Legislature(1999 - 2000)
05/17/1999 07:50 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 17, 1999
7:50 P.M.
TAPE HFC 99 - 147, Side 1.
TAPE HFC 99 - 147, Side 2.
CALL TO ORDER
Vice-Chair Bunde called the House Finance Committee meeting
to order at 7:50 P.M.
PRESENT
Co-Chair Mulder Representative Foster
Co-Chair Therriault Representative Grussendorf
Vice Chair Bunde Representative Kohring
Representative Austerman Representative Moses
Representative J. Davies Representative Williams
Representative G. Davis
ALSO PRESENT
Mike Tibbles, Staff, Representative Gene Therriault; Alison
Elgee, Deputy Commissioner, Department of Administration;
Don Etheridge, Alaska Laborers Union, Juneau; Vincent
O'Connor, Alaska State Employee Association, Anchorage;
Chris Christenson, General Council, Judicial Branch, Alaska
Court System.
TESTIFIED VIA TELECONFERENCE
Paul Lyle, Assistant Attorney General, Department of Law,
Fairbanks; John Athens, Assistant Attorney General,
Department of Law, Fairbanks; Karol Alderman, Assistant
Attorney General, Department of Law, Fairbanks; Leone Hatch,
Assistant Attorney General, Department of Law, Fairbanks;
Richard Keck, Assistant Attorney General, Department of Law,
Fairbanks.
SUMMARY
HB 199 An Act relating to compensation for certain state
employees; and providing for an effective date.
CS HB 199 (FIN) was reported out of Committee with
a "do pass" recommendation and with fiscal notes
by the Department of Administration and the Alaska
Court System.
HOUSE BILL NO. 199
An Act relating to compensation for certain state
employees; and providing for an effective date.
MIKE TIBBLES, HOUSE FINANCE STAFF, REPRESENTATIVE GENE
THERRIAULT, explained the changes made to the work draft
version "K", committee substitute for HB 199. He noted that
the new version would establish:
1. A new pay differential for statutory employees.
The bill provides that if there is a change or a reduction
in employee's pay because of the change in pay differential,
the employee would be frozen at their current pay due to
cost of living allowances (COLA's) or longevity increases
until the pay catches up to them. From there, they will
continue to move up the scale.
For the record, Representative Bunde clarified that current
employees would not be asked to take a reduction in salary,
but would remain in their current place until the schedule
catches up with them. Mr. Tibbles agreed unless an employee
moved from one region to another locale.
2. The new version would remove the recommended
reduction contained in the State Affairs version for
commissioners and judges.
3. The new version would remove the limit and cap for
longevity steps, returning it as is.
4. The new version would modify the Supplemental
Benefits System (SBS) for new employees.
5. The new version would place a cap on the amount of
wages contributions could be made, a floating number. The
current statute places the cap at 1998 social security wage.
For new employees, the State's contribution would be reduced
from 6.13% to 3.065%.
ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, commented that the geographic differential
schedule included in the committee substitute is in fact the
same schedule currently in place for the general government
unit employees and the supervisory employees throughout the
State. The Department of Administration has in the past
proposed legislation to amend the statutory geographic pay
differential in line with those schedules that have been
negotiated through the collective bargaining agreements.
She continued, collective bargaining schedules are a result
of a cost of living differential study provided in 1986. At
that time, new contracts were negotiated to reflect
information resulting in a reduction of the geographic
differential for a number of places in the State. It has
been problematic to modify that schedule.
Ms. Elgee commented that the Department of Administration
supports the committee substitute including the freeze
provision to guarantee that no employee will loose anything
from their current pay. However, the Department strongly
recommends the deletion of Section 1, which indicates that
the geographic differential could not be negotiated through
collective bargaining. She emphasized that language does a
disservice to the State of Alaska.
In response to Representative Bunde, Ms. Elgee pointed out
that the language in Section 5 is in existing statute.
DON ETHERIDGE, ALASKA LABORERS UNION, JUNEAU, commented that
the concern of the Laborers Union is with the SBS portion of
the proposed legislation. He emphasized that it would not
be good to create a two-tier system amongst employees. That
will be difficult on the morale of new hires and could make
it difficult to recruit qualified people.
PAUL LYLE, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF
LAW, FAIRBANKS, questioned if there would be a new schedule
reducing current pay status. Mr. Tibbles advised that all
reductions have been eliminated from the bill.
Representative J. Davies explained that pay would be frozen
at one's current level until that person catches up with the
new proposal. Mr. Tibbles pointed out that the pay scale
would be calculated first on the current area cost pay
differential and then on the newly established pay
differential. Given the result on the new schedule, the
employee's salary would be decreased and that person's
salary would be frozen until COLA's or longevity annual
increases bring them up to the current level, at which
point, they would continue to increase.
Mr. Lyle asked if freezing pay would mean that workers would
not receive longevity pay increases. Representative J.
Davies commented that with the longevity plus inclusion of
the new differential less than the current salary, the
employee would not receive a pay increase. Ms. Elgee
clarified that in the past when modifications were made to
the geographic differential schedule, a freeze was the
approach taken. For merit increase eligibility, the
individual is calculated as if they had not been frozen for
the purpose of each adjustment, measured by when frozen. It
is at that point with the new salary schedule and if that
movement exceeds the frozen salary schedule, they would
receive an increase. It is assumed that an individual
loosing 10% for a geographic differential, that a
combination of events could leave a 3% per year improvement
in the pay base. During year four, that employee would
actually receive more money in their check.
Mr. Lyle agreed that the legislation was better with the
changes proposed in the work draft. He believed that the
cuts would have the greatest impact on career professionals
who have worked the longest for the State. Those employees
experience the fewest pay increases, and those increases are
extended over longer periods of time. He suggested that
freezing pay for state professionals statewide would be
counter productive. Career professional and administrative
staff working for the State of Alaska are underpaid in
relation to their counterparts in the private sector. Mr.
Lyle stressed that there should be a grandfather clause
included for existing employees since they can not negotiate
for higher wages. He concluded that taking money from a few
state employees in the form of cuts or no pay increase is
nothing more than a "disguised income tax". He urged that
everyone in the State be treated equally.
JOHN ATHENS, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF
LAW, FAIRBANKS, echoed the comments of Mr. Lyle.
Additionally, he questioned the need to "rush" the
legislation. He stressed that many people are concerned
with the proposed legislation and asked why the Department
of Administration was intent on changing the cost of living
differential from the 1986 study.
KAROL ALDERMAN, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT
OF LAW, FAIRBANKS, voiced concern with the "unfriendly"
provisions of the legislation toward the long-term employee.
In days of budget cuts, she suggested that the long-term
employees are essential and should be compensated through
longevity.
LEONE HATCH, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF
LAW, FAIRBANKS, testified regarding how the legislation
would effect the quality of the State work force and
stability. She believed that the proposed legislation would
make state service a training ground for inexperienced
people who do not have a commitment to the value of their
work. Additionally, Ms. Hatch believed that the legislation
would result in increased litigation.
RICHARD KECK, (TESTIFIED VIA TELECONFERENCE), DEPARTMENT OF
LAW, FAIRBANKS, echoed concerns previously expressed in
testimony of the other speakers. He urged the Legislature
not to single out State employees.
Mr. Lyle asked if Section 8 would constitute a reduction in
what is presently being interpreted by the State.
Representative Bunde replied that the employee contributions
would continue as they currently are, however, the State
contribution would be reduced for future employees.
Ms. Elgee discussed the two parts included in Section 8.
That section would reduce for the immediately hired
employees and employees first hired after the effective date
of the legislation, the employer contribution to its present
level. The $68,400 savings figure is a reference to the
social security wage base in effect for calendar year 1998.
Employees that reach that wage base generally do so late in
the fall and the social security base is adjusted at the
federal level. It increases on an annual basis, which would
freeze the contribution at the level in place last year.
The contributions for current employees would not continue
to escalate.
VINCENT O'CONNOR, PRESIDENT, ALASKA STATE EMPLOYEE
ASSOCIATION (ASEA), LOCAL 52, ANCHORAGE, stated that he
represented clerks, social workers and labor economists.
There are 7,500 members that provide various State services
throughout Alaska. He urged that the legislation not be
passed, as it would provide an unfair change to current and
future public employees throughout Alaska. Public employees
are professionals and are dedicated to their jobs and
provide a good service to their communities. He asked
members of the Committee to consider ways to raise benefits
for all Alaskans.
Representative Bunde MOVED to adopt work draft 1-LS0823\K,
Cramer, 5/17/99, as the version before the Committee. There
being NO OBJECTION, it was so ordered.
Representative Austerman MOVED to delete Section #1. Ms.
Elgee agreed that the Administration would like to see
Section #1 eliminated from the legislation which would
provide more flexibility when negotiating cost of living
differentials. There being NO OBJECTION, it was deleted
from the bill.
Co-Chair Mulder asked if the bill was prospective. Ms.
Elgee explained that the amendments would effect employees
that are first hired after July 1, 1999 and would not impact
anyone that is currently employed or was previously employed
by the State. The changes to the geographic differential do
have an impact on current employees. Those employees would
not see a diminishment of their current salary.
Representative J. Davies foresaw a negative change would be
that the social security wage base frozen at the 1998 level.
Ms. Elgee noted that the legislation would only effect new
employees to State service that start after July 1, 1999.
Co-Chair Therriault added that the legislative intent is to
take care of seasonal employees and women in the work force
who need to take time off following pregnancy. The changes
would allow those returning to state service, return at the
pay rate they left off at.
In response to questions by Co-Chair Mulder, Ms. Elgee
explained the current tier system. Under the public
employees retirement system (PERS) and the teacher
retirement system (TERS), the State has three tiers. The
last modification made, created Tier #3, to the vesting
retirement length of service. Modifications to that program
have been made prospectively. The SBS program has not been
modified since its inception, making this a first time
change to the SBS system.
(Tape Change HFC 99 - 147, Side 2).
Co-Chair Therriault focused on the fiscal note. He asked
how a 5% turnover rate had been determined. Ms. Elgee
replied that was a factor that the actuaries look at in
determining any kind of future projections on the PERS
system because of the tiered structure of that program. Ms.
Elgee advised that she had very little time to create the
fiscal note and asked that the Committee allow the
Department to prepare a more accurate number. The note
represents the savings for all the employees going through
the state payroll system.
CHRIS CHRISTENSEN, GENERAL COUNCIL TO THE JUDICIAL BRANCH,
ALASKA COURT SYSTEM, explained that the Court System has
assumed a 10% turnover rate, which is double the rate that
the Executive Branch experiences. The rate is high because
Court System employees tend to be low paid and low paid
employees tend to turn over at a higher rate.
Co-Chair Mulder MOVED to report CS HB 199(FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative J. Davies
OBJECTED for the purpose of a comment. He objected to
reducing employee benefits to balance the budget.
Representative J. Davies WITHDREW the OBJECTION. There
being NO further OBJECTION, it was so ordered.
CS HB 199 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal notes by Department of
Administration and the Alaska Court System.
ADJOURNMENT
The meeting adjourned at 8:50 P.M.
H.F.C. 7 5/17/99 p.m.
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