Legislature(1997 - 1998)
05/07/1997 03:30 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
May 7, 1997
3:30 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING:
Board of Barbers and Hairdressers:
Rosalyn C. Wyche - Anchorage
- CONFIRMATION ADVANCED
CS FOR SENATE BILL NO. 126(FIN)
"An Act relating to the retirement incentive program for state
employees; and providing for an effective date."
- MOVED CSSB 126(FIN) OUT OF COMMITTEE
HOUSE BILL NO. 209
"An Act regulating the use of pre-hire project labor agreements for
public construction projects by the state and political
subdivisions of the state."
- FAILED TO MOVE HB 209 OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: SB 126
SHORT TITLE: STATE EMPLOYEES RIP AMENDMENTS
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
03/07/97 628 (S) READ THE FIRST TIME - REFERRAL(S)
03/07/97 628 (S) FINANCE
03/21/97 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/97 (S) MINUTE(FIN)
03/21/97 (S) MINUTE(FIN)
03/25/97 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/25/97 (S) MINUTE(FIN)
03/25/97 (S) MINUTE(FIN)
03/25/97 851 (S) FIN RPT CS 4DP 3NR SAME TITLE
03/25/97 851 (S) DP: PEARCE, SHARP, PHILLIPS, TORGERSON
03/25/97 851 (S) NR: ADAMS, DONLEY, PARNELL
03/25/97 851 (S) INDETERMINATE FN TO SB & CS (GOV)
03/25/97 851 (S) ZERO FISCAL NOTE TO SB & CS (ADM)
03/27/97 (S) RLS AT 10:45 AM FAHRENKAMP RM 203
03/27/97 (S) MINUTE(RLS)
04/22/97 1385 (S) RULES TO CALENDAR 4/22/97
04/22/97 1421 (S) READ THE SECOND TIME
04/22/97 1421 (S) FIN CS ADOPTED UNAN CONSENT
04/22/97 1421 (S) ADVANCED TO THIRD READING UNAN CONSENT
04/22/97 1421 (S) READ THE THIRD TIME CSSB 126(FIN)
04/22/97 1421 (S) PASSED Y19 N1
04/22/97 1421 (S) EFFECTIVE DATE(S) SAME AS PASSAGE
04/22/97 1433 (S) TRANSMITTED TO (H)
04/23/97 1285 (H) READ THE FIRST TIME - REFERRAL(S)
04/23/97 1285 (H) LABOR & COMMERCE, FINANCE
05/02/97 (H) L&C AT 3:15 PM CAPITOL 17
05/02/97 (H) MINUTE(L&C)
05/05/97 (H) L&C AT 3:15 PM CAPITOL 17
05/05/97 (H) MINUTE(L&C)
05/07/97 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 209
SHORT TITLE: PROJECT LABOR AGREEMENTS ON PUB CONSTR.
SPONSOR(S): REPRESENTATIVE(S) VEZEY
JRN-DATE JRN-PG ACTION
03/25/97 827 (H) READ THE FIRST TIME - REFERRAL(S)
03/25/97 827 (H) LABOR & COMMERCE
04/25/97 (H) L&C AT 3:15 PM CAPITOL 17
04/25/97 (H) MINUTE(L&C)
04/30/97 (H) L&C AT 3:30 PM CAPITOL 17
04/30/97 (H) MINUTE(L&C)
05/07/97 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
TOM WILLIAMS, Legislative Assistant
to Senator Bert Sharp
Alaska State Legislature
Capitol Building, Room 516
Telephone: (907) 465-3004
POSITION STATEMENT: Explained CSSB 126(FIN).
JACK KREINHEDER, Senior Policy Analyst
Office of Management and Budget
Office of the Governor
P.O. Box 110020
Juneau, Alaska 99811-0020
POSITION STATEMENT: Answered questions regarding CSSB 126(FIN).
BILL CHURCH, Retirement Supervisor
Division of Retirement and Benefits
Department of Administration
P.O. Box 110203
Juneau, Alaska 99801-0203
Telephone: (907) 465-4460
POSITION STATEMENT: Answered questions regarding CSSB 126(FIN).
MANO FREY, President
AFL-CIO
2501 Commercial Drive
Anchorage, Alaska 99501
Telephone: (907) 272-4571
POSITION STATEMENT: Testified against HB 209.
ACTION NARRATIVE
TAPE 97-58, SIDE A
Number 001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee to order at 3:30 p.m. All members were present
at the call to order.
CONFIRMATION HEARING
Board of Barbers and Hairdressers
Number 123
CHAIRMAN ROKEBERG announced the first order of business would be
the confirmation hearing of Rosalyn C. Wyche, of Anchorage, to the
Board of Barbers and Hairdressers. He indicated the appointment
would be a reappointment. Chairman Rokeberg asked if there were
comments regarding the appointment. There being no response, he
then asked if there was an objection to moving Ms. Wyche's
confirmation forward. There being no objection, Chairman Rokeberg
stated the appointment and accompanying letter would be transmitted
to the Rules Committee for further disposition by the body.
CSSB 126(FIN) - STATE EMPLOYEES RIP AMENDMENTS
Number 345
CHAIRMAN ROKEBERG announced the committee would address CSSB
126(FIN), "An Act relating to the retirement incentive program for
state employees; and providing for an effective date." He asked if
there was anyone in attendance from the Senate Finance Committee.
Number 420
TOM WILLIAMS, Legislative Assistant to Senator Bert Sharp, Alaska
State Legislature, read the following statement into the record:
"Senate Bill 126 will require state agencies to make better use of
the retirement incentive program (RIP) enacted last year.
"Soon after the beginning of the legislative session, the Senate
Finance Committee took testimony from the Office of Management and
Budget (OMB) regarding the Administration's utilization of the RIP
program and the savings that had been realized as a result of the
implementation. The Administration had chosen a very restrictive
and selective approach to implementing RIP program. Consequently,
the number of employees who were even offered the opportunity to
retire under the plan was small relative to total number of state
employees and, therefore, that minimized the potential savings to
the state. In other cases, individuals who were offered the
opportunity to participate may have chosen to delay their
retirement to a later RIP date.
"This bill leaves the basic elements of current retirement
incentive program in place. However, it adds two principal
provisions. First of all, it limits a qualified employee's
participation to the first RIP application period for which they
qualify; and second, it requires state agencies to offer a RIP plan
to all qualified classified state employees during three two-month
periods.
"This legislation will not only increase RIP participation, it will
accelerate when employees are required to retire under this
program. Both elements should increase savings to the state, the
principal impetus to passing the RIP legislation last year."
MR. WILLIAMS said one other main point he would make is although
there are a number of proposals that have been put forth to change
the tool, this legislation doesn't really change the tool. It just
takes steps to ensure that the tool is utilized to the greatest
extent possible. It requires the Administration to use the tool to
get savings. He encouraged the committee to pass the legislation.
Number 849
REPRESENTATIVE GENE KUBINA asked why the legislation only deals
with state employees and not school district employees.
MR. WILLIAMS explained the idea was basically to look for savings
in the Executive Branch. He said that seemed to be where the most
concerns were raised about the number of people that were being
allowed to participate or even being offered to participate. He
noted he has given committee staff information dated March 20,
prepared by OMB, titled "Status Report on Approved RIP plans."
There is also additional information from the Department of
Administration which is an update of the positions in the RIP plan.
Mr. Williams indicated he also had additional information, dated
May 7, which says that of the 12,000 employees that work for the
Executive Branch, 949 were offered to participate in a RIP. He
noted this is an improvement from earlier this year as it is up
about 50 percent. Previously only 660 employees had actually been
offered the opportunity to participate.
MR. WILLIAMS said, "If you buy into the assumption that RIP was
something good and really would save the state some money, then I
think the idea is that RIP ought to be utilized to the greatest
extent possible -- and what we weren't seeing, particularly, was a
willingness to utilize it to its fullest extent and that was the
impetus to this legislation. We are interested in getting some
savings and we encourage them to use the tools they've been given."
Number 730
REPRESENTATIVE JOE RYAN asked if the program requires the employer
to pay the employee's contribution and the employer's contribution
into the pension fund for the three-year or four-year period.
MR. WILLIAMS informed Mr. Ryan he would have to defer that question
to the department. He noted nothing is being changed from last
year's RIP plan; it just pushes them to use the plan.
Number 783
CHAIRMAN ROKEBERG asked what savings have occurred or should have
occurred from the existing program.
MR. WILLIAMS said the Administration has not indicated that. He
noted there is a fiscal note which says the savings are
indeterminate. He suggested that OMB could provide testimony
regarding his question.
MR. WILLIAMS informed the committee members that there is criteria
for offering the RIP to somebody. You have a certain number of
years of service, you have to be a certain age and there has to be
dollar savings associated with each and every opportunity.
Number 908
REPRESENTATIVE BILL HUDSON referred to Representative Ryan's
question and said, "If I read this thing correctly, the employer
pays the portion of the - I think it's three years, and the
employee, essentially, his portion is all (indisc.--coughing) or
paid back as a contribution as a part of it by getting a decreased
overall retirement plan, so that if he had worked that extra three
years and then retired, he'd got his 2 percent times this average
of high three at that point in time and it had a certain dollar
figure for retirement. By taking the RIP and taking it a little
earlier, he ends up with less for the balance of his life." He
explained they have a choice to either pay for it or take an
actuarial reduced income. There has to be a savings indicated to
the state of Alaska over a three-year period of time.
Number 1079
CHAIRMAN ROKEBERG brought forth the following amendment:
Page 2, following line 7:
Insert a new bill section to read:
"* SEC. 3. Section 23(c), ch. 4, FSSLA 1996, is amended to read:
(c) A proposed retirement incentive plan adopted under this section
may not permit an employee who is the governor, the lieutenant
governor or a commissioner, deputy commissioner, or assistant
commissioner of a principal department of the executive branch to
participate in the plan. In the case of each employee who
participates in the retirement incentive plan and who is
compensated at range 17 or above on the state salary schedule or a
comparable level on the salary schedule that applies to the
employee, the employing department or agency shall reduce the range
for the employee's position by at least one level before hiring a
replacement for the employee. For a period of three years after
the position became vacant because of the employee's retirement,
the state department or agency may not increase the salary range
for the position previously held by the retiring employee. The
department or agency may only increase the salary range for the
position after the three-year period of the increase is recommended
by a position classification study."
Number 1139
REPRESENTATIVE RYAN moved Amendment 1 for the purpose of
discussion.
Number 1175
JACK KREINHEDER, Senior Policy Analyst, Office of Management and
Budget, Office of the Governor, came before the committee to
testify. He stated he wasn't in attendance to testify in support
or opposition of the bill. Mr. Kreinheder said he would explain
why the Administration took a different approach in the RIP that
the legislature enacted last year. Mr. Kreinheder explained that
the bill before the committee would convert the RIP currently
underway to something that would be virtually identical to the RIPs
that were done in 1986, 1987, 1989 and 1990. He said they are
generally called across-the-board or blanket RIPs. Anyone who
meets the basic age, service requirements and shows a savings could
participate under the program.
MR. KREINHEDER said, "The main reason the Administration took a
different approach with our RIP plan is when they looked at the
last program done in 1989-1990, although there were estimates of,
I believe, in excess of $6 million of savings by the Division of
Legislative Audit, our concern was that only a handful of the
positions out of the -- I believe it was 759 state employees that
participated in that program -- and only a handful, literally three
or four, of those positions were eliminated. So, in our view,
while you could calculate savings, it was not used as a downsizing
tool, clearly. Virtually, all the positions were refilled. Our
Administration's interest was in using the RIP program as a
downsizing tool and rather than offering it to all employees and
refilling most or all the positions, to use it in the areas of
state government that were facing budget reduction or for other
reasons, were being downsized. So the idea there is to use an
approach which, in our view, is more similar to what most private
sector companies would use." Mr. Kreinheder explained that they
aren't requiring all positions that participate in the plan to be
eliminated. He said they are reviewing the plans carefully and are
strongly encouraging departments to look at eliminating positions
wherever possible.
MR. KREINHEDER referred to projected savings under the current
program and asked the committee to look at wording in the
information he distributed, "must retire by..." He noted the dates
haven't been inserted as a number of the department's have multiple
plans. Mr. Kreinheder noted most of the dates in the information
haven't occurred yet. That means employees, even those who have
applied for the plan, haven't had to retire yet. Experience from
the prior plan shows a large number of employees do wait until the
last month that they can retire before they elect to go. He noted
247 employees have applied for the program. Mr. Kreinheder said to
try and calculate savings at this time is really a stab in the
dark. He stated they'll have a much better idea by July 1. Under
the bill passed last session, OMB is required to prepare a status
report to the legislature by January 15, 1998.
Number 1435
REPRESENTATIVE RYAN said in addition to downsizing as much as
removing positions, the philosophy behind the program was to take
older employees that are at a much higher pay grade and allow them
to retire early and fill the position with entry level positions.
He asked why the Administration is looking more at eradicating
positions than filling them with an entry level position and
realizing the savings.
MR. KREINHEDER explained the emphasis was on downsizing. He said,
"Clearly, we are allowing a majority of the positions to be
refilled. One concern is if you look at sort of the paper savings
when we review these calculations, you might show somebody being
replaced at a lower range saving such and such amount of money.
But one thing that's not factored into those calculations is the
fact a large number of these employees are already eligible for
normal retirement - might retire without the program. So to some
extent, those sort of paper savings or projected savings tend to
overstate the actual savings from the program and that was a
concern when we looked at the savings estimates for the prior
program. The estimate that the Division of Legislative Audit did
assumed that not a single person who participated in the last
program would have retired normally. And they recognized that
wasn't really a valid assumption, but they didn't have any means to
tell how many of them would have retired without the program so
they just ran the numbers as if none would have."
Number 1593
REPRESENTATIVE KUBINA asked Chairman Rokeberg if he is ready for a
motion on the bill.
CHAIRMAN ROKEBERG said he believes there is another witness and
noted there is an amendment on the table.
MR. KREINHEDER said his office is fully confident that both the
current RIP and the proposed change to the program does not in any
way jeopardize the funding or the good standing of the PERS or TRS
systems. The amount that has to be paid into the retirement system
by the both the employer and employee is sufficient when it's
invested over time to pay the additional three years of retirement
checks or credit that employees would receive under the program.
CHAIRMAN ROKEBERG asked Mr. Kreinheder if he has reviewed the
amendment.
MR. KREINHEDER said he believes he understands the amendment.
Number 1684
REPRESENTATIVE KUBINA referred to information the committee members
had and said, "The 247 applications they have received, they cut 72
of those - that they're going to delete those positions and 66 of
them that they're going to downgrade. I guess my point being here
that this Administration has really gone over backwards not to make
the mistakes of past RIP bills. They have really looked at trying
to make savings, and some people think have gone too far because
they haven't (indisc.) people get out of the system. If you
compare with what they're doing, it seems like without your
amendment they're certainly trying to do that every place that is
possible or necessary. Some places, you're amendment might make it
where really it's not appropriate to do that - to downgrade."
MR. KREINHEDER said the one concern he has with the amendment is
that in some cases with the RIP plans they have reviewed, they have
run into situations where departments are limited in the extent to
which they can downgrade positions. Under the state's
classification system, there are restrictions against filling a
position or replacing a position at a lower salary if the person
filling that position is required to do the same work as the person
who left it. He said you can't just pay somebody less if they're
doing the same and comparable duties of similar positions in other
departments. Mr. Kreinheder suggested checking with the Department
of Administration, Division of Personnel.
Number 1791
BILL CHURCH, Retirement Supervisor, Division of Retirement and
Benefits, Department of Administration, came before the committee
and apologized for arriving late. He indicated he would try to
answer questions.
REPRESENTATIVE HUDSON asked Mr. Church if he has any figures
showing savings. He also asked who in the Administration is the
repository of accumulative savings of a RIP.
MR. CHURCH responded, "Certainly as it applies to the overall
program, I don't know whether OMB is tracking that or whom. We,
within the division, we certainly keep records and we know employer
costs. At the end of this week and when the dust settles, we will
be able to tell what employer costs were incurred by employees -
administrative fees are related to that. So as far as the RIP
program itself, we can answer those questions. In actual savings
to an individual department, we wouldn't have statistics based on
that information."
Number 1862
REPRESENTATIVE HUDSON referred to the first RIP and said there were
a lot of state employees that took the three years and retired
early. The system obviously saved money. He asked, "You haven't
had any appreciable effects on the retirement trust funds?"
MR. CHURCH responded that is correct. He said all three of the
bills have been designed so there is no impact to the retirement
funds. The employer cost is designed to compensate the fund for
the present value of the additional benefits that someone would
receive over their anticipated lifetime. He said this is something
that their actuary has been very conscious of over the past two
programs and found that they are assuring that there is no effect
to the contribution rate of employers.
REPRESENTATIVE HUDSON asked how the payments are processed by the
various departments. For example, the Department of Administration
approves ten individuals to retire. He asked, "What changes hand?
Where does the money to pay for that come from? Who to? And
ultimately where does it end up?"
MR. CHURCH responded, "The departments are billed not for those
people that are designated, but only for those individuals who do
actually retire on the program. The departments will pay that
employer cost. It's paid over three years and the first payment is
due by August of the fiscal year following an individual's date of
retirement and then one-third until it's paid."
Number 2046
REPRESENTATIVE RYAN said the amendment seems to accelerate the
process and to bring more people into the system.
CHAIRMAN ROKEBERG asked Mr. Williams to come back before the
committee and explain his position regarding the amendment.
Number 2077
MR. WILLIAMS said he prefers the amendment not be adopted. He
explained the reason is that it changes the tool itself. In the
Senate Finance Committee there were a number of provisions where
people suggested that we change how RIP worked as far as what you
and the Administration had to do to qualify. Mr. Williams
explained the emphasis of the bill was simply not change the tool,
but simply to make sure that the tool was being used.
Number 2118
CHAIRMAN ROKEBERG closed the public hearing on CSSB 126(FIN) and
asked what the wish is of the committee.
REPRESENTATIVE HUDSON said, "Let me just speak for a moment to my
perception of Amendment 1. I view this as somewhat attempting to
micro mange or to create a set situation that if anybody over the
range of 17 has to be hired one grade down and then held static for
three years, and the contracts themselves, salary range as well as
the statutes, normally provide for the progressive range steps up.
I think that by offering this and requiring that they show a
savings, without this amendment they'll have the flexibility in
some cases of not hiring anybody at all in there and saving the
money for the state in that respect -- by getting rid of an
employee or perhaps even by combining two positions rather than
simply just setting up a sort of a rigid schedule to where if you
RIP someone at a 17 or over, you got to drop them a range and then
hold them steady. I just think that it's not well thought out is
on a long-term basis."
Number 2200
CHAIRMAN ROKEBERG said the purpose of the amendment, from his
perspective, is that it would provide a tool and mandate that true
savings do occur. He said it is his understanding that,
historically, that's been one of the difficulties and there has
been a true lack of effective savings from the programs. Chairman
Rokeberg asked if there was an objection to Amendment 1.
REPRESENTATIVE KUBINA and REPRESENTATIVE HUDSON objected.
A roll call vote was taken. Representatives Rokeberg and Cowdery
voted in favor of the adoption of Amendment 1. Representatives
Brice, Kubina, Ryan, Hudson and Sanders voted against the adoption
of Amendment 1. So Amendment 1 failed to be adopted.
Number 2260
REPRESENTATIVE HUDSON moved and asked unanimous consent to move
CSSB 126(FIN), Version F, out of committee with individual
recommendations and attached fiscal notes.
CHAIRMAN ROKEBERG asked if there was an objection. Hearing none,
CSHB 126(FIN) moved out of the House Labor and Commerce Standing
Committee.
HB 209 - PROJECT LABOR AGREEMENTS ON PUB CONSTR.
Number 2309
CHAIRMAN ROKEBERG announced the last order of business would be HB
209, "An Act regulating the use of pre-hire project labor
agreements for public construction projects by the state and
political subdivisions of the state."
MANO FREY, President, AFL-CIO, came before the committee to
testify. He stated project labor agreements (PLAs), when
appropriate, are a cost saving tool that can be used by either the
private or public sector. Many cases have demonstrated that they
work very well. Mr. Frey stated there is not a problem in the
utilization of PLAs. The bill is a an unfortunate attempt to
restrict a large sector of the working construction industry to
using a tool that is a cost-saving device, in many cases, for
public entities. He urged the committee not to support HB 209.
CHAIRMAN ROKEBERG indicated he would entertain a motion.
Number 2396
REPRESENTATIVE JOHN COWDERY made a motion to move HB 209 out of
committee with individual recommendations and the accompanying
fiscal note.
REPRESENTATIVE KUBINA objected.
A roll call vote was taken. Representatives Ryan, Cowdery,
Rokeberg voted in favor of moving the bill. Representatives
Kubina, Sanders, Brice voted against moving the bill. House Bill
209 failed to move.
ADJOURNMENT
Number 2429
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 4:15 p.m.
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