02/06/2002 03:20 PM House L&C
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 6, 2002
3:20 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 56
"An Act relating to minimum wages."
- MOVED CSHB 56(L&C) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 34
Requesting the members of the Alaska delegation in the United
States Senate to urge the Majority Leader of the United States
Senate to allow President George W. Bush's economic security
package to receive a vote.
- BILL HEARING POSTPONED
PREVIOUS ACTION
BILL: HB 56
SHORT TITLE:MINIMUM WAGE
SPONSOR(S): REPRESENTATIVE(S)KOTT
Jrn-Date Jrn-Page Action
01/12/01 0071 (H) READ THE FIRST TIME -
REFERRALS
01/12/01 0071 (H) L&C, FIN
01/16/01 0104 (H) COSPONSOR(S): HARRIS
01/19/01 0134 (H) COSPONSOR(S): MULDER
01/29/01 (H) L&C AT 3:15 PM CAPITOL 17
01/29/01 (H) Heard & Held
01/29/01 (H) MINUTE(L&C)
02/14/01 (H) L&C AT 3:15 PM CAPITOL 17
02/14/01 (H) Heard & Held
02/14/01 (H) MINUTE(L&C)
02/06/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
LINDA SYLVESTER, Staff
to Representative Pete Kott
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801-1182
POSITION STATEMENT: Presented HB 56, Version F, on behalf of
Representative Kott, sponsor.
ED FLANAGAN, Commissioner
Department of Labor & Workforce Development
PO Box 21149
Juneau, Alaska 99802-1149
POSITION STATEMENT: Testified on HB 56, encouraging the
committee to come up with a bill congruent with the governor's
proposal and the initiative.
JACK AMON, President
Alaska Restaurant and Beverage Association
700 Dogwood
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 56, supporting an escalator
of 50 percent of the Consumer Price Index, rather than 100
percent.
BARBARA CRAVER, Attorney
Legislative Legal and Research Services
Legislative Affairs Agency
State Capitol
Juneau, Alaska 99811-1182
POSITION STATEMENT: As bill drafter, answered questions on HB
56, primarily regarding whether the legislation is substantially
similar to the initiative.
DON ETHERIDGE, Lobbyist
for the AFL-CIO
710 West 9th Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 56.
ACTION NARRATIVE
TAPE 02-12, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:20 p.m.
Representatives Murkowski, Meyer, Kott, Rokeberg, and Crawford
were present at the call to order. Representatives Halcro and
Hayes arrived as the meeting was in progress.
CHAIR MURKOWSKI informed the committee that a group of seventh-
grade students from the Pacific Northern Academy in Anchorage
was in attendance. She welcomed the students.
HB 56-MINIMUM WAGE
Number 0031
CHAIR MURKOWSKI announced that the committee would hear HOUSE
BILL NO. 56, "An Act relating to minimum wages."
CHAIR MURKOWSKI explained that HB 56 was scheduled for invited
testimony only. She reminded listeners that there was
substantial public testimony last session on the two different
occasions that HB 56 was before the committee.
Number 0157
REPRESENTATIVE KOTT moved to adopt the proposed committee
substitute (CS), version 22-LS0342\F, Craver, 1/18/02, as the
work draft. There being no objection, Version F was before the
committee.
REPRESENTATIVE KOTT, speaking as the sponsor of HB 56, explained
that last year there were several hearings on minimum wage.
[Version F] imitates the initiative put forward over the summer,
with one exception: [Version F] says the rate of inflation will
be 50 percent of the Consumer Price Index (CPI), instead of the
original 100 percent.
Number 0259
REPRESENTATIVE MEYER asked how [Version F] differs from the
original bill.
REPRESENTATIVE KOTT said originally HB 56 had a smaller increase
in the minimum wage and an incremental, two-step increase. The
CPI index was not in the original version of HB 56.
Number 0310
LINDA SYLVESTER, Staff to Representative Pete Kott, Alaska State
Legislature, explained HB 56 and offered some background.
Dating back to 1938, when the United States established the Fair
Labor Standards Act, she said, Americans have believed it is
entirely appropriate for the government to establish a minimum
wage floor for workers. Immediately after statehood, Alaska
statutes were drafted to echo that conviction. Dating back to
1959, this continues to be the preamble in Alaska's Wage and
Hour Act. It reads as follows:
It is the public policy of the state to establish
minimum wage and overtime compensation standards for
workers at levels consistent with their health,
efficiency, and general well-being; and it is the
public policy of the state to safeguard existing
minimum wage and overtime compensation standards that
are adequate to maintain the health, efficiency, and
general well-being of workers against unfair
competition of wage and hour standards that do not
provide adequate standards of living.
MS. SYLVESTER said the sponsor believes that HB 56 will provide
for a fair minimum wage to Alaska's lowest-paid workers, by
helping to ensure a minimum standard of living for the health,
safety, and well-being of every Alaskan. The bill notes that
currently Washington State, Oregon, and California have
surpassed Alaska in providing for a minimum standard of living
for their workers. For a minimum wage to be fair, Ms. Sylvester
said, it must be indexed through the cost-of-living to help low-
income workers keep pace with inflation.
Number 0430
MS. SYLVESTER noted that HB 56 amends [AS 23.10.065(a)], so that
effective January 1, 2003, an employer will pay a wage of not
less than $7.15 an hour. She said that each year, no later than
September 30, the Department of Labor [& Workforce Development
(DLWD)] shall adjust the minimum wage for inflation, effective
the following year. The minimum wage shall be adjusted for
inflation calculated at 50 percent of the CPI for Anchorage, or
$1 more than the federal minimum wage, whichever is greater.
Number 0478
MS. SYLVESTER said the rationale for a minimum wage of $7.15 an
hour ties into pending federal legislation. She said Alaska
seeks to be $1 ahead of the federal minimum wage, and if federal
legislation passes, the national minimum wage will be $6.15.
She noted areas not addressed by HB 56: an employer may not
apply tips or gratuities given to an employer as credit toward
the minimum hourly wage, and workers employed as public school
bus drivers are specifically excluded from [subsection] (a),
since they are covered in [subsection] (b).
Number 0540
MS. SYLVESTER said the sponsor feels that HB 56 is "similar
enough to the initiative."
CHAIR MURKOWSKI responded that the committee will want to hear
how Version F is substantially similar to the initiative. She
asked if HB 56 will affect the school bus drivers who, by
statute, are now required to receive two and a half times the
minimum wage.
MS. SYLVESTER replied that current statute requires that the
school bus drivers receive two times the minimum wage. If the
minimum wage is raised to $7.15, then a school bus driver's wage
will be two times the new minimum wage - but it won't apply
until after that driver's current contract [expires].
CHAIR MURKOWSKI asked if this is why there is no fiscal note
showing that increase. She asked whether "that is what the
current contracts say."
Number 0623
MS. SYLVESTER reported that she'd checked to find out what the
impacts would be; of the four communities she called, all their
contracts will expire in 2006. She said she hadn't called the
Department of Education and Early Development to find out if
"there was a system there."
CHAIRMAN MURKOWSKI inquired whether or not there is "something
within the contract that says this is the price, unless the
minimum wage should be increased."
Number 0660
REPRESENTATIVE KOTT said he hasn't had the opportunity to
research the [public school bus driver] contracts. He said he
expects that they are "tightly written." He suggested the DLWD
might have some insight on this issue.
REPRESENTATIVE HALCRO referred to AS 23.10.065. He said when
the change was passed in 1990 which mandated that school bus
drivers receive two times the minimum wage, subsection (c) was
put into statute, which essentially says, "If you have existing
contracts, you don't have to give them a raise until you renew."
He said this still doesn't address the question relating to
2005, when all of the contracts come due, because by 2005 the
minimum wage could be around $7.50. He asked, "Applying what we
are paying today, if [HB 56] were to be enacted tomorrow, do you
have any idea of the immediate fiscal impact?"
Number 0750
MS. SYLVESTER said one could make a guess as to the immediate
impact. She explained:
One bus company seems to feel they're tied to the
statute, and they can't go farther than that, twice
the minimum wage. The local [bus company] here in
Juneau is quite a lot higher. So they have their own
businesses and are free to make their contracts with
the school districts.
Number 0787
REPRESENTATIVE HALCRO said it isn't that simple. [The bus
companies] make the contracts with the school districts, and the
state is charged with appropriating the money to pay for those
contracts. He said this has been a concern over the last couple
of years. The contracts are negotiated on the local level, and
the state is responsible for paying these contracts without a
say. He asked, "If [HB 56] was applicable starting tomorrow,
what type of fiscal impact would we be looking at?"
MS. SYLVESTER said she doesn't have that information, but one
could guess by comparing bus drivers' wages today to what they
would be years from now.
REPRESENTATIVE HALCRO asked if Ms. Sylvester could make a guess.
MS. SYLVESTER said she doesn't have that information.
Number 0850
REPRESENTATIVE KOTT suggested that "if we used the last five
years' CPI index growth at 50 percent, and not the 100 percent
as in the initiative, in five years the minimum wage would be
around $7.75." He said that to project the bus driver's wages,
one would double $7.75. He said in five years, at 100 percent,
the minimum wage would be around $8.56.
REPRESENTATIVE MEYER, for the sake of the visiting students,
asked why the bus drivers - but not the janitors or teachers -
were guaranteed twice the minimum wage.
REPRESENTATIVE KOTT answered that an important factor was the
public safety issue involved in transporting children to and
from school.
Number 0930
REPRESENTATIVE HAYES asked why the CPI is at 50 percent instead
of 100 percent in [Version F].
REPRESENTATIVE KOTT answered that the initial version didn't
have the CPI index in it, and the initiative has 100 percent; in
the spirit of compromise, 50 percent was chosen for the proposed
CS. He said some legal opinions suggest it will probably meet
the constitutionality [test], although perhaps it might not. He
said he believes [Version F] is substantially similar to [the
initiative], and that if it were tested in court to determine
whether it is substantially similar, it would be upheld.
Number 0982
CHAIR MURKOWSKI asked Representative Kott if he has requested a
opinion from the attorney general's office with regard to
whether HB 56 is substantially similar [to the initiative].
REPRESENTATIVE KOTT mentioned the attorney general and the
Department of Law.
MS. SYLVESTER said, "They were asked, and they declined to
provide their guidance for this issue." She offered her belief
that based on the constitution, statutes, and Warren v. Boucher,
the guidance is that the language of HB 56 is substantially
similar. The intent of the initiative - although it is rather
vague and doesn't state 100 percent of the increase of the CPI -
seems to disconnect the minimum wage from both the state and
federal legislative processes; instead, it connects to the cost-
of-living indicator.
MS. SYLVESTER said the problem is that the minimum wage is being
devoured by inflation. She added, "Once you connect it to an
elevator, take it away from the legislature, that seems to be
the intent of the actual initiative, rather than putting it at
100 percent or 50 percent."
CHAIR MURKOWSKI asked Ms. Sylvester if she knew how many other
states tie their minimum wage to an "indexer."
Number 1069
MS. SYLVESTER replied that it seems to be the trend, and that
she knows California and Washington State have done this
already.
CHAIR MURKOWSKI said she believed the House Labor and Commerce
Standing Committee had that information introduced last year.
REPRESENTATIVE KOTT offered his belief that the number of states
was in the upper 30s.
Number 1094
REPRESENTATIVE CRAWFORD respectfully disagreed [with earlier
discussion]. He explained that he feels the minimum wage will
continue to be devoured by inflation if it is "locked in at 50
percent of the price increase." He reported that today he'd
dropped off a new amendment that would change the CPI increase
back to 100 percent. He said he and the other petitioners had
spent a lot of time gathering signatures for the increase to be
100 percent of the CPI, and they feel it should be at 100
percent.
REPRESENTATIVE HALCRO said the lack of a fiscal note, even for
"the out years," is troublesome, because fiscal notes extend out
to FY [fiscal year] 08. He said if there are a lot of contracts
expiring at the same time in 2005, that obviously means that
starting in 2006 there is going to be an additional fiscal
impact on the state.
Number 1205
REPRESENTATIVE HALCRO said he was curious why some number has
not been plugged in yet to anticipate the fiscal impact starting
in 2006. He asked whether, because of the connection with what
school bus drivers must make, there is a legal argument that
somehow by this petition the voters are actually voting on
making the legislature appropriate money, which is known to be
unconstitutional. He asked if this could somehow be an
appropriation of funds.
Number 1243
REPRESENTATIVE KOTT said he did not write the fiscal note and
does not know why a zero was entered, but guessed that this
might have been too difficult to project.
REPRESENTATIVE KOTT addressed Representative Halcro's question
relating to appropriation of funds. He said, "This is clearly a
question for the legal people to determine whether or not, by
passage of that initiative, it is somehow usurping our power to
appropriate, or causing us to appropriate."
CHAIR MURKOWSKI said Barbara Craver with Legislative Legal and
Research Services was in attendance and might be able to address
this issue later.
REPRESENTATIVE MEYER recalled that the committee had heard
testimony from some fast-food restaurants and hotels last year;
their concern was if the minimum wage was increased, then they
wouldn't be able to hire some of the younger kids or some of the
kids with special needs.
REPRESENTATIVE MEYER asked whether, if the minimum wage
increased, it would affect the fast-food and hotel businesses,
or if there is "something already in statute that allows for
training purposes that (indisc.) have to pay minimum wage."
Number 1342
MS. SYLVESTER said this is an interesting issue because the
exemptions were put in statute at the beginning, and do allow
for training wages and apprenticeships. She read from AS
23.10.070, which states:
To the extent necessary to prevent curtailment of
opportunities of employment the commissioner may by
regulations or orders provide for the employment at
wages lower than the minimum wage prescribed in AS
23.10.050 - 23.10.150 of
(1) an individual whose earning capacity is
impaired by physical or mental deficiency, age, or
injury, at the wages and subject to the restrictions
and for the period of time that are fixed by the
commissioner; and
(2) an apprentice at the wages that are approved
by the commissioner; or
(3) a learner at the wages and subject to the
restrictions and for the periods of time that are
fixed by the commissioner.
MS. SYLVESTER reported that last year the commissioner of the
DLWD had indicated he has never processed any of these types of
certifications. She said it seems to be a policy difference
that the DLWD has with this portion of the statute. She offered
that it could be a relief that some people seem to be needing.
She cited an example of a small business that is considering
hiring a young individual who lacks any work history. The first
question is whether this person will be able to come to work.
At $7.10, does the business want to take this chance? She said
maybe now is the time for something to be enacted at the
regulation level whereby an employer could temporarily try a new
employee out for a period of time.
Number 1446
REPRESENTATIVE ROKEBERG said although there is a training-wage
provision in the statute, the commissioner of the DLWD never
approved the program. No one has ever come forward because they
know it will never be approved. He added, "What we need to
really make this workable is a change in statute to allow for
the program to be workable, without the individual, discrete
consent every time the commissioner [of the DLWD] has to give
his blessing to do something like this." He said this would be
consistent with the federal law, which does provide for this
provision. He commented that this is a matter of policy, and he
thinks that it is the "wrong policy."
Number 1514
ED FLANAGAN, Commissioner, Department of Labor & Workforce
Development, testified before the committee. He suggested the
market dictates that the training provision is (indisc.) because
the minimum wage has been so low relative to average wages and
what the market has commanded in the state for years. He
recalled that when he was deputy [commissioner] during Governor
Knowles' first term, someone requested [an exemption] and was
sent a form, but the person never sent it back. He suggested
that if there is a higher minimum wage, then there may be more
interest in applying for [an exemption].
Number 1560
COMMISSIONER FLANAGAN said the current law does not apply to a
person under the age of 18 who works 30 hours or less a week.
He reported that a restaurant representative had told him this
is just too difficult to keep track of. Commissioner Flanagan
said he didn't find the representative's comment to be very
credible, however. A provision of statute allows an employer -
if the employee is under 18 years of age and is working 30 hours
or less a week - to "fall under the training wage in the federal
law." He added, "We do have those unused student-learner
exemptions."
COMMISSIONER FLANAGAN said he has learned a lot regarding
workers with special needs since the Division of Vocational
Rehabilitation has moved under the DLWD. He stated that "within
the advocacy community for folks with disabilities, I think
there's a real push to not have those so-called sheltered
workshops and lowered wages to try and bring folks up to speed
where they can command the actual minimum wage." He explained
that any future commissioner would have the discretion to not
make any person go out and apply for any type of exemption.
COMMISSIONER FLANAGAN said in regard to [Version F], "We're
getting there." He said 13 months ago the governor asked the
legislature to raise the minimum wage to $7.15 and to index it
to inflation with a full CPI. He agreed with finding (4) in
[Version F], which states:
A fair minimum wage indexed to the cost-of-living will
help low-income workers keep pace with inflation.
COMMISSIONER FLANAGAN said the above finding does not state "a
fair index to half the cost-of-living."
Number 1642
COMMISSIONER FLANAGAN said the process for determining the CPI
on the federal level has been adjusted within the past few years
so that it is more conservative than it was prior to 1998. He
stated that he thought over the last three years the CPI has
only averaged "about .9 or maybe 1.2." He said this figure has
been less than the increase in the average weekly wage. He
noted that the cost-of-living has been rising slower than wages
in the state in the past three years. He said there is a lot of
statewide support for raising the minimum wage to $7.15, with
the index being tied to the CPI. He encouraged the committee to
"go that extra last step" and come up with a bill that is truly
congruent with the governor's proposal and the initiative.
Number 1686
COMMISSIONER FLANAGAN said that in 1990 [in the 15th
legislature], then-Representative Donley helped [HB 305] pass,
which established the minimum wage for school bus drivers at two
times the minimum wage. He remarked, "There was a situation
where every five years, a new bidder would come in and basically
undercut the wages that during the five-year contract had maybe
been built up." He said this has been a state law for 12 years
without much discussion or controversy.
REPRESENTATIVE ROKEBERG asked Commissioner Flanagan if he'd said
the Anchorage CPI has been less than 1 percent for the past
couple of years.
Number 1770
COMMISSIONER FLANAGAN said he thought [the Anchorage CPI] was
"1.2 last year and .9 the year before."
REPRESENTATIVE ROKEBERG recalled an Anchorage web site that
showed, in the first half of 2000, a CPI of 2.9 percent.
COMMISSIONER FLANAGAN said he didn't have that information with
him, but believed the [CPI] to be lower than the increase in the
average weekly wage. [Reading from a paper handed to him], he
said, "1.7, 1.0, and 1.5 is showing for 2000, 1999, and 1998."
He said the CPI is done twice a year, and he doesn't know how
one-half of the year would be much higher than the other half.
REPRESENTATIVE ROKEBERG offered his experience that the
Anchorage CPI has actually been lower than the national all-
urban or the clerical workers indexes. He asked Commissioner
Flanagan if he knows why the Anchorage CPI was selected to
represent Alaska.
Number 1796
COMMISSIONER FLANAGAN answered that the only published CPI for
the state of Alaska is the Anchorage CPI. Most contracts in
Alaska that utilize a CPI refer to the Anchorage CPI.
REPRESENTATIVE ROKEBERG asked whether some adjustments were made
a couple of years ago that made the CPI more conservative. He
said there is ongoing controversy about the efficacy and the
accuracy of the Consumer Price Index.
COMMISSIONER FLANAGAN said he thinks there will always be
controversy over the CPI, but that it has diminished since the
revision.
Number 1831
REPRESENTATIVE ROKEBERG said, in regard to the training wage
situation, that he thought a program had to be approved by the
DLWD at large, and not with an individual application.
COMMISSIONER FLANAGAN concurred. He added that he didn't know
how elaborate a program had to be.
Number 1867
REPRESENTATIVE ROKEBERG interjected to ask why $7.15 was
selected as the proposed new minimum wage. He said it looked
like a 25.9 percent increase.
Number 1906
COMMISSIONER FLANAGAN said he believes the $7.15 figure was
initiated in [DLWD] internal administration discussions. He
recalled that the governor's bill had a two-step process whereby
the minimum wage would have been $6.40 last October [2001], and
then $7.15 this coming October [2002].
COMMISSIONER FLANAGAN mentioned that there has been a lot of
discussion over the past few years about raising the federal
minimum wage, but it has never happened. He pointed out that
$7.15 is a dollar over the federal minimum wage. For a family
of four with one wage earner working 40 hours and the other wage
earner working 20 hours - or if one of them worked 60 hours - at
$7.15 an hour the family would just barely be over the poverty
line. He said this is one reason $7.15 was chosen as the
proposed new minimum wage. If Alaska moves the minimum wage to
$7.15 on January 1, it will probably be the highest minimum wage
in the United States. He predicted that Washington State would
probably be over $7.00 an hour by 2002 because its minimum wage
is tied to the CPI.
Number 1978
COMMISSIONER FLANAGAN referred to the 26-percent increase, and
pointed out that when the "50 cent Alaska over the federal" was
put in, the federal was a dollar, so the differential was 50
percent. At 50 cents over $5.15, now it's under 10 percent,
however. He said he doesn't think $7.15 is an inappropriate
jump.
Number 2000
CHAIR MURKOWSKI indicated nothing in statute says it has to
relate to a program. Rather, it refers to individuals whose
earning capacity is impaired, an apprentice, or a learner. She
asked if the exemptions are in regulation.
COMMISSIONER FLANAGAN said he doesn't believe so, but he hasn't
looked at the regulations because there haven't been any
requests during his four years as deputy [commissioner] or three
years as commissioner. He said he believes when those were
first [introduced], especially the apprentices and student
learners, the minimum wage was a much larger percentage of what
would have been a journeyman wage for the craft. He said, "A
50-percent or 60-percent apprentice might actually have had to
be below the minimum wage. We're talking the '60s."
Number 2048
REPRESENTATIVE ROKEBERG asked Commissioner Flanagan, if the
legislature were to craft a training regulation, whether the
[DLWD] would be willing to work with the legislature on it.
COMMISSIONER FLANAGAN answered that he'd certainly look at it.
He commented that if Alaska has a $7.00 minimum wage, there will
be a change, and it's to be seen whether there actually is any
dislocation. He added, "You're convinced there will be; I'm
not. Who knows who's right?" He added that he does have a
concern if the legislature wants to do something like the
federal training wage, whereby someone under 20 - which he
thinks is too old - during the first 90 days on a job gets paid
a sub-minimum wage. He said he wouldn't support something like
that.
Number 2120
REPRESENTATIVE ROKEBERG disagreed with Commissioner Flanagan
about the impact on the economy. He said many people with small
businesses have entry-level positions and are concerned about
their labor costs when having to train youngsters who tend to be
"somewhat transient." He agreed it is an administrative problem
and that "keeping track of the 90 days" could be a problem also.
He commented that he doesn't think it's entirely unfair to be
able to hire people at less than a given wage if they are in a
training position. The expectations and scope of duties during
the 90 days may be restricted for this limited period of time.
Number 2173
REPRESENTATIVE ROKEBERG asked, "Isn't collective bargaining the
cornerstone of organized labor?"
COMMISSIONER FLANAGAN replied yes, but suggested that
Representative Rokeberg may want to direct that question to an
AFL-CIO representative. He said many people aren't covered by
collective bargaining, and he thinks organized labor has
historically supported the wage floor.
REPRESENTATIVE ROKEBERG remarked that he is disturbed,
discussing minimum wage, when politicians "are representing
businesspeople and the laborers of the state and unilaterally,
without any bargaining, dictate an amount of basic wage." He
said this is pushing the wage floor of Alaska up by almost 26
percent.
Number 2234
COMMISSIONER FLANAGAN offered that people "far and beyond"
organized labor support the societal good of a minimum wage.
REPRESENTATIVE ROKEBERG said there is economic theory that says
implementing a minimum wage - and, in particular, a high minimum
wage - is going to cost jobs and job opportunities for entry-
level workers.
Number 2253
COMMISSIONER FLANAGAN indicated [the DLWD] has recent experience
and that there have been a lot more detailed studies of the last
two federal increases nationally. The job-reducing effect has
been found to be much less than in previous models. He
acknowledged that there still will be people studying and coming
from the other direction also.
REPRESENTATIVE ROKEBERG said he agrees with Commissioner
Flanagan when those studies are done in a growth economy.
COMMISSIONER FLANAGAN mentioned continued employment growth in
[Alaska], "hopefully for the foreseeable future."
REPRESENTATIVE ROKEBERG said the employment growth under the
current administration has been outstanding.
REPRESENTATIVE HALCRO said last year when [HB 56] was heard in
committee, several questions were asked by the committee; he had
a summary of some of the answers, although in some cases there
was no data available to answer the questions. He said one
question that kept coming up was, "How many of these folks
making minimum wage are the head of household?" The response
was that there was no current data on how many heads of
households are earning the minimum wage.
REPRESENTATIVE HALCRO pointed out that the fiscal note from the
Department of Health and Social Services says there is a
projected savings in the "out years of an average of about
$500,000." He read from the fiscal note, "Approximately 670
adults currently receive ATAP [Adult Temporary Assistance
Program] assistance," because they have jobs paying $5.65 to
$7.15 an hour. He asked whether there are 670 adults who are
heads of households who [earn minimum wage].
Number 2333
COMMISSIONER FLANAGAN responded that it would be better for the
Department of Health and Social Services to speak on its fiscal
note, but said it is a "very discrete population that
[Department of Health and Social Services] have very detailed
information on." He said he didn't know if one could
extrapolate the figure out to the population at large.
Number 2360
REPRESENTATIVE HALCRO asked if there are adults who are the
heads of households who are making minimum wage, and in all
reality living below the poverty line. He asked, "Wouldn't it
be safe to assume that they would be getting some kind of
assistance from the state?"
COMMISSIONER FLANAGAN replied that there isn't a figure for the
population at large. He pointed out that there may be people in
such situations who aren't getting assistance because maybe they
are working two jobs, or three jobs between two wage earners.
The fiscal note is based on getting transitional assistance, and
if an employee has more countable earned income - which will
happen when someone gets a raise from $6.50 to $7.15 an hour -
one can compute a figure. He added, "That's probably a dollar
for dollar at some point, or close to it."
Number 2425
JACK AMON, President, Alaska Restaurant and Beverage
Association, said the reason Commissioner Flanagan has not had
any applications for the training wage exemption is because "all
of the fast-food operator that I've talked to have found the
regulations somewhat (indisc.)." He offered that owners would
take advantage of the training-wage exemption if [the
legislature] "would make it more friendly along the printable
statute." He asked if the committee would find a way to step
the increase instead of going to $7.15. He said he would
support the 50 percent of the CPI, rather than 100 percent.
TAPE 02-12, SIDE B
Number 2491
MR. AMON said, "If we could compromise even on a two-step
increase, ... that would certainly help a lot of small employers
to absorb the increase."
Number 2466
REPRESENTATIVE HAYES asked Mr. Amon what the average starting
salaries are for jobs in his industry.
MR. AMON reported that in the table-service restaurant industry,
there are people who earn minimum wage. However, they are
tipped workers, and their "average wages across the industry"
are $8.50 to $15.00 an hour, including tips. He said today the
lowest an employer could really pay someone in a dishwashing
position is between $7.50 and $8.50 an hour.
REPRESENTATIVE HALCRO asked Mr. Amon about some conversations he
has had with fast-food employers regarding the training-wage
exemption. He referred to the single application for a
training-wage exemption Commissioner Flanagan said he'd sent out
that was never returned. He said some of the testimony has been
that the training wage is difficult to obtain, and on the other
hand, it's not difficult - one just has to ask.
Number 2369
MR. AMON said he isn't an expert on this topic, but it is his
understanding that it isn't difficult to apply for the
exemption, but that it is difficult to administer. He said,
"That 30-hour-a-week thing made it difficult to schedule
employees, because sometimes you might have to keep somebody an
extra hour or so, and if you went over 30 hours, that was the
trigger." He reported that the "administration costs [are] what
stopped them."
Number 2336
REPRESENTATIVE ROKEBERG asked Mr. Amon if any employee at the
Marx Brothers [Cafe] earns minimum wage.
MR. AMON reported that new servers earn minimum wage, but,
including tips, still make $15 to $25 an hour.
REPRESENTATIVE ROKEBERG asked if there any restaurant operations
in Alaska have as many as 100 employees.
MR. AMON answered, "Definitely."
REPRESENTATIVE ROKEBERG said:
Right now, my calculation - even if you worked a 40-
hour week - would be $226 an hour ... plus tips. And
if you have a 25-percent increase, that is $56.
Therefore, if you have 100 people working for you, it
would be $5,600 a week that your overhead would go up,
and over $20,000 a month.
REPRESENTATIVE ROKEBERG asked Mr. Amon what he thought would
happen to that restaurateur when that happens.
Number 2275
MR. AMON answered that the restaurant has to raise menu prices.
He explained that the average restaurant, including his own, is
a good-performing restaurant if the net bottom line is 6 to 8
percent of gross revenue. He commented that there is a slim
profit margin, but there are high labor costs. Most restaurants
expect 25 to 30 percent of their gross revenue to go to labor.
Number 2229
CHAIR MURKOWSKI asked Ms. Craver if she could speak on the issue
of "substantially similar."
BARBARA CRAVER, Attorney, Legislative Legal and Research
Services, Legislative Affairs Agency, responded that the most
important case relating to this issue in Alaska is Warren v.
Boucher. This case discussed how similar legislation has to be
in order to take an initiative off a ballot. She said, "The
test that they use seems to be somewhat weighted on depending on
how complex the issue is that you are talking about." She
offered that she thinks the general consensus is that [HB 56] is
not very complex and is fairly straightforward. A minimum wage
will be set, and perhaps - or perhaps not - will have an
increase based on the CPI.
Number 2192
MS. CRAVER commented that the court did say that it would allow
more latitude for the legislature to enact a program that the
(indisc.) was very complex. She said legislation would have to
be pretty similar to the initiative in order to get the
lieutenant governor to take the initiative off of the ballot.
CHAIR MURKOWSKI asked: If HB 56 has the exact same language as
the initiative, "but we have added something on," does that get
beyond the realm of "substantially similar"?
Number 2149
MS. CRAVER said she doesn't know and hasn't been able to find
any case law where there were extra items added to an initiative
that did not impair the main purpose of the initiative. She
offered her "gut instinct" that if it doesn't impair what the
initiative is trying to accomplish, she doesn't understand why
it would be held back. She reiterated that there is no case law
to support this.
Number 2122
CHAIR MURKOWSKI asked Ms. Craver if, in her opinion, Version [F]
is substantially similar to the initiative.
MS. CRAVER said she doesn't think she could say Version F is
substantially similar, and that "we just have to put the issue
out there." She asked, "Is 50 percent of the CPI close enough
to 100 percent to be substantially similar, or not?" Those
facts have not been presented to Alaskan courts, or any other
court that has been researched. She offered that it is closer,
but obviously not exactly the same.
CHAIR MURKOWSKI reported that if HB 56 moved forward and was
challenged as not being substantially similar, the initiative
would remain on the ballot. She asked when a challenge would be
made.
MS. CRAVER explained that the lieutenant governor is asked to
confer with the attorney general to determine whether or not the
legislation is substantially similar. If they decide that the
legislation is substantially similar, then the initiative is
taken off of the ballot. Ms. Craver said she thought a decision
had to be declared in time for someone opposing that decision to
be able to take action. She said there is a period of time so
that the issue of whether the initiative goes on the ballot or
not is actually debated in court; that's when the decision is
made. It is either put back on or is taken off the ballot.
Number 2039
CHAIRMAN MURKOWSKI asked if there was a scenario in which the
legislation would be challenged in court while the initiative
was still moving forward - basically having it happen on both
fronts.
MS. CRAVER offered that she thinks this could happen. If the
lieutenant governor decides the legislation isn't substantially
similar, the initiative remains on the ballot. If the
legislature has adjourned and passed the legislation, it depends
on the effective date. The initiative becomes law 90 days after
it is certified, so maybe in mid-March, if it passed, the
minimum wage would rise. It depends on the legislation that the
legislature has passed. If the legislation came into effect
prior to mid-March, it might be effective for a while, but an
initiative cannot be repealed with [legislation]. She said she
doesn't know the answer.
Number 1993
REPRESENTATIVE KOTT reported that he'd received a memorandum
from Ms. Craver [dated January 14, 2002, to Representative Brian
Porter, which referenced a memorandum dated February 28, 2002,
from Terry Kramer to Representative Porter]. Representative
Kott noted that the memo indicates the inflation-adjustment
section may not be substantially the same measure as the minimum
wage [initiative]. The memorandum states that "a bill which did
not contain any provision for future increases in the minimum
wage based on the CPI would probably not be considered
[substantially the same measure]." He commented that this
language is "still in the gray area." Representative Kott noted
that Ms. Craver had closed the paragraph by suggesting, "It is a
much closer question [if] the bill contains an escalator clause
based on the CPI. This might be similar enough that [a] court
would find that the bill supplants the initiative."
REPRESENTATIVE KOTT suggested that clearly the legislative Act
doesn't need to conform to the initiative in all respects, and
that it is intended that the legislature should have some
discretion in deciding how far the legislative Act should differ
from the provisions of the initiative. He said he doesn't think
[the bill] varies to the extent it has gone outside the
parameters of the legislative powers.
Number 1906
REPRESENTATIVE HALCRO asked if this could be construed as the
public voting to make an appropriation on behalf of the
legislature.
MS. CRAVER said she hadn't considered this issue until
Representative Halcro mentioned it earlier. She offered that
she hasn't done research in that area of law, and cannot even
say what guidelines are used to determine whether it is close
enough to be an appropriation.
REPRESENTATIVE HALCRO said it appears that if [HB 56] passed,
and the CPI portion is enacted, then it isn't a "one-time kick."
This is going to be a constant step increase that the government
won't have a say over, and that gets to the heart of the
question.
Number 1858
MS. CRAVER responded that it seems to her, without doing any
research, that increasing the minimum wage will have myriad
effects on everybody who purchases things, including the
government. She said she doesn't know "how close that
connection has to be before the initiative itself is seen as an
inappropriate use of the initiative power by making an
appropriation."
Number 1837
REPRESENTATIVE ROKEBERG referred to Warren v. Boucher. He said
[HB 56] appears to be almost identical [to the initiative], with
one modest change. He questioned why Ms. Craver was having
trouble venturing an opinion about similarity. He added, "As
Representative Kott points out, this does give the legislature
some latitude, and quite frankly, I don't think we've taken much
latitude at all with [Version F]."
Number 1773
MS. CRAVER offered [Legislative Legal and Research Services']
feeling that the CPI difference might be enough for a court to
find it isn't substantially similar. She explained that this is
just an opinion, and not based on case law, and could very
easily be seen as not being that much different.
CHAIR MURKOWSKI asked Ms. Craver if the phasing or step approach
to reach the $7.15 minimum wage is any better.
MS. CRAVER asked, "How close does it have to be to identical to
still be substantially similar?" She suggested that if the
legislature takes an approach different from exactly the one
used in the initiative, it would be more successful if the
legislature could justify why it took a different approach to
reach the same goal. She asked, "If the legislative Act
achieves the same general purpose, are [the courts] going to
hold your feet to the fire to be exactly identical?" She
answered that it doesn't appear so.
Number 1677
REPRESENTATIVE ROKEBERG said he appreciates the point that Ms.
Craver is making, and that "the supreme court also makes the
point that complexity has a good deal to do with the
interpretation." He offered that the entire issue is extremely
complex, and in particular the impact on the economy of Alaska.
He stated, "It's a macroeconomic action on the part of the
legislature, and in so far as the permutations of consumer price
indexes, ... the impact on the individual employers and workers
is going to be variable."
REPRESENTATIVE ROKEBERG offered that the legislative intent of
merely trying to be as similar as possible to the initiative
should meet the statutory and constitutional requirements. He
said that with the courts giving the legislature the same
latitude as they gave in Warren v. Boucher, he didn't have any
problem believing that Version F would be "extraordinarily
similar."
Number 1601
REPRESENTATIVE CRAWFORD said that if [Version F] got the minimum
wage to the same place as the initiative, even if it didn't get
there the same way, then he thought it would be substantially
similar. He added, "This guarantees that we won't get to the
same place, because inflation is going to move at 100 percent
and our wage is going to move at 50 percent." He said he
believes a 50-percent-of-the-CPI escalator is a built-in
inequity. He argued:
The whole reason for having an escalator is so that it
takes the political argument out of it every three or
four years, so that we don't have to continue to
revisit this issue. If we leave the 50-percent CPI
escalator in there, then I'm sure this will be
litigated, and the initiative - maybe not this fall -
will go on the ballot at some point.
Number 1520
REPRESENTATIVE HALCRO said Article XI, Section 7, of the Alaska
constitution addresses the issue of appropriation of funds. He
explained, "My concern is that ... with the tie in, there, to
the 'people transportation' issue, I think there's a legitimate
argument there, that this - by nature - is appropriating money."
REPRESENTATIVE HAYES said he would think administrative law has
already done that. He referred to a friend who'd tried to put a
Peace Corps issue on the ballot; the opinion was that it dealt
with appropriation, and subsequently it was thrown off. He
stated, "I'm assuming in their deliberation, the Department of
Law, the attorney general, and the lieutenant governor's staff
does ... decide ... before it ever is certified." He suggested
that should be verified.
REPRESENTATIVE ROKEBERG agreed with Representative Hayes that
for this ballot [measure] to reach this point, it has been
reviewed by the attorney general for constitutionality. He said
the legislature could repeal the people [transportation] statute
to rectify that point. Representative Rokeberg said he finds it
interesting that an attached fiscal note from the Department of
Health and Social Services indicates a $500,000 figure for
transfer of payment from the government over to the private
sector by raising the wages. He remarked, "So, there's a
transfer of responsibility right in the fiscal note. I don't
believe that the constitution ... takes that into account."
Number 1380
DON ETHERIDGE, Lobbyist for the AFL-CIO, testified before the
committee. He said, "Our official stance is, until we meet ...
with the AFL-CIO here on the 19th, that we're sticking with our
initiative language and we're going to follow up with that." He
explained that if with [the wage increase] is to split it into
two steps, [the AFL-CIO] already tried that option
unsuccessfully in the past. That is why the proposed wage
increase is "in one jump."
Number 1323
CHAIR MURKOWSKI reported that there had been at least two other
opinions requested of Legislative Legal and Research Services
during the interim. The first asked whether a minimum-wage bill
that didn't allow for a CPI would be considered substantially
[similar]. The opinion received from Terry Cramer said no.
Another opinion, requested in October, asked, "Is it
substantially similar if you do the wages to the same level as
the initiative, but instead of using the CPI, you attach it to
average weekly wage?" She reported that the opinion received
was "probably not." She said the questions have been asked, but
she'd been told there wouldn't be any definitive answers. She
concluded, "I don't know that we know anything more about what
'substantially similar' really means. It sounds like we just
have to go test it."
Number 1214
REPRESENTATIVE KOTT offered that the issue seems to be divided
on whether or not it would meet the test of being substantially
similar.
Number 1180
REPRESENTATIVE CRAWFORD moved to adopt Amendment 1 [22-
LS0342\F.2, Craver, 2/6/02], which read:
Page 2, line 11:
Delete "50"
Insert "100"
REPRESENTATIVE ROKEBERG objected.
REPRESENTATIVE CRAWFORD said he believes that without the
escalator [for the wage increase] as it was in the petition, it
seems not to be substantially similar. He offered that the
people he has talked to would rather not go through the
litigation process, but would if they have to. He stated, "We
don't want to guarantee in law that the minimum wage is going to
increase slower than prices."
Number 1125
REPRESENTATIVE HAYES inquired about the process.
REPRESENTATIVE KOTT answered that if HB 56 were to pass both
bodies and be signed into law by the governor, there probably
[would have] been some discussion with the lieutenant governor,
who would have made her suggestions regarding whether [HB 56] is
substantially similar. He said he suspects that if [HB 56]
became law, there wouldn't be the impetus - from the people in
"labor" or anywhere else - to challenge the legislation's being
substantially similar because it doesn't reach that 100 percent
of the CPI index.
Number 1024
REPRESENTATIVE KOTT pointed out, "It's only understood that the
CPI index is at 100 percent. It's not written in the
initiative. ... So we're making it clear that where we're
coming from, it's 50 percent of the CPI index." He agreed with
Representative Rokeberg's point that this is an incredibly
complex issue when talking about the CPI, the impact on economy,
and the impact on businesses, especially the small businesses
paying minimum wage.
REPRESENTATIVE KOTT expressed that HB 56 wouldn't just affect
those making minimum wage. There would also be some impact for
those in the "mid-management ... arena," who also would receive
an increase in benefits. He explained that if the bill becomes
law, then the initiative comes off [the ballot]. However, if
the lieutenant governor "determines that this is not
substantially similar, then the initiative goes forward, and
maybe we'll challenge the lieutenant governor's decision."
Number 0946
REPRESENTATIVE HALCRO agreed and said by implementing even 50
percent of the CPI, [at least] it's still 50 percent of the CPI.
He noted that currently the minimum wage isn't indexed to the
CPI, and that, coupled with the two-tiered jump in the wage, is
sufficient. He offered, "Certainly, we're all supportive of the
minimum wage." He added, however, that there are economies out
there with real people who have to make real payroll, and this
is going to have an effect on them.
REPRESENTATIVE HALCRO noted that last year there were "several
different conversations" with regard to this bill about what
[effect this will have on statewide projects like the proposed
gas pipeline, for example]. He reiterated that he thinks just
adopting the CPI and going through a review process every year
is sufficient. He offered that 50 percent of the CPI is fair to
start out with, and can always be adjusted in the future. He
said, "I just think we need to be very sincere in our efforts to
improve the working environment, but also be very careful about
not negatively impacting commerce."
Number 0836
REPRESENTATIVE CRAWFORD said he understands there are real
people out there making real payroll. There are also real
people out there trying to make a "living wage," who will be
affected as much as the employers, if not more. He said he
believes with only a 50-percent-of-the-CPI escalator, it
guarantees that it won't keep pace with inflation. He said he
believes HB 56, with the escalator, was designed to keep [the
legislature] from having to revisit this issue every few years.
He offered that it would be "much more difficult to come back
and take another look at it with the smaller escalator in
there."
Number 0772
REPRESENTATIVE HALCRO said he doesn't disagree, but thinks the
two-tiered bump in the wage, combined with even 50 percent of
the CPI, is a significant move toward improving wages. He
added, "We also need to remember that people don't give
themselves jobs. Employers create jobs. And so we have to
maintain a very delicate balance when you're talking about
affecting, especially, these entry-level workers."
REPRESENTATIVE ROKEBERG stated his opposition to the CPI concept
as attached to the minimum-wage bill. He said, "Once we as a
legislature were to enact that, it's going to get very difficult
to back away from it, ... [because] it takes it out of
discussion." He offered that he considers this a collective-
bargaining process, at arm's length, between employers and
employees. Referring to the economic recession of 1986, he
said, "The wage levels that were established then, before that,
went down to a lower level than they did before." He added that
if there is a statutory situation with a high minimum wage
attached to an escalator, it isn't going to react to the market
conditions.
Number 0624
REPRESENTATIVE HAYES said he had requested some information last
year regarding which businesses actually pay minimum wage. He
remarked that it is very difficult to hire anybody at minimum
wage in Fairbanks.
REPRESENTATIVE KOTT, after handing a list to Representative
Hayes, explained that it indicates the types of industries, not
specific employers, that pay minimum wage.
Number 0567
CHAIR MURKOWSKI informed the committee that last year the
seafood industry testified that it had many employees starting
at minimum wage, but that travel and room and board were
provided.
REPRESENTATIVE KOTT asked, "Is the extra 50 percent the straw
that breaks the camel's back? I don't know." He said there was
testimony last year and during the interim that HB 56 was going
to have a negative effect on many businesses around the state,
especially in the service industries. Despite perhaps some
optimism out there, there are going to be jobs lost. He offered
that wage earners trying to make ends meet might be unable to,
because employers are going to be "tightening their belt." The
greatest cost to employers is personnel, and it's the first
place an employer is going to make reductions. He said:
The market's only going to bear so much of an increase
on a product or a service, and once it reaches that
pinnacle, people are going to back off, saying, "I'm
not paying anymore. I'm staying at home, cook my own
hamburgers, rather that go out and eat." So I think
there's going to be some ... negativity associated
with [its] going to the CPI in the beginning. But at
least this mitigates part of that problem by keeping
it at the 50 percent, rather than going to 100
percent. So for all those reasons, I will oppose the
amendment.
Number 0416
REPRESENTATIVE CRAWFORD said maybe the per diem should go up by
50 percent of the CPI, instead of following the Consumer Price
Index. He stated, "If it's good for us, I think it's good for
all those people that are out there in low-wage jobs."
CHAIR MURKOWSKI responded that it seems that "[ours] has gone
down from year to year, too. So I'm not sure that's it's tied
to the CPI. It's tied to the federal COLA [cost-of-living
allowance]." She added, "As it goes down, we take the drop in
our per diem as well."
Number 0364
REPRESENTATIVE KOTT said, "I don't believe we have any control
over that, either, with the exception that if you wanted to give
back the extra to LAA [Legislative Affairs Agency] or to House
Rules, I'll be more than glad to accept."
Number 0272
A roll call vote was taken. Representatives Crawford and Hayes
voted to adopt Amendment 1. Representatives Meyer, Kott,
Rokeberg, Halcro, and Murkowski voted against it. Therefore,
Amendment 1 failed by a vote of 2-5.
Number 0230
REPRESENTATIVE CRAWFORD moved to adopt Amendment 2 [22-
LS0342\F.4, Craver, 2/6/02], which read:
Page 2, following line 17:
Insert a new bill section to read:
"* Sec. 3. AS 23.10.065 is amended by adding a new
subsection to read:
(d) An employer, with the agreement of the
employee, may pay up to $2 less than the hourly wage
required under (a) of this section if the amount of
the reduction is used by the employer to provide
adequate health care as defined by the commissioner."
Renumber the following bill section accordingly.
REPRESENTATIVE ROKEBERG objected.
Number 0215
REPRESENTATIVE CRAWFORD explained that last year there was
discussion that some employers would like to raise the minimum
wage but then wouldn't be able to afford health care for their
employees. Amendment 2 would give employers some latitude and
help in providing health care for their employees. The
agreement [provision] allows either side to opt out. He noted
that many people approaching the five-year limit on welfare are
going to be kicked off the welfare rolls and will need
insurance. Amendment 2 would give them some latitude to go out
and find a low-paying job plus health care for family members.
He concluded, "I just believe this gives both employers and
employees some latitude to gain health care that they haven't
had before."
Number 0076
CHAIR MURKOWSKI asked Representative Crawford whether [Amendment
2] would run into legal problems because it is setting in
statute a minimum wage. She inquired whether it would be
creating yet another exemption from the minimum wage, similar to
the training wage.
TAPE 02-13, SIDE A
Number 0004
REPRESENTATIVE CRAWFORD explained that when "it started out, ...
we thought that this would probably have no effect, but as we
continued on, ... we're not sure now." He said if [Amendment 2]
is going to change [HB 56] too much, he would be glad to
introduce it as stand-alone legislation.
Number 0120
MS. CRAVER commented that it appears [Amendment 2] would not
necessarily reduce the minimum wage for anyone who didn't want
it to be reduced. In that case, it seems to be an option that
doesn't necessarily change the impact of the legislation, which
is to increase the minimum wage. She said [Legislative Legal
and Research Services doesn't] know the answer to the question
of whether adding [amendments] to legislation that tries to
supplant an initiative makes it not substantially similar. She
noted that she hasn't been able to research it. One could make
an argument that it doesn't impair what is intended in the
initiative. The people who wanted the initiative still get what
they want, if, in fact, it is substantially similar. Adding
something else doesn't change that.
Number 0202
CHAIR MURKOWSKI referred to the language in [Amendment 2] and
said it is allowing the commissioner to determine whether
adequate health care has been provided. She asked, "That's kind
of nebulous, isn't it?"
MS. CRAVER responded that "this would have to be fleshed out
considerably further" in order to satisfy the federal
government.
Number 0290
REPRESENTATIVE KOTT offered an example of an employer with 20
minimum-wage employees who also are being provided health care.
He said the suggested changes would force the employer to tell
the employees that due to cost-cutting measures, health care
would be reduced or discontinued. If the employee and the
employer agreed to deduct $2 an hour from the wages, then the
employer could make a contribution [to keep] the employee's
health care. He asked, "Wouldn't that have a substantive effect
of reducing their minimum wage $2?"
MS. CRAVER agreed it would be the practical effect.
Number 0400
REPRESENTATIVE KOTT restated his concern: an employer currently
paying premiums for health care would have to tell an employee
that either he/she agrees to deduct $2 [from the hourly wage],
or else health care will be discontinued altogether.
REPRESENTATIVE HALCRO responded, "In theory, but ... let's be
honest. ... The people out there that need health care are
people that are making $5.65, $6.00 an hour, and ... can't
afford to participate in an employer-sponsored program." He
said he thinks Representative Crawford is "onto something ...
very good," and offered that there should be some tweaking of
the language regarding how it is applied, from a practical
standpoint, for a business owner. He suggested the [health care
option] is kind of an incentive for the employer. An employer
can go to a health care provider and get some kind of plan to
which employees can buy in.
REPRESENTATIVE HALCRO explained that this would do a couple of
things. It would build loyalty for the employer, because a
lower-wage employee with benefits is more likely to stay on and
become a longer-term, more productive employee. And the
employee would be better off because of having access to health
care [insurance].
Number 0547
REPRESENTATIVE KOTT replied, "It's a great idea, but I think the
employers right now can do that." He offered that if an
employee with a family of four is making $350 a week, $80 out of
a paycheck may be the difference between having health care and
not having a house to live in.
REPRESENTATIVE CRAWFORD rebutted, "That's the reason why we put
it in there with the agreement of the employee." The employee
has the option of deducting money from his/her wages to cover
health care costs. He said the expense that hits single mothers
the hardest is medical coverage for their kids. He surmised,
"There are a lot of people ... that would like to have health
care and would give up $2 out of their minimum wage to do that."
Number 0640
REPRESENTATIVE HALCRO referred to an example of somebody working
two jobs, where at one job, the employer could deduct $2 an hour
and the employee would know that money was going towards health
insurance. He said this program obviously has to be mutually
agreeable. He asked, "What's wrong with ... having this
opportunity?" He said it seems to be one more option for an
employer to manage the business and to provide coverage for
those employees who otherwise are not covered, simply because of
their skill and wage level.
REPRESENTATIVE MEYER said, "I also think we're onto something
here, Representative Crawford, but I don't think now is the time
and place to deal with this, especially not with this particular
bill before us." He said he would like to see what adequate
health care coverage is, as defined by the commissioner.
Number 0764
REPRESENTATIVE ROKEBERG surmised, "It's whatever $320 a month
can buy you."
REPRESENTATIVE CRAWFORD responded that $320 a month won't buy
adequate health care, and the balance would have to be made up
by the employer. He explained what [the bill] envisioned as
adequate health care is about the same as [the third, lower-cost
option] on the state [insurance plan]. He said, "We're not
trying to go for really good insurance; we're just trying to get
the average case of insurance out there." He stated that this
will give the employer a break when he/she is trying to provide
benefits to employees, in order for [the employer] to have
longer-term, more loyal employees.
REPRESENTATIVE ROKEBERG offered his belief that if HB 56 passes,
employers that still pay minimum wages are going to be lucky to
be able to afford to provide any benefits. He added, "So I
think it'll cost benefits."
REPRESENTATIVE HALCRO said he can't agree with that conclusion
because "you're telling them one thing and then you're asking
them another." He explained that [the legislature] is going to
tell [the employers] that the minimum wage will be raised by
roughly $2 an hour. On the other hand, [the legislature is]
saying, "But, we will allow you to deduct up to $2 an hour to
contribute to an employee health care plan or into some kind of
a pool, if you so choose." He suggested this is an opportunity
for employers, not a mandate.
Number 1000
REPRESENTATIVE HALCRO offered that possibly the insurance
industry could "come out with a product." He said:
There's companies coming out with all kinds of
products all the time. My company takes a look at it
every year when we renew our insurance coverage for
our employees. ... [There are] all kinds of
different products out there, and if you can get the
insurance companies to create a market where they
create a product for these folks to buy in at $320 a
... month, why wouldn't we want to at least set the
stage for that kind of an option? I mean, we're not
mandating anything. We're simply giving them an
opportunity to take that $2-an-hour hit, either way
you look at it, and investing it in something that's
going to pay them returns. I don't see where this
isn't a good idea.
REPRESENTATIVE KOTT, referring to the health care program
Representative Halcro said he provided his employees, asked what
the premium is: "Is it $320, or is it similar to what the state
pays for adequate health care?" He said he doesn't think the
state plan is a premium plan, but is probably a plan that would
be acceptable [to] the commissioner. He offered that an
employee is not only getting hit with the $2 increase, which can
be applied toward health care, but also is adding on whatever
additional amount there is to reach that premium. He said, "So
it may not be a $320 premium; it's now going to be a $500 hit."
Number 1080
REPRESENTATIVE HAYES explained that companies such as his offer
some type of health care [plan] that would fit into this, which
is supplemental health insurance. He claimed a conflict because
this probably would benefit his company greatly.
REPRESENTATIVE HALCRO said, "So, what you're saying is ... if
you adopted something like this, where it was totally voluntary
- the two sides had to agree - sure, there's products out there
that could get somebody covered for this."
REPRESENTATIVE HAYES responded, "Absolutely."
REPRESENTATIVE KOTT said, "You did say that it was supplemental.
So it's supplementing something else."
REPRESENTATIVE HAYES explained, "The insurance that we sell is
supplemental. And we prefer that it's with something else, but
it can stand alone."
Number 1168
REPRESENTATIVE CRAWFORD stated that because of the voluntary
nature, he believes "this is an avenue that we need to explore"
because many people out there need health care but aren't
getting it. He offered that this is a good first step. The
cost is $320 a month if a person is working 40 hours a week, but
if that person is working overtime, it's more. He noted that
his insurance with the state has family coverage at 70 percent
[up to the yearly maximum]; it costs $500-some a month. He said
he believes that with another dollar or two dollars an hour, an
employer could supplement this and come up with a pretty good
insurance policy.
Number 1250
CHAIR MURKOWSKI objected to Amendment 2 because there is no
certainty that Version F is substantially similar [to the
initiative]; adding to it will raise further suspicion that it
isn't substantially similar. She said she isn't stating whether
she thinks it's a good idea, but isn't willing to support it at
this time.
Number 1315
REPRESENTATIVE CRAWFORD countered that [the legislature is]
"charging blindly ahead on the other issue," not knowing whether
it's substantially similar or not. He said, "We're going to run
it up the flagpole and see if it flies, and I'd like to run this
one up and see if it flies as well."
REPRESENTATIVE KOTT said, "I just hope you run it up a different
flagpole." He offered his belief that HB 56, as it currently
stands, is substantially similar and would meet the test; any
changes would jeopardize the bill substantially. He referred to
a section of law that deals with school bus drivers, where a
provision says an employer may not apply fringe benefits as a
credit for payment of minimum wage. He said, "So even in that
particular area, we've gone so far as to say, 'You can't give
any credit.'" With Amendment 2, he said, "the area just became
totally complex."
Number 1387
CHAIR MURKOWSKI said she'd spoken with representatives from the
seafood industry last year, who were looking to see if there was
a way that they could get some offset of the minimum wage for
what they contribute in terms of room and board and travel.
REPRESENTATIVE CRAWFORD remarked, "In NCSL [National Conference
on State Legislatures], they said that you could give waivers
against the federal minimum wage for things like health care,
for training wages. So, maybe it conflicts with our state law."
Number 1433
REPRESENTATIVE HALCRO asked: Since health care reform is an
emerging area in federal law, who is to say that employers might
not get some kind of a tax credit for participating in a program
through which they create an avenue for their employees to
obtain affordable health care coverage? Stating support for
[Amendment 2], Representative Halcro suggested that employers
not only would win by having another option to hire and retain
employees, but also they could avail themselves of certain tax
credits or breaks by providing something like this.
Number 1500
A roll call vote was taken. Representatives Crawford, Hayes,
and Halcro voted for Amendment 2. Representatives Kott,
Rokeberg, Meyer, and Murkowski voted against it. Therefore,
Amendment 2 failed by a vote of 3-4.
REPRESENTATIVE HAYES asked how HB 56 deals with the fisheries
industry and the housing of workers.
Number 1526
REPRESENTATIVE KOTT responded that [HB 56] doesn't assist that
particular industry. He offered that the seafood industry is
failing right now, and "this could be the nail that seals the
coffin." He suggested forming stand-alone legislation.
REPRESENTATIVE KOTT remarked that he is a little disturbed that
there hasn't been more testimony from organized labor on this
monumental issue. He said last year [organized labor was] at
the table and said it supported the bill in its existing form at
the time, the last version. He explained that the previous
version didn't have the CPI index, "but they supported that."
He stated that at the time, [organized labor said] it liked the
governor's bill a little better because it did have the CPI. He
said, "I just wanted to put that on the record, and I hope
during their deliberations on the 18th that they can reach some
kind of agreement and support the particular measure before this
... body. Otherwise, we don't know what's coming down the
pipe."
Number 1611
CHAIR MURKOWSKI agreed with Representative Kott. She added that
she was hopeful that there would be a little more enthusiasm
from [organized labor on HB 56].
REPRESENTATIVE ROKEBERG declared that he has a potential
conflict of interest as a small businessman with 19 people
currently on his payroll, all earning above $7.15 an hour. He
asked to be excused from voting.
CHAIR MURKOWSKI declined his request.
Number 1649
REPRESENTATIVE ROKEBERG suggested that market wages should be
set by the market, rather than by politicians and labor leaders
sitting together making policy. He offered that this "is 180
degrees off from collective bargaining." The small businessman
and the worker are only represented by their representatives at
the meeting, and they're not bargaining. Each individual
business has its own unique set of circumstances. Calling this
a "unilateral Act," he noted that HB 56 is a response to the
initiative, "which, in a way, is ... a 26-percent increase [in]
personnel cost for a lot of businesses in this state." He said
it's particularly targeted at the hospitality industry because
the tip provisions were drafted right into the initiative. He
suggested that [the hospitality industry] is the largest
employer in Alaska, and has been picked on. He explained:
We're asking them for increased taxation for basic
commodity and products that they're selling. We're
actually going to tax them on ... about three
different levels right now, from sales taxes to income
taxes, business taxes, and alcohol taxes. ... Not
only are we going to do that, we're going to raise
their labor cost by 26 percent. ...
Tourism and seafoods industry are the two industries
that are down the worst in this state right now. And
what this bill does is just drives a ... nail in [the]
coffins of a lot of small businesses. And I pride
myself [on] being a small businessman, living off my
own wits for 38 years in the state of Alaska, being
self-employed. ...
I must say that I think this is a terrible thing. The
timing couldn't be worse for the economy, and this is
going to destroy small businesses and decrease jobs,
particularly in the hospitality and seafood
industries. I can't vote for it. Never, never.
Number 1755
REPRESENTATIVE CRAWFORD offered to cosponsor a bill with
Representative Rokeberg to make it universal collective
bargaining for all of those people who don't get collective
bargaining right now. He said, "Then we could do away with the
minimum wage. Until everybody gets a chance to do collective
bargaining, that's the reason why we have a floor underneath."
REPRESENTATIVE HAYES explained that this is an interesting
situation because if HB 56 doesn't move out of committee, there
will be an initiative on the ballot anyway. He said, "Then we
could leave it up to our constituents to decide if they want
this increase or not."
Number 1796
REPRESENTATIVE KOTT said Representative Hayes had made a good
point. He argued that the initiative does more harm than [HB
56] does. He said, "I could live with it either way, and I
would love to be on the other side of the campaign trying to
defeat the initiative." He offered that there would be a lot of
money thrown at either supporting the initiative or opposing it,
and he suggested that "maybe that's where we should let it go."
He pointed out that based on all the surveys and opinions he has
seen, the initiative and minimum-wage increase are supported by
a vast majority of Alaskans, around 80 percent. He added, "And
that's in everybody's district. We all know the recent poll
that was done in September, October. And that was after, I
believe, [September 11]."
Number 1860
REPRESENTATIVE MEYER argued that he isn't sure much attention
should be given to polls because [the legislature is] here to do
the right thing, not necessarily what's the popular thing. He
recalled that when he was on the assembly there were polls, for
example, for an alcohol tax, with as high as 75- to 80-percent
support. When a large industry begins advertising against it,
the numbers in the poll can slip, and then it ultimately gets to
a vote and fails. He asked if the State Chamber of Commerce has
voiced an opinion as to whether it would, if the initiative went
to a vote, have an advertising campaign to try to kill it.
CHAIR MURKOWSKI said she didn't have any information on that
issue. She suggested that Representative Kott might have that
information.
REPRESENTATIVE KOTT said he didn't have that information either.
Number 1920
MS. SYLVESTER said she'd spoken with Pamela LaBolle from the
State Chamber of Commerce and explained to her the new proposed
committee substitute [Version F]. Ms. Sylvester reported that
Ms. LaBolle was perplexed last year because one-third of her
membership supported [the legislation], one-third didn't like
it, and one-third didn't care. She said Ms. LaBolle had been
informed that the hearing was today, but wasn't present.
CHAIR MURKOWSKI, referring to polls and surveys, said some folks
say they support an increase to a minimum wage, but don't fully
understand what it means to go from the standard that Alaska has
always had, tying it to the federal minimum wage, to a
completely different standard, which is what [HB 56 is doing].
She remarked that her husband, as a self-employed small
businessman, "would love to think that he could give an annual
increase just for being there." She offered that she isn't
entirely certain how accurate the surveys are, because it
depends on what the question is. It's one thing to ask, "Do you
support an increase to the minimum wage?" It's another to ask,
"Do you agree and understand what the terms of the initiative
are?"
Number 1994
REPRESENTATIVE HALCRO noted that Representative Murkowski made
an excellent point. He said the surveys received last year -
both from the Alaska State Chamber of Commerce and the National
Federation of Independent Business - showed a strikingly similar
extrapolation of data when looking at the questions. He noted
that support for the minimum wage, or the lack thereof, was 45
to 50 percent, right in the middle. He explained that the
percentage of respondents who do not pay their employees minimum
wage was incredibly high: 95 percent on both surveys. He said
this leads him to believe that "when the average Alaskan, who is
one of these 95 percent who's not making minimum wage, goes to
the polls and says, 'Yeah, you know what, I think my ... grocery
packer needs a raise,' ... people are going to vote because it
doesn't affect them."
REPRESENTATIVE HALCRO offered that [an escalator at] 50 percent
of the CPI is reasonable, whereas 100 percent of the CPI is
going to hurt a lot more. He asked, "Should we mitigate,
adhere, and try and reach for something that's workable, or do
we just back off and ... let the people of this state vote on
this issue?" He said it is a policy question and that he thinks
the committee should move [HB 56].
Number 2078
REPRESENTATIVE CRAWFORD agreed with Representative Rokeberg that
a 26-percent increase is "a shock to the system of all small
businessmen and large businessmen or any other businessmen you
want to talk to." He argued that if there were a consumer price
indexer the last time the minimum wage was raised, "today we
wouldn't have to be hitting this with a large increase." He
mentioned that even Mr. Amon had said he'd "prefer to see the
consumer price index in there ... rather than see us be $1 over
the federal minimum wage." He suggested a consumer price
indexer will take away the shock that happens every four or five
years.
Number 2140
REPRESENTATIVE KOTT, referring to a poll taken October 9-17,
2001, said the question was asked relating to the initiative
that would raise the minimum wage [incrementally] and then
adjust the minimum wage annually to match inflation. He said a
lot of people aren't really sure what inflation means. He noted
that "75 percent of Alaskans, ... plus or minus 4 percent margin
of error, ... supports that." Then the specific question was
asked in the poll, "Do you favor or oppose thereafter adjusting
the minimum wage annually to match inflation?" Representative
Kott reported that the margin actually increased to 77 percent
of those who support it.
REPRESENTATIVE KOTT suggested this is a clear indication that
the general public is supporting [it]. He said he isn't sure if
one could overcome "that kind of deficit going in." He said if
the legislature doesn't pass HB 56, it will be taking the chance
that the minimum-wage initiative will be defeated. He stated,
"We want to mitigate as much of the ... negative impact on
business that we possibly can. Just put something that [is] not
quite as harmful."
Number 2241
REPRESENTATIVE MEYER said he wasn't opposed to moving [HB 56].
He asked whether it could be moved without a fiscal note.
CHAIR MURKOWSKI informed Representative Meyer that there were
two fiscal notes. She said there was some discussion of whether
the "people transportation" cost should be factored in after
2005.
Number 2275
REPRESENTATIVE KOTT moved to report CSHB 56, version 22-
LS0342\F, Craver, 1/18/02, out of committee with individual
recommendations and the accompanying fiscal notes.
REPRESENTATIVE ROKEBERG objected.
CHAIR MURKOWSKI asked if Representative Rokeberg wished to speak
to his objection.
REPRESENTATIVE ROKEBERG withdrew his objection.
CHAIR MURKOWSKI asked if there was any further objection. There
being no further objection, CSHB 56(L&C) was moved from the
House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:40 p.m.
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