Legislature(1995 - 1996)

03/20/1996 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                         March 20, 1996                                        
                            1:40 P.M.                                          
                                                                               
  TAPE HFC 96-81, Side 1, #000 - end.                                          
  TAPE HFC 96-81, Side 2, #000 - end.                                          
  TAPE HFC 96-82, Side 1, #000 - end.                                          
  TAPE HFC 96-82, Side 2, #000 - #215.                                         
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House  Finance Committee                 
  meeting to order at 1:40 p.m.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley                                                              
  Co-Chair Foster               Representative Martin                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  Representative Mulder was absent from the meeting.                           
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Mark Boyer, Commissioner, Department of Administration; Mila                 
  Doyle, Labor Relations, Department  of Administration; Diane                 
  Corso,    Labor    Relations    Manager,    Department    of                 
  Administration;   Alison    Elgee,   Deputy    Commissioner,                 
  Department   of   Administration;    Katherine   Strasbaugh,                 
  Assistant Attorney General, Department of Law; Terry Cramer,                 
  Attorney,   Legislative   Affairs  Agency;   Pat  Gullafson,                 
  Assistant Attorney General, Department of Law.                               
                                                                               
  SUMMARY                                                                      
                                                                               
  INQUIRY INTO MONETARY TERMS AND INTERIM LABOR AGREEMENTS                     
  MARINE   HIGHWAY   SYSTEM   COST  OF   LIVING   DIFFERENTIAL                 
  OVERPAYMENTS                                                                 
                                                                               
  Co-Chair Hanley  reviewed the  issues before  the Committee.                 
  He  noted  that the  first area  of  concern relates  to the                 
  conversion of sick leave  to personal leave.  He  noted that                 
  the second area of  concern was brought to the  attention of                 
  the Committee by Representative Martin.   The Committee will                 
  review Cost of Living  Differentials (COLD) overpayments  to                 
  Marine Highway  System employees.   He  noted that  in-state                 
  employees are paid  between 18  and 22.5  percent more  than                 
                                                                               
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  out-of-state employees.  Some out-of-state employees claimed                 
  and received in-state COLD payments.                                         
                                                                               
  Co-Chair Hanley  provided members  with back-up  information                 
  regarding   the   issues   under   Committee   consideration                 
  (Attachment 1).                                                              
                                                                               
  INQUIRY INTO MONETARY TERMS AND INTERIM LABOR AGREEMENTS                     
                                                                               
  Co-Chair Hanley noted  that monetary  terms of an  agreement                 
  must  be  submitted  before  the  legislature  for approval.                 
  Monetary terms of an agreement are defined as changes in the                 
  terms   and  conditions  of  employment  resulting  from  an                 
  agreement   that   will   require   an   appropriation   for                 
  implementation or will result in  a change in state revenues                 
  or productive work hours for state employees.                                
  The  Committee  reviewed  two contracts  negotiated  by  the                 
  Administration.   The interim agreements  allowed conversion                 
  of employee sick and annual leave  to personal leave.  Under                 
  certain conditions employees can cash-in annual and personal                 
  leave.  They cannot cash-in sick leave.                                      
                                                                               
  MARK  BOYER,  COMMISSIONER,  DEPARTMENT   OF  ADMINISTRATION                 
  stressed   that   the   Administration  is   given   maximum                 
  flexibility  regarding  requirements for  the  submission of                 
  monetary terms in negotiation of contracts.                                  
                                                                               
  Commissioner  Boyer  asserted that  his management  style is                 
  inclusive, thorough, and collaborative.  He stressed that he                 
  entertains all points of views.  He  maintained that counsel                 
  is sought in regards to decisions  made by his Department to                 
  assure sound principles.                                                     
                                                                               
  KATHLEEN STRASBAUGH, ASSISTANT ATTORNEY  GENERAL, DEPARTMENT                 
  OF  LAW  addressed  legal  questions.    She  stressed  that                 
  monetary  terms  as defined  by in  statute  is not  what an                 
  ordinary person would customarily think of as something with                 
  cash value.  Monetary terms have  been defined as that which                 
  requires an appropriation for its implementation or a change                 
  in  productive  work   hours.     She  emphasized  that   no                 
  appropriation was  required for  the  interim conversion  of                 
  employee leave.                                                              
                                                                               
  Ms. Strasbaugh observed that on an average, employees use 60                 
  percent of their sick leave.  She  pointed out that the cash                 
  value of sick leave  converted to annual leave may  never be                 
  paid.  The leave  may be entirely  used.  She asserted  that                 
  the conversion will result in less  leave usage.  She stated                 
  that an appropriation may never be required.                                 
                                                                               
  Ms.  Strasbaugh stated that  the Administration expects that                 
  leave  usage  will be  reduced.   She observed  that similar                 
                                                                               
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  conversions  occurred  in  1989.   She  emphasized  that the                 
  practice of leave conversion is  consistent with the wording                 
  of the law.                                                                  
                                                                               
  Ms. Strasbaugh disagreed with Ms. Cramer's assessment of how                 
  the Court would rule in regards to leave conversions (see Ms                 
  Cramer's memorandum  dated 3/20/96  in Attachment  1).   She                 
  noted that she would inform the Court that no appropriations                 
  would  be needed to pay for the leave conversion.  She would                 
  not be able to tell the Court how many productive work hours                 
  would be gained or lost as result of leave conversions.  She                 
  did not  think that  the Court  would allow  an employer  to                 
  speculate in regards to future costs.                                        
                                                                               
                                                                               
  Co-Chair Hanley asked if unions  requested the conversion of                 
  sick leave to  annual leave.  He asked if  this is generally                 
  viewed as a benefit to the union or to the State.                            
                                                                               
  DIANE  CORSO,   LABOR  RELATIONS   MANAGER,  DEPARTMENT   OF                 
  ADMINISTRATION                                                               
  discussed the  bargaining process.   She  stressed that  the                 
  State  proposed  implementing  personal  leave  systems   in                 
  previous negotiations.   She observed in  most circumstances                 
  24 hour institutions must pay  overtime for employee's leave                 
  replacement. She maintained that employee  hours off the job                 
  are reduced  when  sick and  annual  leave is  converted  to                 
  personal  leave.   She  noted  that  the  State  proposed  a                 
  personal leave system during  negotiations with the  Labors,                 
  Trades and Crafts union  (LTC).  She observed that  many LTC                 
  employees  are  involved   in  24  hour  operations.     She                 
  emphasized that  the combined accrual rate is higher under a                 
  sick and annual leave system.                                                
                                                                               
  In  response to  a  question by  Co-Chair Hanley,  Ms. Corso                 
  explained that the  personal leave accrual rate  was reduced                 
  below  the combined accrual rate  for sick and annual leave.                 
  Co-Chair  Hanley noted  that not  all employees  use all  of                 
  their sick leave  before they retire.   The balance of  sick                 
  leave would  not be  of  value to  the individual  employee.                 
  Personal leave is of cash value to the employee.                             
                                                                               
  In response to  a question by Co-Chair  Hanley, Commissioner                 
  Boyer explained that  there was  a one time  transfer of  50                 
  percent of each  employee's sick leave to personal  leave in                 
  the Labors, Trades and Crafts (LTC) union.  Supervisory Unit                 
  (SU) employees  were also allowed  to convert 50  percent of                 
  their  sick  leave  to  personal  leave.   This  change  has                 
  occurred.  According to the Office of Attorney General leave                 
  conversion is not a monetary term.                                           
                                                                               
  Co-Chair Hanley questioned  if a  change in employee  health                 
                                                                               
                                3                                              
                                                                               
                                                                               
  premiums can  be  made  as part  of  an  interim  agreement.                 
  Commissioner Boyer stated that if  the health premium amount                 
  was changed  up or  down it would  be a  monetary term.   He                 
  observed that changes  in health premiums were  submitted in                 
  the LTC and SU contracts.  He noted that these changes would                 
  require additional appropriations.                                           
                                                                               
  Co-Chair Hanley referred to 23.01, Employee Health Insurance                 
  (see Attachment 1).   Commissioner Boyer clarified  that the                 
  state  health  premium  contribution  of  $524  dollars  was                 
  carried forward from the currently approved contract.                        
                                                                               
  Ms.  Corso noted that the only  change was the addition of a                 
  provision  allowing  the  union  to  increase  the  employee                 
  contribution rate after a notice period  to the State.  This                 
  would  not  incur additional  cost to  the State.   Co-Chair                 
  Hanley pointed out that a previous document prepared  by the                 
  Administration erroneously indicated that the health premium                 
  amount was $500 dollars.                                                     
                                                                               
  Co-Chair Hanley noted that the  Commissioner's letter, dated                 
  3/18/96, contained in Attachment 1, stated that a change  in                 
  departments' rate of contribution for  the leave account was                 
  not needed in this fiscal year.  He asked if any changes are                 
  anticipated  in  the  future  based  on  leave  conversions.                 
  Commissioner Boyer  stated that the Administration  does not                 
  expect any changes  in leave cash out calculations  based on                 
  the conversion.   He  stressed that  their calculations  are                 
  based on the history of previous conversions.                                
                                                                               
  ALISON   ELGEE,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                 
  ADMINISTRATION discussed leave conversions.  The  Department                 
  budgets actual  leave utilization on  an annual basis.   All                 
  departments are assessed the same terminal leave percentage.                 
  Leave cash out  is adjusted  on a quarterly  basis based  on                 
  utilization  by department.   She  explained  that contracts                 
  allow employees  to cash  in a  certain number  of hours  if                 
  thresholds are  met.   Additional leave  cash in  is at  the                 
  option of the employer.   A quarterly review was  instituted                 
  to provide employer responsibility for additional leave cash                 
  in.                                                                          
                                                                               
  Ms. Corso explained that there are no caps on personal leave                 
  accrual.   She noted that personal  leave has to be  used to                 
  cover any medical absences for the employee or family.                       
                                                                               
  Commissioner Boyer pointed out that  the contracts contain a                 
  mandatory usage provision.  A standard of 37.5 hours must be                 
  used annually or lost.   The employee can cash out five days                 
  if they have a 10 day mandatory usage.                                       
                                                                               
  Co-Chair Hanley noted that the estimated  value of the leave                 
                                                                               
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  conversion would be  approximately $7 million dollars  if it                 
  were all cashed out.  He stressed that upon termination sick                 
  leave  which  was  converted  to  personal  leave  would  be                 
  available  for cash  in.  This  leave that would  not have a                 
  cash value if it had not been converted.                                     
                                                                               
  Commissioner Boyer stated that the  statute does not address                 
  the  question of  value.   The  statute  refers to  required                 
  appropriations.     There  is  no   increased  appropriation                 
  required.  The  personal services budget of  each department                 
  is billed a  standard 1.4 percent.  This is billed to a bank                 
  that is drawn  down from by  the employer.  Co-Chair  Hanley                 
  questioned  if the  draw  down  would  be increased  by  the                 
  conversion.    Commissioner Boyer  responded that  there are                 
  limitations on the draw down  of active employees within the                 
  contracts.                                                                   
                                                                               
  Co-Chair Hanley stressed that some employees will  terminate                 
  within the next year.  He asserted that their leave  cash in                 
  will be greater  due to the interim  contract.  Commissioner                 
  Boyer  acknowledged  that  their  cash opportunity  will  be                 
  greater.  He restated that  an additional appropriation will                 
  not  be  needed.    He  stressed  that  the  1.4  factor  is                 
  historically reflective  of previous leave conversions.   He                 
  stressed that if  the Legislature  laid off 1,000  employees                 
  the rate would be eschewed.                                                  
                                                                               
  Co-Chair Hanley concluded that there is  a cash value to the                 
  employee that  does not require an additional appropriation.                 
  He asked if additional leave value  was placed on the books.                 
  Commissioner Boyer clarified  that leave  was taken from  an                 
  account that  does not  have a cash  value and placed  in an                 
  account that does have a cash value.                                         
                                                                               
  Ms.  Elgee   explained  that   non-covered  employees   were                 
  converted  in the late 70's from an annual/sick leave system                 
  to  a  personal leave  system.   A  review was  conducted to                 
  ascertain  the average  actual  leave  utilization of  state                 
  employees.  It was determined that employees  use 60 percent                 
  of their sick leave on an annual basis.  Annual leave and 60                 
  percent of the accrued sick leave were converted to personal                 
  leave.   The total leave value remained the same as had been                 
  previously utilized.  She  stated that there was a  net zero                 
  cost to the state of Alaska.  Commissioner  Boyer emphasized                 
  that the economies of scale allow a net zero result.                         
                                                                               
  Co-Chair Hanley observed that payments to leave accounts are                 
  adjusted periodically.  Ms. Elgee explained that adjustments                 
  are only made  for leave cash in.   She noted that  prior to                 
  the Hickel  Administration a  flat amount  was assessed  all                 
  departments for terminal  leave and leave  cash in.  It  was                 
  discovered that the Department of Public Safety's leave cash                 
                                                                               
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  in  practices  were  increasing  the  rate  statewide  by  a                 
  noticeable percentage.  The decision  was made that managers                 
  should be responsible  for leave cash in.   Leave cash in is                 
  adjusted  on  a quarterly  basis.   It  is  assessed through                 
  payroll and goes into the working reserve account to be used                 
  for terminal leave, leave cash in and unemployment insurance                 
  benefits.                                                                    
                                                                               
  Ms. Elgee  explained  that the  Administration  budgets  the                 
  annual  leave  need  on  a  cash  basis.    Co-Chair  Hanley                 
  maintained that there is going to be an increase in the cash                 
  amount  that  is  needed  to  cover  additional leave.    He                 
  stressed  that  employees  can  retire  or  quit  with  more                 
  personal leave than  they had before the  interim agreement.                 
  Commissioner Boyer  emphasized that some employees will wait                 
  10 - 20 years before they cash their leave in.                               
                                                                               
  Commissioner Boyer estimated that sick  leave not used would                 
  be 40 percent  on an  annual basis.   Co-Chair Hanley  noted                 
  that there is  a 10  percent employee turnover.   Ms.  Elgee                 
  pointed out the  size of the employee pool results in a wide                 
  variety of situations.                                                       
                                                                               
  Co-Chair Hanley stressed that there  is a cash difference to                 
  the  State.    He  questioned  if  personnel  costs  include                 
  contributions of employee  leave.   Ms. Elgee restated  that                 
  the  State  does  not  accrue  liability  for  leave.    The                 
  Department  of  Administration budgets  based  on  an annual                 
  usage pattern.                                                               
                                                                               
  (Tape Change, HFC 96-81, Side 2)                                             
                                                                               
  In response to  a question by Co-Chair  Hanley, Commissioner                 
  Boyer  stated  that the  leave  conversion was  considered a                 
  win/win situation.   The  State gained  reduced accrual  and                 
  utilization rate.  The employee gained more flexibility.  He                 
  restated that  it was an employer desire for many years.  He                 
  added  that  the  city of  Fairbanks  bargained  for similar                 
  provisions.    He  maintained that  it  makes  good business                 
  sense.                                                                       
                                                                               
  In response to remarks by  Representative Navarre, Ms. Corso                 
  noted that personal leave systems, in most of the contracts,                 
  were modeled on the state statutory scheme.                                  
                                                                               
  Ms. Elgee observed  that members of the  Teachers Retirement                 
  System  (TRS) have  the  ability to  convert  sick leave  to                 
  retirement credit.  She pointed out  that this would need to                 
  be taken  into account in terms of  any uniform application.                 
  Co-Chair Hanley  noted that  the Teachers Retirement  System                 
  differs from other groups.   Ms. Corso added that  there are                 
  members of TRS in other state employee groups.                               
                                                                               
                                6                                              
                                                                               
                                                                               
  Representative   Therriault   noted  that   legislation  was                 
  introduced  to  allow   cash  in   of  unused  sick   leave.                 
  Commissioner Boyer  pointed out that  the legislation  would                 
  have  allowed  a  100  percent   conversion.    The  interim                 
  contracts provide for a 50  percent conversion and a reduced                 
  accrual rate.                                                                
                                                                               
  Co-Chair  Hanley clarified that if an employee had 100 hours                 
  of sick leave 50 hours would  be converted to personal leave                 
  and 50 would remain as sick leave.                                           
                                                                               
  Commissioner Boyer stressed that personal leave must be used                 
  before the remaining sick  leave can be accessed.   Co-Chair                 
  Hanley observed that  the requirement  to access sick  leave                 
  was  reduced  from  30  to  20  days.    Commissioner  Boyer                 
  emphasized that it is a  defined environment that disappears                 
  over time.                                                                   
                                                                               
  Representative Martin expressed concern that there may be an                 
  impact to the State's long term retirement costs.                            
                                                                               
  In  response  to a  question  by Representative  Martin, Ms.                 
  Corso explained that the decision was reached to consult the                 
  Attorney  General.    Commissioner  Boyer  noted  that   the                 
  position of the  Attorney General was that  leave conversion                 
  was  not a monetary  term that required  notification of the                 
  Legislature.    He   maintained  that   the  Department   of                 
  Administration  is   conforming   to   past   practices   of                 
  Administrations of both parties.                                             
                                                                               
  Representative Martin  maintained that sick  leave should be                 
  for sick people.                                                             
                                                                               
  Ms. Corso  noted that the  only kind  of leave  that can  be                 
  donated  to  another  individual  is  personal leave.    She                 
  observed  that there has been  an increase in personal leave                 
  donations for sick leave use by other employees.                             
                                                                               
  Co-Chair Hanley concluded that there is  a cash value to the                 
  conversion.    He  observed that  employees  are  allowed to                 
  convert 50 percent and keep 50 percent of their sick leave.                  
                                                                               
  Co-Chair Hanley referred to the memorandum by Ms.  Cramer in                 
  Attachment 1.   He  pointed out that  the memorandum  states                 
  that  the  fact that  the cost  does  not need  an immediate                 
  appropriation does  not circumvent  the need  to submit  the                 
  contracts.    If  a  future  cost  can be  demonstrated  the                 
  conversions would be a monetary term.                                        
                                                                               
  TERRY  CRAMER, ATTORNEY, ALASKA  LEGAL SERVICES  stated that                 
  she would argue that the conversion is a monetary term  if a                 
                                                                               
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  future cost is  determined.  She  stressed that there is  an                 
  ascertainable period of time that the terms will apply.  She                 
  pointed  out that the  State will be  bound by the  terms in                 
  subsequent years.                                                            
                                                                               
  MARINE   HIGHWAY   SYSTEM   COST  OF   LIVING   DIFFERENTIAL                 
  OVERPAYMENTS                                                                 
                                                                               
  Co-Chair   Hanley  summarized   that   some  Department   of                 
  Transportation   and   Public  Facilities,   Marine  Highway                 
  employees were compensated  at the in-state level  when they                 
  should have been compensated at a lower out-of-state level.                  
                                                                               
  Representative  Martin noted  that he  received a copy  of a                 
  memorandum by Commissioner Boyer to Jim Ayers, dated 6/30/95                 
  (see Attachment 1).   He also received an  anonymous letter,                 
  dated 11/26/96 (see Attachment 1).  He noted that statements                 
  made  in   the  memorandum  were   reprinted  in   newspaper                 
  editorials.                                                                  
                                                                               
  Representative Martin reviewed  other documents contained in                 
  Attachment  1.    He  maintained  that  he  was  mislead  by                 
  Commissioner Boyer in regards to  the status of negotiations                 
  between the State and marine highway employees.  He asserted                 
  that these employees should make  100 percent restitution to                 
  the State.  He questioned  Commissioner Boyer's authority to                 
  forgive the indebtedness to the State.                                       
                                                                               
  Commissioner  Boyer  stressed  that he  did  not  believe an                 
  agreement had been  reached when he spoke  to Representative                 
  Martin in December  1995.  He  emphasized that an offer  had                 
  been made and  agreed to  in principal.   The agreement  was                 
  contingent upon acceptance by all  ten members of the Marine                 
  Engineers'  Beneficial  Association  (MEBA).    He  did  not                 
  receive indication that  this qualification was met.   There                 
  were  no signatures from MEBA members on the agreement until                 
  after December  20. 1995.  He had no firm agreement with the                 
  other two units involved.                                                    
                                                                               
  Representative Navarre pointed out  that the commissioner of                 
  Department of Administration  is not required to  inform the                 
  chairman of the  Legislative Budget  and Audit Committee  or                 
  legislature in regards  to negotiations.   He observed  that                 
  employees  disputed  the  claim  that  the  Cost  of  Living                 
  Differential (COLD) was wrongly taken.  No determination had                 
  been made.   He suggested  that a state asset  was not given                 
  away because  it has  not determined  if COLD  payments were                 
  wrongly paid.                                                                
                                                                               
  Ms. Corso gave an overview of the issue.  She explained that                 
  in March 1992,  as a result  of recommendations made by  the                 
  Governor's   Task   Force   on    Organization   Efficiency,                 
                                                                               
                                8                                              
                                                                               
                                                                               
  investigations   were  made   into  COLD   payments.     The                 
  investigation was conducted through the Office of Management                 
  and Budget.  Meetings were held  with the Department of Law,                 
  Department    of    Administration    and   Department    of                 
  Transportation  and  Public  Facilities.   In  July  1992, a                 
  working group was formed.   The working group recommended in                 
  August 1992, that the  Office of Management and  Budget send                 
  out new certification forms.   Under the agreement employees                 
  that claim COLD  are required to certify annually  that they                 
  meet  the  requirements  and are  entitled  to  receive COLD                 
  payments.      Additional   information   including   rental                 
  agreements were required.  Approximately 700 people received                 
  inquiries at this time.  Members  of the working group began                 
  meeting with the  Labor Relations  Steering Committee.   The                 
  majority of members  were certified.  Two  hundred and fifty                 
  files were turned over to the Labor Relations Section in the                 
  Division  of  Personnel,  Department  of  Administration  to                 
  continue  the  investigations.   Of  these, 125  needed more                 
  information and 125 were suspect.   In March 1993, a private                 
  investigator was hired.   The suspect group  was narrowed to                 
  90 employees to be interviewed.                                              
                                                                               
  The State decided to attempt to seek global settlements with                 
  all  three  bargaining  units  involved;  Marine  Engineers'                 
  Beneficial  Association,  Inlandboatmen's  Union (IBU),  and                 
  Master, Mates and Pilots  (MMP).  The State would  agree not                 
  to  seek  criminal  prosecution  of  employees  and  not  to                 
  terminate employees if employees would  agree to a lengthily                 
  suspension and pay  back money  claimed by the  State.   She                 
  stressed that  the  State felt  it  would be  worthwhile  to                 
  settle in order to avoid the cost of lengthy investigations.                 
  The agreement was rejected by IBU. Only eight members of MMP                 
  and one individual in MEBA signed up for the settlement.                     
                                                                               
  Interviews began in January 1994.  In June 1994, a number of                 
  employees were  terminated.  Global  settlement negotiations                 
  were begun again.  Ms.  Corso noted that MEBA signed  up for                 
  the   agreement    but   IBU    rejected   the    agreement.                 
  Investigations were completed by November 1994.  Twenty nine                 
  employees were  found to be inappropriately  collecting COLD                 
  payments.   These were dismissed.  The remainder were issued                 
  some form  of discipline.   In  December 1994,  arbitrations                 
  were held.                                                                   
                                                                               
  (Tape Change, HFC 96-82, Side 1)                                             
                                                                               
  Ms. Corso noted that the MEBA decision was received in March                 
  1995.  The Arbitrator found for the State on all points.  In                 
  three other cases the  State won one, lost one and split the                 
  third  decision.     There  are  additional  cases  awaiting                 
  arbitration.                                                                 
                                                                               
                                                                               
                                9                                              
                                                                               
                                                                               
  Representative Martin observed that  $700.0 thousand dollars                 
  are  in  question.    He   referred  to  the  memorandum  by                 
  Commissioner  Boyer.   He  pointed  out that  the memorandum                 
  indicated that  members of Commissioner  Boyer's staff  were                 
  opposed to a settlement.                                                     
                                                                               
  Commissioner  Boyer  stressed   that  the  labor   relations                 
  perspective is  only one  perspective which  is narrowed  to                 
  that  field  of expertise.    He  acknowledged  that he  was                 
  counseled against the settlement by members of Department of                 
  Administration.    He  emphasized  that  this is  the  third                 
  attempt at settlement.  The  current settlement only affects                 
  10 of 28  employees.  The  total monetary environment  under                 
  the agreement  is $430.0  thousand dollars.   He  maintained                 
  that the Administration is aggressively pursuing prosecution                 
  of employees not covered by the  agreement.  He acknowledged                 
  that the  offer was made to  all the employees.   He pointed                 
  out that IBU believes they have won the issue.                               
                                                                               
  Representative  Martin maintained  that  the settlement  was                 
  overly generous.   He questioned Commissioner Boyer's  right                 
  to give away the State's assets.  He noted that if the other                 
  unions get a better deal that MEBA will get the same deal.                   
                                                                               
  PAT GULLAFSON, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW                 
  maintained  that   the   commissioner   of   Department   of                 
  Administration has the  authority to settle  labor disputes.                 
  He demonstrated that  the Commissioner has the  authority to                 
  settle employee  disputes.   He emphasized  that a  disputed                 
  dollar  is  not considered  worth 100  cents.   The  cost of                 
  collecting each dollar must be taken into consideration.  He                 
  reiterated that there have been four negotiations with mixed                 
  results.                                                                     
                                                                               
  Co-Chair Hanley noted  that the  memorandum by  Commissioner                 
  Boyer indicated that Mr. Gullafson was not supportive of the                 
  deal.  Commissioner Boyer clarified  that the memorandum did                 
  not address the March 11, 1995 or August 8, 1995 agreements.                 
  He  noted that the  memorandum discussed  an offer  from the                 
  unions.  In response  to a question by Co-Chair  Hanley, Mr.                 
  Gullafson stated that there is probably a 50/50 chance of an                 
  arbitrator ruling in  favor of  the State.   He pointed  out                 
  that arbitration is  difficult to argue  against.  He  noted                 
  that the agreement establishes clarity between the State and                 
  MEBA  regarding  qualifications  for   the  Cost  of  Living                 
  Differential.    He stressed  that  there will  be  a future                 
  savings through a reduction in disputes.                                     
                                                                               
  Co-Chair  Hanley  stated  that  residency  should not  be  a                 
  negotiating point.  He felt  that residency requirements for                 
  COLD payments should be clarified statutorily.                               
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Representative Martin acknowledged the importance of setting                 
  residency requirements in  regards to COLD eligibility.   He                 
  asserted that employees  mislead the  State.  He  maintained                 
  that the state of Alaska should take the cases to court.                     
                                                                               
  Mr. Gullafson observed that it has not been established that                 
  the  employees  were clearly  ineligible for  COLD payments.                 
  Representative Martin  restated  that  employees  should  be                 
  pursued for false claims.                                                    
                                                                               
  In response to a question  by Co-Chair Hanley, Mr. Gullafson                 
  noted that attorney fees are paid by  the party that did not                 
  win the arbitration.                                                         
                                                                               
  Co-Chair  Hanley  questioned  if the  agreement  between the                 
  State and MEBA  is fair.   He referred  to comments made  by                 
  Commissioner  Boyer  in  the memorandum  to  Jim  Ayers (see                 
  Attachment 1).   He observed that the  memorandum questioned                 
  the political  benefit  of  an agreement.    He  noted  that                 
  repayment will only  be 15  percent.  He  observed that  the                 
  memorandum questioned if there is  a benefit in helping  the                 
  union representative deliver  for the  union in an  election                 
  year.   Commissioner Boyer also asked in the memorandum what                 
  the press fallout would be and if there is  a political need                 
  that could be met.   He stressed that these  statements make                 
  the  settlement  more questionable.    He questioned  if the                 
  agreement was motivated by political aims.                                   
                                                                               
  Commissioner Boyer stated  that he knew the  answers to most                 
  of  the questions posed  by the  memorandum.   He maintained                 
  that it is healthy to ask  political questions.  He asserted                 
  that his decision was not based on political considerations.                 
  He reiterated  that it  was a  good business  decision.   He                 
  emphasized  the  time  and energy  the  issue  has absorbed.                 
  There are 18 cases pending.  He stressed the decision not to                 
  throw good money after bad.  He emphasized the importance of                 
  providing a criteria  for future disputes.  He asserted that                 
  millions of dollars  will be  saved by removing  individuals                 
  from future COLD eligibility.                                                
                                                                               
  Commissioner  Boyer noted  that the permanent  fund dividend                 
  criteria  for residency  has  been withheld  in  court.   He                 
  stated that his  goal was  to implement  an agreement  which                 
  embraced the best set of  criteria for determining residency                 
  and  put  it in  place  by  the agreement.    He  noted that                 
  legislation will  be introduced  to place  this criteria  in                 
  statute.  He restated that the goal is to contain the  drain                 
  of future  resources.   He  estimated that  the State  saves                 
  $20.0 thousand  dollars a  month  in benefits  that are  not                 
  being paid as  a result of actions taken by  the current and                 
  previous Administrations.  He observed that  3 out 10 of the                 
  individuals in the agreement  are receiving COLD again.   He                 
                                                                               
                               11                                              
                                                                               
                                                                               
  emphasized that the   Department  of Administration and  the                 
  Department of  Transportation and  Public Facilities  should                 
  not be in the position of policing employees when there is a                 
  permanent fund dividend fraud division that works.                           
                                                                               
  Commissioner  Boyer  noted   that  the  State   claims  that                 
  employees  were  overpaid  $800.0  thousand   dollars.    If                 
  arbitrator awards followed the  estimated 50/50 pattern  the                 
  State  would receive repayment  of $400.0  thousand dollars.                 
  The  State  has  already spent  $300.0  thousand  dollars to                 
  pursue  these  claims.    He  stressed  that  the  State  is                 
  approaching  the break even  point.  He  maintained that the                 
  agreement trades a  break even  proposition for a  permanent                 
  fix to a problem that would have continued to perpetuate the                 
  drain of state resources to employees that are not qualified                 
  to receive COLD.                                                             
                                                                               
  Representative Martin  observed that the  most other  groups                 
  will have to pay is 15 percent.   He questioned if one union                 
  could  sue  if anther  union  receives a  better settlement.                 
  Commissioner Boyer pointed out that  employees are currently                 
  being treated differently.  He added that the offer was made                 
  to the other  unions.  The offer stood for four months.  The                 
  offer was not accepted by IBU or MMP unions.   He maintained                 
  that  there  will  be no  better  settlement  than what  was                 
  offered all three unions and accepted by MEBA.                               
                                                                               
  In  response to  a question  by Co-Chair  Hanley,  Ms. Corso                 
  reiterated that the  offer was made to  all three bargaining                 
  groups.                                                                      
                                                                               
  MILA DOYLE,  LABOR RELATIONS,  DEPARTMENT OF  ADMINISTRATION                 
  explained that  the initial  global settlement  offer, which                 
  was offered by Commissioner Usera, had  two components.  The                 
  offer required  that the union  agree to withdraw  all class                 
  action  grievances  and  unfair labor  practices  around the                 
  issue  of  COLD.     Both  MEBA  and  MMP  agreed   to  this                 
  requirement.     In   addition,  the   agreement  gave   the                 
  opportunity for individual members to sign up for protection                 
  under the settlement  offer.   The settlement provided  that                 
  individual members  would not  be prosecuted  or lose  their                 
  jobs.    The employees  would  receive a  lengthy suspension                 
  which could not be disputed  through arbitration.  Employees                 
  would  be required  to  pay the  full amount  of restitution                 
  claimed by the State.  The  agreement provided for a neutral                 
  third party to  review disputes  regarding the amount  owed.                 
  Eight members of  MMP and one  member of MEBA accepted  this                 
  agreement.                                                                   
                                                                               
  Commissioner  Boyer concluded  that there  are  18 employees                 
  remaining  with disputed amounts  totaling just under $400.0                 
  thousand dollars.                                                            
                                                                               
                               12                                              
                                                                               
                                                                               
  In   response  to  a   question  by  Representative  Martin,                 
  Commissioner Boyer explained that employees  fill out a form                 
  and  attest  to their  residency.   He  reiterated  that the                 
  Department's  priority  was  to  change  the  venue  to  the                 
  Permanent Fund  Dividend Division's  fraud unit.   He  noted                 
  that  there  was no  structure in  place to  accomplish this                 
  prior to  the agreement.   Employees will have  to recertify                 
  their eligibility based on permanent fund dividend criteria.                 
  The Department of Transportation  and Public Facilities will                 
  transfer the forms to the  Department of Revenue for review.                 
  The  Department  of  Transportation and  Public  Facilities,                 
  Marine   Highway   System    has   been   responsible    for                 
  certification.                                                               
                                                                               
  Commissioner  Boyer  restated   that  legislation  will   be                 
  proposed  to permanently  make the  permanent fund  dividend                 
  criteria the criteria for future COLD qualification.                         
                                                                               
  In response to a question  by Representative Therriault, Ms.                 
  Corso  clarified  that  the  current  collective  bargaining                 
  agreement    includes    general    provisions   for    COLD                 
  qualifications.   This  is consistent  with  permanent  fund                 
  dividend  requirements.   Further negotiations  will clarify                 
  specific criteria and  the process  for determining that  an                 
  employee has meet the criteria.                                              
                                                                               
  (Tape Change, HFC 96-82, Side 2)                                             
                                                                               
  Representative Therriault asked if there was any willingness                 
  by  employees  to  police themselves.    Commissioner  Boyer                 
  replied that guilt or wrong doing  was never admitted by any                 
  of the employees.                                                            
                                                                               
  Co-Chair Hanley reiterated  concerns regarding terms of  the                 
  agreement.    He  restated   that  the  political   comments                 
  contained  in the 6/30/96  memorandum by  Commissioner Boyer                 
  has caused concern regarding the  validity of the agreement.                 
  He observed that the lack of information  given to lawmakers                 
  was seen as misleading by some legislators.                                  
                                                                               
  Representative   Martin   stated   that   he   wished   that                 
  Commissioner  Boyer   had  been  more  "straight"  with  him                 
  regarding the  potential agreement of  August 8,  1995.   He                 
  asserted that the overpayments are "out right theft".                        
                                                                               
  Commissioner Boyer  urged members to support  legislation to                 
  place   COLD   residency   requirements  and   certification                 
  provisions in statute.  Co-Chair Hanley assured him he would                 
  assist in addressing the issue.                                              
                                                                               
  Representative  Therriault  noted that  IBU  took a  vote in                 
                                                                               
                               13                                              
                                                                               
                                                                               
  August 1995 to  authorize a walk  out due to  the lack of  a                 
  contract.  He questioned if this issue would have caused IBU                 
  members to vote for  a walk out.  Commissioner  Boyer stated                 
  he could not speculate what effect  the issue would have had                 
  on the vote.  He noted that the atmosphere was very intense.                 
                                                                               
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 2:15 p.m.                                           
                                                                               
                                                                               
                               14                                              

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