity in making the geographical  pay differentials                                                            
the same for all state employees.                                                                                               
Senator Hoffman  referenced the five  geographical areas  that would                                                            
experience  salary reductions  listed in the  fiscal note.  He asked                                                            
for a detailed analysis.                                                                                                        
Ms. Elgee  did not  have figures  to reflect  the amounts  resulting                                                            
from this legislation,  noting the  limited time the administration                                                             
had  to prepare  for  this  hearing.  She offered  to  compile  this                                                            
Co-Chair Kelly  asked for a comparison of this bill  with one passed                                                            
in the previous legislative session then vetoed by the governor.                                                                
Ms. Elgee replied  that the earlier legislation contained  unrelated                                                            
amendments  to  the   Supplemental  Benefits  System   (SBS),  which                                                            
resulted in the governor  vetoing the bill. She noted this bill does                                                            
not  contain   these  provisions.   She  explained  the   provisions                                                            
established  a two-tiered environment  for SBS, reduce the  employer                                                            
contribution to half of  the employee contribution and set a maximum                                                            
salary in statute.                                                                                                              
Co-Chair Kelly agreed that  the information Senator Wilken requested                                                            
would be  valuable. However,  he noted the  need to report  the bill                                                            
from  Committee and  suggested  the  information could  be  provided                                                            
before the Senate Rules Committee hearing on the bill.                                                                          
Co-Chair Donley stated  he would not request a hearing for this bill                                                            
in the Senate  Rules Committee before  the information is  received.                                                            
Co-Chair  Donley offered a  motion to report  from Committee  SB 180                                                            
with accompanying  fiscal notes from the Alaska Court  System, Trial                                                            
Courts for $94,300, and  the Department of Administration, all state                                                            
agencies, for a negative $108,000.                                                                                              
The bill MOVED from Committee with no objection.                                                                                
AT EASE 9:40 AM / 9:42 AM                                                                                                       

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