Legislature(1995 - 1996)
03/06/1996 08:15 AM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
MARCH 6, 1996
8:15 A.M.
TAPE HFC 96 - 62, Side 1, #000 - end.
TAPE HFC 96 - 62, Side 2, #000 - end.
TAPE HFC 96 - 63, Side 1, #000 - #337.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 8:15 A.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Kohring
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Navarre was not present for the meeting.
ALSO PRESENT
Representative Jerry Mackie; Mike Greany, Director, Division
of Legislative Finance; Arthur Snowden II, Administrative
Director, Alaska Court System; Stephanie Cole, (Testified
via teleconference), Deputy Administrative Director, Alaska
Court System; Anne Hays, (Testified via teleconference),
International Brotherhood of Electrical Workers (IBEW)
Union, Anchorage; Bob Larsen, (Testified via
teleconference), International Brotherhood of Electrical
Workers (IBEW), Anchorage; Chris Christensen, Staff Counsel,
Alaska Court System; Mark Boyer, Commissioner, Department of
Administration; Mila Doyle, Labor Relations, Office of the
Commissioner, Department of Administration; Dianne Corso,
Labor Relations Section, Office of the Commissioner,
Department of Administration; Dan Spencer, Budget Analyst,
Office of Budget and Management.
SUMMARY
CONTRACT LABOR AGREEMENTS & COMPENSATION INCREASES:
Court System
Covered
Non-Covered
Legislature
Exempt
1
ALASKA COURT SYSTEM
ARTHUR SNOWDEN II, ADMINISTRATIVE DIRECTOR, ALASKA COURT
SYSTEM,
provided the Committee with a committee substitute work
draft for HB 144, an act relating to salaries for officers
and employees who are not members of a collective bargaining
unit. He provided a brief overview of that legislation.
STEPHANIE COLE, (TESTIFIED VIA TELECONFERENCE), DEPUTY
ADMINISTRATIVE DIRECTOR, ALASKA COURT SYSTEM, testified
regarding the negotiated Court System contract with the
International Brotherhood of Electrical Workers (IBEW)
Union. The Court System bargaining unit consists of 300
non-supervisory court employees, statewide, amounting to
half of the Court Systems work force. Most of the employees
in that Union are range 12 and under. These employees voted
to be recognized by IBEW in July, 1994. Ms. Cole pointed
out that the negotiated contract was fair to the employees.
Ms. Cole presented a summary of terms of the contract. The
benefits package would not change. Employees would continue
to receive PERS retirement, health coverage and State
Benefit System (SBS) benefits with the same conditions of
the non-covered employees. The contract provides that the
bargaining unit would receive the same geographic
differential as the uncovered employees. Overtime is paid
only after 40 hours of work. The employees have not had a
salary increase since 1991.
Under the agreement within the contract terms, the employee
would receive a 5.2% raise for the first year of the
contract and would begin July, 1996. The first component of
the raise would be a 3.6% increase, bringing employees up to
1992 parity. The second component would be additional 1.5%
increase, and that would bring employees up to parity for
next year's proposals currently before the Legislature.
ANNE HAYS, (TESTIFIED VIA TELECONFERENCE), INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS (IBEW), ANCHORAGE,
reiterated the major concern that IBEW has regards the
differential lost during the past four years by the Court
System. That loss will not be recoverable. The contract
would bring employees in line with parity. Ms. Hayes noted
approval of the contract language that outlines the economic
impact.
Ms. Hays added, the $590 request represented the cost of the
5.2% pay raise. Co-Chair Hanley pointed out that the spread
sheet provided by Legislative Finance Division indicated
1.5% increase for all employees and was not reflective of
2
the contract before the Committee. He requested current
figures demonstrating costs for FY97, FY98, and FY99.
Mr. Snowden commented that the total package would cost $1.7
million dollars. He reiterated that would bring the Court
System employees equal to what the unions are requesting
this year.
Co-Chair Hanley asked if privatization had been considered.
Mr. Snowden replied that there was no ban on privatization.
Transcript production will soon be privatized. There are no
formal break times included in the contract. Co-Chair
Hanley questioned the system used for health care. Mr.
Snowden noted that the Court System uses the same health
care system, leave, SBS and retirement as other State
employees. The Court System also uses the same five step
plan for merit raise and longevity. He stressed that Court
System employees enter the work force at two range levels
lower than the Executive Branch employees.
Ms. Cole spoke to the geographical differential. She noted
specific contract provisions which would allow that concern
to be taken into consideration. Salaries including merit
raises and longevity are established in contract.
Mr. Snowden addressed pay privileges recommended for the
non-covered employees. Those employees work hard and often
long hours. There are approximately 300 people in the non-
covered status, and 200 of those employees are paid under
Range 15. These employees have not received a pay raise in
five years. He emphasized that those employees deserved to
be treated fairly and equally to those employees in the
unions. Judges would also be included for the recommended
pay raises. The Alaskan judges rank between 34 - 37th
nationwide in monthly pay. These judges deserve a cost-of-
living allowance. Mr. Snowden concluded that law clerks
should also receive a raise. The State changes law clerks
every year and they are hired directly out of law school.
When the pay scale is not changed for five years, the Alaska
salary does not entice new law clerks to hire on.
Mr. Snowden emphasized that the Court System request is
reasonable. He pointed out that the committee substitute
for HB 144 would reflect a new pay scale in statute for
judicial employees and would amount to a 5.2% increase.
BOB LARSEN, (TESTIFIED VIA TELECONFERENCE), INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS (IBEW), ANCHORAGE,
reiterated that the union has sought interests of parity and
that through arbitration a partnership for both union
members and the State was achieved.
3
Co-Chair Hanley questioned the accuracy of the national
judicial status average quoted by the Court System. Mr.
Snowden responded that national salaries were averaged with
the local cost-of-living index of that area. The figures
provided the Committee include that adjustment.
LEGISLATURE
Co-Chair Hanley pointed out that the spread sheets reflect a
1.5% increase each year for the non-covered employee in the
Legislature. Representative Brown asked for further
information regarding the total number of legislative
employees and the number of staff working on contract.
MIKE GREANY, DIRECTOR, DIVISION OF LEGISLATIVE FINANCE,
noted that he would check with the Director of the
Legislative Affairs Division to provide that information.
DISCUSSION AND COMMENTS
Representative Grussendorf questioned the Chair's intent
regarding the proposed contracts. Co-Chair Hanley responded
that it was his intent, and that if the contracts were
granted, all of them would be included and the non-covered
employee status also. He reiterated that all contacts
should be dealt with as a whole unit. He recommended that a
reclassification salary study should be undertaken by the
Legislature before the next session.
Co-Chair Hanley spoke to the unidentified costs that will
increase with the new wage schedule. He suggested that the
Legislature undertake a long-term planning schedule and fund
that cost this year. That study would provide that
information be available for the next session to address the
parity issues. The intent for this year would be to either
approve or deny all the contracts. Representative Mulder
asked the true costs of the contracts.
MARK BOYER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
stated that the numbers provided the Legislature reflected
the known costs. Merit pay is not a contract driven cost,
regardless, if the contracts are passed or not. He advised
that the health care costs were reflected in FY97 costs.
Personal Early Retirement System (PERS), Teacher Early
Retirement System (TERS), and State Benefit System (SBS)
costs were not included in the figures. Those costs would
be shown in the personal services budget and are not new
costs. Co-Chair Hanley agreed that the merit pay and the
health benefits could decrease because of the negotiated
sharing. However, the SBS and PERS would be increased; that
information is not shown in the existing contracts.
4
Commissioner Boyer stated that the PERS system was more
complex. There are many factors used to determine the
employer contribution. The contracts would not drive that
issue. Co-Chair Hanley disagreed.
DAN SPENCER, BUDGET ANALYST, OFFICE OF BUDGET AND
MANAGEMENT, noted, based on the budget calculations, if the
PERS rate decreases, then the State's contribution would
decrease. The contribution rate established in PERS is not
determined by the salary. That number would be determined
by investment and actuarial levels. Co-Chair Hanley noted
that the percentages do not change and are an investment
related percentage, but the relative amount based on the
contracts negotiated would be increased.
(Tape Change, HFC 96-62, Side 2).
Representative Mulder asked if the FY97 general fund
contribution total would be $9.7 million dollars. Co-Chair
Hanley referenced the handout distributed previously by
Legislative Finance Division and the figures included. He
summarized, the final numbers will include $2-$3 million
dollars more than the estimate of $9.7 million dollars,
assuming the negotiated pay raises to the union and the non-
covered employees. Representative Mulder voiced concern
with the general fund increase projected over the next three
years which would be needed to substantiate the requested
amounts.
Representative Mulder questioned the effect of not funding
the contracts. Commissioner Boyer stated that the FY97
budget has these increases built into it. They have been
financed into the budget provided by each affected
department, while at the same time all departments have
proposed $40 million dollars in reductions. Co-Chair Hanley
confirmed that the budget only accounts for $8.43 million
contract negotiation dollars. Mr. Spencer stated that the
health increases negotiated with the unions are included in
the FY97 budget. The projections would provide for a 1.5%
increase step-up. He commented that the proposed figures
were not an attempt to quantify every single cost associated
with the increased wages.
Co-Chair Hanley requested an updated spread sheet indicating
all areas covered in the union negotiations.
Representative Mulder reiterated, what would happen if the
contracts were not funded. Commissioner Boyer replied:
"I think we are all here in June, Mr. Chairman.
The Governor has made a commitment to these
contracts and the Governor has made a commitment
5
to funding the contracts upfront and not making
reductions in an across the board fashion to
essentially, internally require the departments to
eat these new costs."
Co-Chair Hanley asked what would happen if the contracts
were rejected. Commissioner Boyer replied:
"You are here in June, Mr. Chairman. I can't make
a commitment on what the Governor will or won't do
at the end of the Session. When the dust settles,
the Governor will do what he needs to do. But he
has suggested that it is like the American Express
phrase: 'You don't leave home without it'. I
would recommend to him that we call you back into
Special Session to fund the contracts."
Commissioner Boyer continued that two of the contracts which
were not funded last year have expedited processes for
getting to impasse with strike votes. He emphasized that
there could be a shut down on the ferry system and airports
until a court injunction was implemented.
Representative Martin expounded on the Department's
obligation to provide the correct costs of the contracts to
the Legislature. Commissioner Boyer advised that the costs
proposed reflect the three year cost of the contracts and
pointed out that the negotiation process was open to the
public. Discussion followed regarding the bargaining
process. Mr. Spencer responded to Representative Martin's
question regarding merit raise, stating that in FY97, it
amounted to 1.5% of an employees salary and any variable
benefits associated with that. Health benefits would be the
variable area. There is merit in the existing system. He
added that if the cost of the contracts were calculated with
step increases, the number included would be $3.5 million
dollars. That system currently exists.
Representative Brown interjected that the Committee must
consider the cost of not approving the contracts. She noted
that our current system clearly states that there will be
bargaining, and that system has been applied in good faith.
She stressed that the contract negotiations were reasonable
and should be honored. Members of these unions have not had
a wage increase in several years. She mentioned the
disruption that would occur if the contracts were not
accepted, both in lost productivity as well as the potential
of a strike. The Administration has built the anticipated
costs into the budget.
Representative Brown agreed that the merit system should be
studied in greater detail. Currently, merit appears as a
6
perfunctory obligation and is rarely denied. She thought
perhaps a "true" merit system should be implemented. The
Legislature is in control of that aspect of the
determination and that it could be changed. She reiterated
that concessions have been made relative to where the
Legislature was last year, and that these concessions appear
to be reasonable. She added, that the disparity will cause
more and more employees to go toward unions, not the most
desireable situation from managements point of view.
Representative Brown encouraged members to approve the
contracts.
Representative Kelly asked for the list of unions which do
not include step increases. Commissioner Boyer stated that
the LTC, IBU, teachers and marine units each use a different
system.
MILA DOYLE, LABOR RELATIONS, OFFICE OF THE COMMISSIONER,
DEPARTMENT OF ADMINISTRATION, responded that the marine
contracts do not have merit, longevity or any step
increases. Any changes in pay result from negotiating wage
increases or promotions within the system. Co-Chair Hanley
asked if the promotions were based on evaluations and
seniority. Ms. Doyle pointed out that it would depend on
the actual classification. Minimum qualifications must be
met to progress into a new classification and that it is not
an automatic progression.
Merit increases are steps A through E within the salary
schedule. Step F follows after a one year duration moving
to step J. Steps J, K, L, and M are the longevity steps.
Those steps are based on time. Merit steps are based on
merit and can be denied. Longevity steps tend to be
automatic but do include a few variables. Co-Chair Hanley
asked for a spread sheet indicating the number of years to
move from step A through M and the financial obligation
associated with those moves.
DIANNE CORSO, LABOR RELATIONS SECTION CHIEF, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF ADMINISTRATION, explained that
the contracts provide basic guidelines for how merit
increases are supposed to be granted. These are called
performance incentives which distinguishes them from the
statutory provisions. The major contracts share a basic
format that the employee be acceptable and be of
"progressively greater value" with each evaluation.
Co-Chair Hanley reiterated that the merit system needs to be
changed. Implementation of a motivational aspect would
change peoples attitude in State government. Ms. Corso
noted that to change the interpretation of what was
acceptable, would require changing options within the
7
statutory venue. However, the language change would require
negotiation changes. Co-Chair Hanley stressed that the
Legislature could change that language and then establish
the standard. Commissioner Boyer suggested that would be
the preferred way for the Legislature to provide guidance.
(Tape Change, HFC 96-63, Side 1).
Commissioner Boyer noted that the work environment has
changed dramatically over the years. A much higher
qualified employee is now required. Representative
Therriault commented that upgrading employee skills has
resulted in large costs to the State. Commissioner Boyer
countered that the employees often pay "out of pocket" or
from personal services for further training.
Representative Grussendorf voiced concern that repercussions
would be suffered by not ratifying the contracts. He asked
the Chair's intent. Co-Chair Hanley pointed out that the
Governor has introduced a pay differential bill; and that a
bill also exists for a Tier III level retirement system. He
stated that his preference would be to place the geographic
differential into statute which would then require the
Administration to negotiate that consideration in the
contracts.
Commissioner Boyer recommended that the proposed legislation
include funds for a fiscal note to cover costs of preparing
an analysis.
Representative Brown inquired about the sixty day statutory
deadline for the contract ratification. Ms. Corso
referenced A.S. 23:42:15, stating that the Legislature is
suppose to adopt a resolution either approving or
disapproving the contract within sixty days of having it
submitted. Commissioner Boyer added that the contracts were
submitted on the eighth day of the session and that the
Legislature would have seventy days from that time.
Commissioner Boyer added that in the absence of approval,
the courts have suggested, or in the absence of language in
the budget rejecting the contracts, the contracts would be
approved. The law allows that the parties involved may re-
enter negotiation.
Co-Chair Hanley distributed a legal memo dated, 2/06/95,
addressing legislative action with respect to the monetary
terms of collective bargaining contracts. [Attachment #1].
"The provisions in AS 23.40.215(b) suggest that
the legislature must adopt a resolution within 60
8
days of submission of the monetary terms to the
legislature. The statute is not clear as to what
happens if the legislature fails to meet the 60-
day deadline. The requirement for funding by the
legislature is subsection (a) does not state that
if the legislature fails to act within a 60-day
period, the money is considered to have been
appropriated. And, since a resolution can only be
viewed as a nonbinding statement, failure to make
such a statement should not be given more weight
than the making of the statement would hold.
Therefore, I believe that the 60-day time period
should be viewed as a goal, not a legal
requirement. Failure to adopt a resolution within
the 60 days does not preclude the legislature from
acting later."
He added that the Legislature can include language even
after the sixty day deadline which rejects the contracts.
The Legislature could also approve the contracts after the
sixty day time limit. The other option would be not to
address the contracts, which would make the contracts
approved without appropriating the departmental funding to
support them.
Co-Chair Hanley reiterated the request for up-dated spread
sheets. He asked if the State was required to use the SBS
system. Commissioner Boyer replied, they were not. Co-
Chair Hanley asked the State's flexibility in not using that
system or in decreasing the percentage that the State pays
toward the SBS system. Commissioner Boyer noted that Bob
Stalnaker, Director of Retirement and Benefits could address
that concern at the next meeting.
ADJOURNMENT
The meeting adjourned at 9:55 A.M.
HOUSE FINANCE COMMITTEE
MARCH 6, 1996
8:15 A.M.
TAPE HFC 96 - 62, Side 1, #000 - end.
TAPE HFC 96 - 62, Side 2, #000 - end.
TAPE HFC 96 - 63, Side 1, #000 - #337.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 8:15 A.M.
PRESENT
9
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Kohring
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Navarre was not present for the meeting.
ALSO PRESENT
Representative Jerry Mackie; Mike Greany, Director, Division
of Legislative Finance; Arthur Snowden II, Administrative
Director, Alaska Court System; Stephanie Cole, (Testified
via teleconference), Deputy Administrative Director, Alaska
Court System; Anne Hays, (Testified via teleconference),
International Brotherhood of Electrical Workers (IBEW)
Union, Anchorage; Bob Larsen, (Testified via
teleconference), International Brotherhood of Electrical
Workers (IBEW), Anchorage; Chris Christensen, Staff Counsel,
Alaska Court System; Mark Boyer, Commissioner, Department of
Administration; Mila Doyle, Labor Relations, Office of the
Commissioner, Department of Administration; Dianne Corso,
Labor Relations Section, Office of the Commissioner,
Department of Administration; Dan Spencer, Budget Analyst,
Office of Budget and Management.
SUMMARY
CONTRACT LABOR AGREEMENTS & COMPENSATION INCREASES:
Court System
Covered
Non-Covered
Legislature
Exempt
ALASKA COURT SYSTEM
ARTHUR SNOWDEN II, ADMINISTRATIVE DIRECTOR, ALASKA COURT
SYSTEM,
provided the Committee with a committee substitute work
draft for HB 144, an act relating to salaries for officers
and employees who are not members of a collective bargaining
unit. He provided a brief overview of that legislation.
STEPHANIE COLE, (TESTIFIED VIA TELECONFERENCE), DEPUTY
ADMINISTRATIVE DIRECTOR, ALASKA COURT SYSTEM, testified
regarding the negotiated Court System contract with the
International Brotherhood of Electrical Workers (IBEW)
Union. The Court System bargaining unit consists of 300
non-supervisory court employees, statewide, amounting to
10
half of the Court Systems work force. Most of the employees
in that Union are range 12 and under. These employees voted
to be recognized by IBEW in July, 1994. Ms. Cole pointed
out that the negotiated contract was fair to the employees.
Ms. Cole presented a summary of terms of the contract. The
benefits package would not change. Employees would continue
to receive PERS retirement, health coverage and State
Benefit System (SBS) benefits with the same conditions of
the non-covered employees. The contract provides that the
bargaining unit would receive the same geographic
differential as the uncovered employees. Overtime is paid
only after 40 hours of work. The employees have not had a
salary increase since 1991.
Under the agreement within the contract terms, the employee
would receive a 5.2% raise for the first year of the
contract and would begin July, 1996. The first component of
the raise would be a 3.6% increase, bringing employees up to
1992 parity. The second component would be additional 1.5%
increase, and that would bring employees up to parity for
next year's proposals currently before the Legislature.
ANNE HAYS, (TESTIFIED VIA TELECONFERENCE), INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS (IBEW), ANCHORAGE,
reiterated the major concern that IBEW has regards the
differential lost during the past four years by the Court
System. That loss will not be recoverable. The contract
would bring employees in line with parity. Ms. Hayes noted
approval of the contract language that outlines the economic
impact.
Ms. Hays added, the $590 request represented the cost of the
5.2% pay raise. Co-Chair Hanley pointed out that the spread
sheet provided by Legislative Finance Division indicated
1.5% increase for all employees and was not reflective of
the contract before the Committee. He requested current
figures demonstrating costs for FY97, FY98, and FY99.
Mr. Snowden commented that the total package would cost $1.7
million dollars. He reiterated that would bring the Court
System employees equal to what the unions are requesting
this year.
Co-Chair Hanley asked if privatization had been considered.
Mr. Snowden replied that there was no ban on privatization.
Transcript production will soon be privatized. There are no
formal break times included in the contract. Co-Chair
Hanley questioned the system used for health care. Mr.
Snowden noted that the Court System uses the same health
care system, leave, SBS and retirement as other State
employees. The Court System also uses the same five step
11
plan for merit raise and longevity. He stressed that Court
System employees enter the work force at two range levels
lower than the Executive Branch employees.
Ms. Cole spoke to the geographical differential. She noted
specific contract provisions which would allow that concern
to be taken into consideration. Salaries including merit
raises and longevity are established in contract.
Mr. Snowden addressed pay privileges recommended for the
non-covered employees. Those employees work hard and often
long hours. There are approximately 300 people in the non-
covered status, and 200 of those employees are paid under
Range 15. These employees have not received a pay raise in
five years. He emphasized that those employees deserved to
be treated fairly and equally to those employees in the
unions. Judges would also be included for the recommended
pay raises. The Alaskan judges rank between 34 - 37th
nationwide in monthly pay. These judges deserve a cost-of-
living allowance. Mr. Snowden concluded that law clerks
should also receive a raise. The State changes law clerks
every year and they are hired directly out of law school.
When the pay scale is not changed for five years, the Alaska
salary does not entice new law clerks to hire on.
Mr. Snowden emphasized that the Court System request is
reasonable. He pointed out that the committee substitute
for HB 144 would reflect a new pay scale in statute for
judicial employees and would amount to a 5.2% increase.
BOB LARSEN, (TESTIFIED VIA TELECONFERENCE), INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS (IBEW), ANCHORAGE,
reiterated that the union has sought interests of parity and
that through arbitration a partnership for both union
members and the State was achieved.
Co-Chair Hanley questioned the accuracy of the national
judicial status average quoted by the Court System. Mr.
Snowden responded that national salaries were averaged with
the local cost-of-living index of that area. The figures
provided the Committee include that adjustment.
LEGISLATURE
Co-Chair Hanley pointed out that the spread sheets reflect a
1.5% increase each year for the non-covered employee in the
Legislature. Representative Brown asked for further
information regarding the total number of legislative
employees and the number of staff working on contract.
MIKE GREANY, DIRECTOR, DIVISION OF LEGISLATIVE FINANCE,
noted that he would check with the Director of the
12
Legislative Affairs Division to provide that information.
DISCUSSION AND COMMENTS
Representative Grussendorf questioned the Chair's intent
regarding the proposed contracts. Co-Chair Hanley responded
that it was his intent, and that if the contracts were
granted, all of them would be included and the non-covered
employee status also. He reiterated that all contacts
should be dealt with as a whole unit. He recommended that a
reclassification salary study should be undertaken by the
Legislature before the next session.
Co-Chair Hanley spoke to the unidentified costs that will
increase with the new wage schedule. He suggested that the
Legislature undertake a long-term planning schedule and fund
that cost this year. That study would provide that
information be available for the next session to address the
parity issues. The intent for this year would be to either
approve or deny all the contracts. Representative Mulder
asked the true costs of the contracts.
MARK BOYER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
stated that the numbers provided the Legislature reflected
the known costs. Merit pay is not a contract driven cost,
regardless, if the contracts are passed or not. He advised
that the health care costs were reflected in FY97 costs.
Personal Early Retirement System (PERS), Teacher Early
Retirement System (TERS), and State Benefit System (SBS)
costs were not included in the figures. Those costs would
be shown in the personal services budget and are not new
costs. Co-Chair Hanley agreed that the merit pay and the
health benefits could decrease because of the negotiated
sharing. However, the SBS and PERS would be increased; that
information is not shown in the existing contracts.
Commissioner Boyer stated that the PERS system was more
complex. There are many factors used to determine the
employer contribution. The contracts would not drive that
issue. Co-Chair Hanley disagreed.
DAN SPENCER, BUDGET ANALYST, OFFICE OF BUDGET AND
MANAGEMENT, noted, based on the budget calculations, if the
PERS rate decreases, then the State's contribution would
decrease. The contribution rate established in PERS is not
determined by the salary. That number would be determined
by investment and actuarial levels. Co-Chair Hanley noted
that the percentages do not change and are an investment
related percentage, but the relative amount based on the
contracts negotiated would be increased.
(Tape Change, HFC 96-62, Side 2).
13
Representative Mulder asked if the FY97 general fund
contribution total would be $9.7 million dollars. Co-Chair
Hanley referenced the handout distributed previously by
Legislative Finance Division and the figures included. He
summarized, the final numbers will include $2-$3 million
dollars more than the estimate of $9.7 million dollars,
assuming the negotiated pay raises to the union and the non-
covered employees. Representative Mulder voiced concern
with the general fund increase projected over the next three
years which would be needed to substantiate the requested
amounts.
Representative Mulder questioned the effect of not funding
the contracts. Commissioner Boyer stated that the FY97
budget has these increases built into it. They have been
financed into the budget provided by each affected
department, while at the same time all departments have
proposed $40 million dollars in reductions. Co-Chair Hanley
confirmed that the budget only accounts for $8.43 million
contract negotiation dollars. Mr. Spencer stated that the
health increases negotiated with the unions are included in
the FY97 budget. The projections would provide for a 1.5%
increase step-up. He commented that the proposed figures
were not an attempt to quantify every single cost associated
with the increased wages.
Co-Chair Hanley requested an updated spread sheet indicating
all areas covered in the union negotiations.
Representative Mulder reiterated, what would happen if the
contracts were not funded. Commissioner Boyer replied:
"I think we are all here in June, Mr. Chairman.
The Governor has made a commitment to these
contracts and the Governor has made a commitment
to funding the contracts upfront and not making
reductions in an across the board fashion to
essentially, internally require the departments to
eat these new costs."
Co-Chair Hanley asked what would happen if the contracts
were rejected. Commissioner Boyer replied:
"You are here in June, Mr. Chairman. I can't make
a commitment on what the Governor will or won't do
at the end of the Session. When the dust settles,
the Governor will do what he needs to do. But he
has suggested that it is like the American Express
phrase: 'You don't leave home without it'. I
would recommend to him that we call you back into
Special Session to fund the contracts."
14
Commissioner Boyer continued that two of the contracts which
were not funded last year have expedited processes for
getting to impasse with strike votes. He emphasized that
there could be a shut down on the ferry system and airports
until a court injunction was implemented.
Representative Martin expounded on the Department's
obligation to provide the correct costs of the contracts to
the Legislature. Commissioner Boyer advised that the costs
proposed reflect the three year cost of the contracts and
pointed out that the negotiation process was open to the
public. Discussion followed regarding the bargaining
process. Mr. Spencer responded to Representative Martin's
question regarding merit raise, stating that in FY97, it
amounted to 1.5% of an employees salary and any variable
benefits associated with that. Health benefits would be the
variable area. There is merit in the existing system. He
added that if the cost of the contracts were calculated with
step increases, the number included would be $3.5 million
dollars. That system currently exists.
Representative Brown interjected that the Committee must
consider the cost of not approving the contracts. She noted
that our current system clearly states that there will be
bargaining, and that system has been applied in good faith.
She stressed that the contract negotiations were reasonable
and should be honored. Members of these unions have not had
a wage increase in several years. She mentioned the
disruption that would occur if the contracts were not
accepted, both in lost productivity as well as the potential
of a strike. The Administration has built the anticipated
costs into the budget.
Representative Brown agreed that the merit system should be
studied in greater detail. Currently, merit appears as a
perfunctory obligation and is rarely denied. She thought
perhaps a "true" merit system should be implemented. The
Legislature is in control of that aspect of the
determination and that it could be changed. She reiterated
that concessions have been made relative to where the
Legislature was last year, and that these concessions appear
to be reasonable. She added, that the disparity will cause
more and more employees to go toward unions, not the most
desireable situation from managements point of view.
Representative Brown encouraged members to approve the
contracts.
Representative Kelly asked for the list of unions which do
not include step increases. Commissioner Boyer stated that
the LTC, IBU, teachers and marine units each use a different
system.
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MILA DOYLE, LABOR RELATIONS, OFFICE OF THE COMMISSIONER,
DEPARTMENT OF ADMINISTRATION, responded that the marine
contracts do not have merit, longevity or any step
increases. Any changes in pay result from negotiating wage
increases or promotions within the system. Co-Chair Hanley
asked if the promotions were based on evaluations and
seniority. Ms. Doyle pointed out that it would depend on
the actual classification. Minimum qualifications must be
met to progress into a new classification and that it is not
an automatic progression.
Merit increases are steps A through E within the salary
schedule. Step F follows after a one year duration moving
to step J. Steps J, K, L, and M are the longevity steps.
Those steps are based on time. Merit steps are based on
merit and can be denied. Longevity steps tend to be
automatic but do include a few variables. Co-Chair Hanley
asked for a spread sheet indicating the number of years to
move from step A through M and the financial obligation
associated with those moves.
DIANNE CORSO, LABOR RELATIONS SECTION CHIEF, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF ADMINISTRATION, explained that
the contracts provide basic guidelines for how merit
increases are supposed to be granted. These are called
performance incentives which distinguishes them from the
statutory provisions. The major contracts share a basic
format that the employee be acceptable and be of
"progressively greater value" with each evaluation.
Co-Chair Hanley reiterated that the merit system needs to be
changed. Implementation of a motivational aspect would
change peoples attitude in State government. Ms. Corso
noted that to change the interpretation of what was
acceptable, would require changing options within the
statutory venue. However, the language change would require
negotiation changes. Co-Chair Hanley stressed that the
Legislature could change that language and then establish
the standard. Commissioner Boyer suggested that would be
the preferred way for the Legislature to provide guidance.
(Tape Change, HFC 96-63, Side 1).
Commissioner Boyer noted that the work environment has
changed dramatically over the years. A much higher
qualified employee is now required. Representative
Therriault commented that upgrading employee skills has
resulted in large costs to the State. Commissioner Boyer
countered that the employees often pay "out of pocket" or
from personal services for further training.
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Representative Grussendorf voiced concern that repercussions
would be suffered by not ratifying the contracts. He asked
the Chair's intent. Co-Chair Hanley pointed out that the
Governor has introduced a pay differential bill; and that a
bill also exists for a Tier III level retirement system. He
stated that his preference would be to place the geographic
differential into statute which would then require the
Administration to negotiate that consideration in the
contracts.
Commissioner Boyer recommended that the proposed legislation
include funds for a fiscal note to cover costs of preparing
an analysis.
Representative Brown inquired about the sixty day statutory
deadline for the contract ratification. Ms. Corso
referenced A.S. 23:42:15, stating that the Legislature is
suppose to adopt a resolution either approving or
disapproving the contract within sixty days of having it
submitted. Commissioner Boyer added that the contracts were
submitted on the eighth day of the session and that the
Legislature would have seventy days from that time.
Commissioner Boyer added that in the absence of approval,
the courts have suggested, or in the absence of language in
the budget rejecting the contracts, the contracts would be
approved. The law allows that the parties involved may re-
enter negotiation.
Co-Chair Hanley distributed a legal memo dated, 2/06/95,
addressing legislative action with respect to the monetary
terms of collective bargaining contracts. [Attachment #1].
"The provisions in AS 23.40.215(b) suggest that
the legislature must adopt a resolution within 60
days of submission of the monetary terms to the
legislature. The statute is not clear as to what
happens if the legislature fails to meet the 60-
day deadline. The requirement for funding by the
legislature is subsection (a) does not state that
if the legislature fails to act within a 60-day
period, the money is considered to have been
appropriated. And, since a resolution can only be
viewed as a nonbinding statement, failure to make
such a statement should not be given more weight
than the making of the statement would hold.
Therefore, I believe that the 60-day time period
should be viewed as a goal, not a legal
requirement. Failure to adopt a resolution within
the 60 days does not preclude the legislature from
acting later."
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He added that the Legislature can include language even
after the sixty day deadline which rejects the contracts.
The Legislature could also approve the contracts after the
sixty day time limit. The other option would be not to
address the contracts, which would make the contracts
approved without appropriating the departmental funding to
support them.
Co-Chair Hanley reiterated the request for up-dated spread
sheets. He asked if the State was required to use the SBS
system. Commissioner Boyer replied, they were not. Co-
Chair Hanley asked the State's flexibility in not using that
system or in decreasing the percentage that the State pays
toward the SBS system. Commissioner Boyer noted that Bob
Stalnaker, Director of Retirement and Benefits could address
that concern at the next meeting.
ADJOURNMENT
The meeting adjourned at 9:55 A.M.
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