Legislature(1995 - 1996)
03/20/1995 03:10 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR & COMMERCE STANDING COMMITTEE March 20, 1995 3:10 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Jerry Sanders Representative Brian Porter Representative Kim Elton Representative Beverly Masek Representative Gene Kubina MEMBERS ABSENT None COMMITTEE CALENDAR HB 236: "An Act relating to reductions in compensation for state officers and employees; and providing for an effective date." HEARD AND HELD WITNESS REGISTER REPRESENTATIVE MARK HANLEY Alaska State Legislature State Capitol Building, Room 507 Juneau, AK 99811-1182 Telephone: (907) 465-4939 POSITION STATEMENT: Provided information regarding HB 236 WENDY REDMON, Vice President for University Relations University of Alaska, Statewide John Butrovich Building P.O. Box 755000 Fairbanks, AK 99775 Telephone: (907) 474-7582 POSITION STATEMENT: Testified on HB 236 MIKE MCMULLEN, Acting Director Division of Personnel Department of Administration P.O. Box 110201 Juneau, AK 99811-0201 Telephone: (907) 465-4430 POSITION STATEMENT: Provided information regarding HB 236 MYRTLE ELLERBEE, Manager Title IV-E Program Division of Public Assistance Department of Health and Social Services P.O. Box 110640 Juneau, AK 99811-0640 Telephone: (907) 465-3347 POSITION STATEMENT: Testified on HB 236 PREVIOUS ACTION BILL: HB 236 SHORT TITLE: REDUCTION IN STATE EMPLOYEE COMPENSATION SPONSOR(S): FINANCE JRN-DATE JRN-PG ACTION 03/06/95 597 (H) READ THE FIRST TIME - REFERRAL(S) 03/06/95 597 (H) LABOR & COMMERCE, FINANCE 03/17/95 (H) L&C AT 03:00 PM CAPITOL 17 03/17/95 (H) MINUTE(L&C) 03/20/95 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 95-21, SIDE A Number 000 The House Labor & Commerce Standing Committee was called to order by Chairman Pete Kott at 3:10 p.m. Members present at the call to order were Representatives Kott, Rokeberg, Porter, Elton, Masek, and Sanders. Representative Kubina was absent at the call to order. He stated there was a quorum. HB 236 - REDUCTION IN STATE EMPLOYEE COMPENSATION CHAIRMAN PETE KOTT asked the prime sponsor of HB 236, Representative Mark Hanley, to join them at the table. Chairman Kott asked if there was a suggested amendment to HB 236. Number 025 REPRESENTATIVE MARK HANLEY pointed out that the amendment addresses the oversight of the Governor and Lieutenant Governor not being included in HB 236. He commented they have an idea of how they can incorporate a graduated scale of state employees; however, it creates many questions as well. People were speaking of a lower percentage reduction within lower ranges and drawing the line somewhere. Representative Hanley stated in doing that, they must pick percentages which would all be fairly arbitrary. This would probably only affect the salary schedule for those that are noncovered in the union. He said with the covered employees, the language would suffice; you could probably put intent language in to encourage negotiators to do the same thing. However, it is hard to identify the same types of ranges across the board in the different bargaining units. Representative Hanley suggested leaving it the same as the language of the bill so an average of 5 percent would be achieved, allowing a lower reduction of some, if that were negotiated, and a higher reduction on others, but the average does have to be 5 percent. REPRESENTATIVE HANLEY stated that a question had come up concerning Class One employees who are not allowed to strike. There is additional language requiring the same of a binding arbitrator, that arbitrators could not award above that for the same amount of time. He said the Governor is required to negotiate a 5 percent reduction in the salaries and benefits to be maintained for three years. He supposed if a bargaining unit chose not to accept, at that point it could be imposed on them and certain bargaining units could go on strike. However, the public safety employees would not be able to go on strike. At that time, the legislature would have to change it and the Governor's hands would be tied. Representative Hanley went on to say the law would require the Governor to implement the 5 percent reduction. REPRESENTATIVE HANLEY suggested the committee, at minimum, address the amendment, including the Governor and Lieutenant Governor being reduced by 5 percent. He also suggested addressing the binding arbitration situation. If they want to get into the graduated percentage issue, it would become a much more in-depth issue. He advised if this were done, that legislators be higher than a range 10, but that is a policy call. CHAIRMAN KOTT asked if there were questions for the prime sponsor. Number 151 REPRESENTATIVE KIM ELTON asked if the department was still putting together figures on the graduated percents. REPRESENTATIVE HANLEY answered they were trying to get numbers based on different categories, at least for the noncovered employees. Number 160 REPRESENTATIVE NORMAN ROKEBERG asked Representative Hanley to comment on the university employees and others that are not covered by collective bargaining, but who have historically made a good faith effort to reduce their salaries and benefits. He said there is a question of equity if they implement an across-the-board cut when these employees have already "bitten some of the bullet." Number 176 REPRESENTATIVE HANLEY stated that every bargaining unit will say they have made good faith efforts to reduce. Others will say "that union, or that bargaining unit or that noncovered person has better benefits than I do." He said that the simplicity of the 5 percent reduction is if there is inequity, this maintains it. Number 197 REPRESENTATIVE BRIAN PORTER commented he had spent a considerable amount of time in one of the positions being discussed. He also stated he was part of a department which tried to responsibly involve cost reduction. He would like to see those people who tried hard at cost reduction be given some assistance. He said they could possibly evaluate the average increases of contracts over the last appropriate number of years, then appropriate the overall percentages based on the reverse of that. He asked whether we would not reach the same number, but yet credit past good work? Number 214 REPRESENTATIVE HANLEY responded that you could try. However, some have held the line on health care benefits, and some have not. REPRESENTATIVE PORTER interjected he was speaking of the value of the overall package. REPRESENTATIVE HANLEY said it gets into the legislature deciding they want everyone on an equal basis. He feels that is a laudable goal, but to actually derive this goal is next to impossible. Number 240 REPRESENTATIVE PORTER responded it wouldn't have to be a one-to- one relationship, but they should receive some credit. Number 252 REPRESENTATIVE HANLEY commented anything was possible. However, would they do it over three, five or seven years? Bargaining units change and people move into different scenarios. REPRESENTATIVE PORTER said it was his understanding that numbers are kept on the average contract increase and those numbers are readily available for comparison. The numbers are there to work with to account for the good work of managers in reducing their costs. REPRESENTATIVE HANLEY asked if Representative Porter was talking of looking at individual bargaining units. REPRESENTATIVE PORTER said right now, the noncovered employees are 6.7 percent behind, on average, the covered employees. REPRESENTATIVE PORTER said he was talking about percentage differences over a time period in the increases from their individual basis. Number 265 REPRESENTATIVE HANLEY responded that if you don't take, for example the noncovered employees, which at current level, if you look at it over time, will be the same because if you average it out they will be behind. The legislature has not granted an increase when covered employees have had negotiated increases. Number 267 REPRESENTATIVE PORTER gave an example of three unions and non-reps. In the last ten years `union A' had an increase of 15 percent overall cost to their contract, `union B' had 18 percent, `union C' had 12 percent, and non-reps had 10 percent. He explained the amount they should request in deductions should be reflected in how much they have increased over the last ten years, assuming that isn't too difficult to assess. Number 287 REPRESENTATIVE HANLEY asked how they should assess the increase. He asked whether they should take the total (indisc. coughing), and divide it by the number of people. Sometimes certain people receive different raises within the same bargaining unit because they have tried to bring their own people at the bottom up. Therefore, you get not only into bargaining unit, but by category and range. Number 286 REPRESENTATIVE PORTER said they are talking about overall goals for overall costs of contracts. He thought it wouldn't be difficult to come up with the same result of an overall 5 percent increase and then vary it based on the last ten years. Number 297 REPRESENTATIVE HANLEY stated that this would basically equalize everyone's pay. REPRESENTATIVE PORTER commented that he was trying to give some benefit to past experience. That would not result in a equalization of pay. REPRESENTATIVE HANLEY commented that it would decrease the margin; it may not equalize it, but it's leaning in that direction. REPRESENTATIVE PORTER said it would tend toward compressing the spread. Number 312 REPRESENTATIVE ROKEBERG said they were talking about two different elements; those being the impact on the lower ranges and the disparity between different units and groups of employees. Number 333 REPRESENTATIVE PORTER said that if you took a higher percentage from bargaining units that have had higher increases over the last ten years, you would be having that effect. It would be easier to manage. Number 312 REPRESENTATIVE ROKEBERG stated that he did not see that. He felt that there needed to be two different calculations to achieve the effects talked about. He asked Representative Hanley to comment on this. REPRESENTATIVE HANLEY said he didn't have the information there. He said in trying to simplify the bill, it has become more complicated. Number 333 REPRESENTATIVE PORTER stated there was no doubt in his mind they couldn't do this in this committee at this time. However, he is not suggesting they delay the bill for that purpose, but that is food for thought for the Finance Committee. Number 335 REPRESENTATIVE ELTON responded that he would prefer having something more comfortable before they move it on. He asked Representative Hanley if there was any consideration to 5 percent across-the-board and a 1.4 percent for those who didn't participate in the previous pay raise. REPRESENTATIVE HANLEY stated that it is worked into the bill. The salary schedule is reduced for noncovered employees, whereas the 5 percent reduction applies to total compensation packages. REPRESENTATIVE ELTON asked him to explain this. REPRESENTATIVE HANLEY explained that the 5 percent cut for noncovered employees is only for the salary schedule; it does not include benefits. He said the bargaining unit is about 95 percent of the average of the total package. Number 359 REPRESENTATIVE ELTON said he understands the salary schedule was in Section 9. Section 10 has a series of subparagraphs addressing each of the items Representative Hanley was talking about, However, his understanding of Section 11 is that it was for the others. Number 368 CHAIRMAN KOTT interjected about Section 10 (e) of the original bill where it talks about "the average per employee compensation set in the new contract may not exceed 95 percent of the average." He said Representative Hanley is suggesting for the next bargaining agreement there will be 5 percent in both wages and compensation, or one or the other. REPRESENTATIVE ELTON asked if those same cuts would apply to the noncovered or exempt and partially exempt employees. REPRESENTATIVE KOTT replied that the noncovered employees would receive a straight 5 percent salary cut across-the-board. REPRESENTATIVE HANLEY added after they have already had a 3.6 percent diminishment in their salaries simply because the legislature did not increase the noncovered employees the last time around. Under the provisions of HB 236 they would take another 5 percent. REPRESENTATIVE HANLEY gave an example of two employees, one is noncovered, one is covered. The noncovered employee makes $50,000 a year salary and the covered employee makes $50,000 a year salary. Their benefits both equal $20,000 each. The noncovered employee has 5 percent of the $50,000 reduction. The covered employee has a reduction of 5 percent of $70,000 because it is compensation pay which includes benefits. Number 399 REPRESENTATIVE ELTON pointed out he was talking about history, not what is happening in the future. The history is that the noncovered employees did not participate in the last raise. The net effect is they are taking a bigger hit with this legislation. Number 410 REPRESENTATIVE HANLEY stated 5 percent of the total package is a bigger reduction than 5 percent of a smaller amount. If you wanted to do the same thing, you could say noncovered employees would get a 5 percent salary reduction and covered employees would get a 5 percent salary reduction. The bargaining units would then choose how they would achieve that. Number 428 REPRESENTATIVE PORTER noted that would come close to a 3.5 percent difference. Number 430 REPRESENTATIVE ELTON commented the older he gets the more important his benefit package is. He is not comfortable with what they are proposing, which for many employees, is in the neighborhood of 7 percent. Number 435 REPRESENTATIVE ROKEBERG asked if the legislators were part of the salary schedule in Section 9. REPRESENTATIVE HANLEY replied they are paid at a range 10 with no step increases. CHAIRMAN KOTT asked if there were additional questions for Representative Hanley. Hearing none, he asked Wendy Redmon to join them at the table. WENDY REDMON, VICE PRESIDENT FOR UNIVERSITY RELATIONS, UNIVERSITY OF ALASKA, STATEWIDE, asked if this was being teleconferenced. CHAIRMAN KOTT stated that it was not. MS. REDMON replied she had declined to testify on March 17 because it was on teleconference. She said this was probably the most uncomfortable testimony she has had to give. She was asking that the university be exempted from the bill, because the salary schedule the university recently adopted is lower than what is currently in HB 236. The university is already paying less in three out of the four key categories--accounting, tax accountants, administrative assistants and secretaries--than what the state is currently proposing at a 5 percent reduced level. She said the Board of Regents has taken a very hard-line position on salaries over the past decade. The increase for average employees over the last ten years has been 22.8 percent. The state has gone up 55.4 percent during that same period of time. MS. REDMON stated when the state experienced the health care benefit crisis, the university redid their whole package. The state is paying $428 per month per employee. The university is paying $328 per month. She said the university employees are on a co-pay system; they are paying cash for part of their health care insurance as well as having their overall level of insurance reduced. Ms. Redmon related they did away with the Fairbanks differential three years ago. She doesn't mean to be blasting the state. Their current pay scales are not out of line, but for the legislature to say to the university and the Board of Regents, who have taken a very conservative approach to salaries, that they are arbitrarily going to cut back 5 percent? She said what Representative Hanley said was correct in that they wouldn't be changing the differential, they'd just be perpetuating it. Besides the university employees, the other largest market in the state are other state employees. Ms. Redmon said this a very inequitable situation. They are trying to do things internally, and hope the university is a good place to work and can make up for it in other ways. She is requesting there be some acknowledgment that the Board of Regents, in their management of the university, in their fiduciary responsibility, has kept its services in line with resources that are available. MS. REDMON also stated that the university has two small unions. The first is a faculty unit with approximately 250 employees. Those salaries and benefits are exactly the same as nonunionized faculty. She said physical plant and maintenance workers make up the other unit. They negotiated a 1.5 percent salary increase over the next two years, which is a very modest increase in light of where they started relative to their peers in the state. MS. REDMON acknowledges the dilemma the legislature is in. However, there does need to be some consideration in looking at those elements of the state that have taken the initiative to try to deal with this issue and not just throw them in with an across- the-board reduction. Number 512 CHAIRMAN KOTT commented this was what Representative Porter alluded to earlier. There have been a number of conscientious and frugal efforts in the negotiation process, and possibly those bargaining units should be given some credit. REPRESENTATIVE PORTER asked if, in the first category, they took a higher percentage reduction in existing wage than 5 percent, or whether she was comparing. MS. REDMON interjected that she was comparing. Currently, for example, the administrative assistant position at the university has a pay scale (which they just put into place) at $14.62 an hour. The pay scale under HB 236 for the beginning wage for this position is $16.25 an hour, $2.00 more than what the university is currently paying. REPRESENTATIVE PORTER asked if their classifications mirrored the state classifications. MS. REDMON responded their classifications are not set in statute. This legislation would direct the Board of Regents to adopt a compensation reduction in accordance with the state. There is no perfect correlation. She stated there are many positions at the university the state does not have. For the ones that are similar they would look at, for example, the administrative assistant mid- level position and find their salaries are $14.62. State salaries are set at $16.25. She doesn't think it is the state's intent to give them the extra money so the scale levels are comparable. REPRESENTATIVE PORTER asked if these positions were the same job descriptions. MS. REDMON replied essentially, yes. She said with the faculty, of course, there are no comparisons. HB 236 doesn't anticipate how to deal with that. Average salaries for faculty are $45,700 per year. The average for K-12 teachers is $46,000. Ms. Redmon stated that for West Coast universities the averages are $47,000 per year. Without including the area differential in faculty salaries, it has presented enormous problems in trying to recruit faculty to come to Alaska. She realizes many of their constituents would not feel sorry for them, making a $46,000 year, a nine-month salary. However, that is the national market they are competing in to get faculty. If they cannot be competitive in their salaries, they simply cannot find people to come here with the other downsides to many disciplines working in the state. Number 533 REPRESENTATIVE ELTON asked if the annual salary included teaching assistants. MS. REDMON responded it was only full-time, nine-month faculty. She said there are people that have been working at the university for 30 years and are making $90,000 a year, but most of the faculty are at the low end of the scale. Number 562 REPRESENTATIVE ELTON asked if those would be assistant, associate, and full professors. MS. REDMON said that would be correct, with Ph.Ds. Number 562 REPRESENTATIVE KUBINA commented on the Vice Chancellor at the University of Fairbanks making $124,000 a year. Maybe they could take it out of those people's salaries. He asked, as the bill is written, whether they would have to reduce everyone's salary 5 percent, period. Number 568 MS. REDMON explained it would direct the university to develop a compensation reduction in accordance with Section 9. Section 9 says essentially, salaries will be reduced by 5 percent. She supposed they could argue they would do nothing, because in effect, their salary schedules are already, and in many cases, lower than what is set out in Section 9. Therefore, they would just ignore this; however, she would feel better if they were either clearly exempted and there was some confidence the Board of Regents was going to continue to do what they've been doing in terms of managing its fiduciary responsibilities. So it is a little unclear. MS. REDMON continued that it was very clear, with the collective bargaining side, they are under the Public Employment Relations Act (PERA). The elements under Section 10 would clearly apply to those collective bargaining groups they are currently under negotiations with. Number 583 REPRESENTATIVE KUBINA observed from being on the campaign trail, it is not the $46,000 salaries, but rather, it is the $124,000 salaries that make it hard for the public to have sympathy. CHAIRMAN KOTT commented that on the same campaign trail they heard about the state employee at the assistant deputy commissioner position making $80,000, not the clerk making $12,000 per year. Number 589 REPRESENTATIVE ROKEBERG asked Ms. Redmon if they had an analysis to prove their point or demonstrate that more graphically. MS. REDMON stated she had her people pull out four of the most common classified positions and they took a look at what the university pay rate is, what the state range is, what their current hourly rate is, and what the proposed hourly rate is under HB 236. She said she was quite moved by the testimony of state employees eligible for public assistance. It never occurred to her so many people employed at the university, earning less than $11.00 hour, with a family of four, would be eligible for assistance. Number 604 MIKE McMULLEN, ACTING DIRECTOR OF DIVISION OF PERSONNEL, DEPARTMENT OF ADMINISTRATION, stated he was there to answer any questions. Number 609 CHAIRMAN KOTT asked if he could discuss the various categories of employees, levels one, two and three. MR. McMULLEN said the collective bargaining statute (PERA) provides three classes of employees. Class One is not allowed to strike. If earlier processes of bargaining have failed, there is mandatory arbitration to set the contract terms for that group, which consists of police, fire and corrections. Class Two employees are those whose services can be interrupted without affecting public safety or welfare. Those include snow removal and education. Those employees are treated like Class Three until the employer is able to convince a court that public safety is being jeopardized. At that point, they are treated like Class One employees. The biggest class is Class Three employees, who have the unlimited right to strike when they reach impasse in the collective bargaining process. It is that group, where the employees have the economic mechanism of striking, where the employer has the economic mechanism of imposing contract terms. CHAIRMAN KOTT asked if resources were available to go back over the past ten years and look at the various bargaining contracts, to see what kind of increases there have been. He asked if that information was available within the department. MR. McMULLEN said the information was available. He said that it makes a threshold question of at what point in time were relations between the units equitable, to be a baseline just picking a point in time. TAPE 95-21, SIDE B Number 000 CHAIRMAN KOTT asked if the unions had negotiated a contract since 1992. MR. McMULLEN commented the Class One employees have not had a new contract since 1990. The rest have. CHAIRMAN KOTT asked if the noncovered employees' last increase was in 1991. MR. McMULLEN said that was correct. CHAIRMAN KOTT noted Representative Elton's concerns were that the noncovered employees had not had a cost of living increase since 1992. MR. McMULLEN said it was a 3.6 percent increase in 1992. CHAIRMAN KOTT asked if Mr. McMullen had the numbers for 1993, 1994. MR. McMULLEN said nonrepresented employees, and general government employees have not had an increase. Supervisors have an increase scheduled under the terms transmitted to this legislature, as well as do laborers and crafts. Confidential has a 2.5 percent increase scheduled for July 1, transmitted to the last legislature. The Inland Boatman's Union has a 3.5 percent increase scheduled for July 1. The Mt. Edgecumbe teachers have an increase coming up which was transmitted to the last legislature. CHAIRMAN KOTT asked when the last cost of living increase for noncovered employees was. MR. McMULLEN answered 1991. CHAIRMAN KOTT noted that the noncovered employees had lost... MR. McMULLEN interjected, 3.6 percent to the rest of the state. CHAIRMAN KOTT asked if this was per year or over the past three years. MR. McMULLEN responded over the last three years. Number 074 REPRESENTATIVE ROKEBERG commented it would be helpful to have a spreadsheet analysis of the historic perspective of the items they have been discussing. Number 081 MR. McMULLEN responded they had recently prepared a document of that nature for the Senate Finance Committee. Number 088 REPRESENTATIVE ELTON commented they were significantly changing the philosophy of collective bargaining. He asked Mr. McMullen if he considered himself still a collective bargainer if you were operating under the terms of this epic of legislation? He said there is not a lot to bargain other than implementing the mandate from the legislature. Number 100 MR. McMULLEN responded that doing this does not destroy collective bargaining per se. The collective bargaining statute clearly sets out the legislature's role in agreements. It is specific from the statute that the legislature has a role in providing oversight to the process. He said within the realm of collective bargaining, the legislature would give some guidance. In regards to specific bargaining for the three-year life contemplated by HB 236, this would take away the flexibility for trading anything for or against salary increases. Number 139 REPRESENTATIVE ELTON pointed out he does not remember a time the oversight has been applied pre-bargaining instead of post- bargaining when legislative oversight has been provided. MR. McMULLEN responded there had been no specific legislation pre-negotiation. However, there had been clear directions. For example, the question of retroactivity, the feedback from the Finance Committee about no longer having retroactive agreements, to the point they do not have retroactive agreements coming before the legislature. REPRESENTATIVE ELTON asked if those directions were in the form of law. MR. McMULLEN replied they were not. REPRESENTATIVE KUBINA queried whether the legislature had ever passed a law directing them to do something regarding collective bargaining. Number 158 MR. McMULLEN stated they had passed laws regarding out-of-state differential under PERA. Number 171 REPRESENTATIVE KUBINA asked if the legislature could pass a resolution rejecting the contracts already submitted. Or, can the legislature just not fund them? Number 197 MR. McMULLEN responded that, with respect to the three there now, the legislature could clearly reject by resolution. Even without the resolution, they could be turned down in the appropriations bill, which has happened before. He said the contracts from prior years are past the resolution point. However, funding can be turned down. There has been a front section in some appropriation bills in the past that says, none of the appropriations made by this bill can be used to fund the increase in such a contract for the coming fiscal year. He said there are multiple mechanisms available to the legislature in rejecting terms of contracts. REPRESENTATIVE KUBINA asked if the rest of the contract would still be in effect. MR. McMULLEN explained if the contract is rejected in any form, the parties go back to negotiation. The resolution is nonbinding in that, if the appropriation itself doesn't come through at the end, that resolution doesn't mean the rest of the terms go forward. REPRESENTATIVE KUBINA asked if the Administration supports HB 236. MR. McMULLEN replied, it does not. REPRESENTATIVE KUBINA asked if the Administration has taken an official position against the bill. MR. McMULLEN responded he was out of town on the 17th and did not know what the deputy commissioner testified. Number 218 CHAIRMAN KOTT asked if the state could unilaterally rescind an existing contract, simply by not funding it. Wouldn't the state still be liable? MR. McMULLEN explained the legislature could reject the terms by specifically not funding those changes the contracts provide. This is a major issue with retroactive agreements. If the parties have an agreement, they start filling that agreement in January, and then in May the legislature says they don't get the salary part of the agreement. These parties have already been living with the agreement in other areas, but it was all part of the same package. Mr. McMullen stated if part of the package is thrown out, then the whole package is thrown out. The legislature can kill any provision by specifically not funding (indisc. -- coughing). Then, the parties are left to renegotiate. Number 261 REPRESENTATIVE KUBINA thought there was a court decision that said once the contract has been ratified by the legislature the first year, they were obligated to the full three years. MR. McMULLEN noted it was the opposite conclusion. The legislature has the renewed opportunity each year to address those terms. REPRESENTATIVE KUBINA asked what the use of a contract was. Number 269 REPRESENTATIVE PORTER commented that, like so many things, the term of the contract is subject to appropriation. This is the power the legislature has. REPRESENTATIVE ELTON observed that if that was the case, they didn't need the bill. MR. McMULLEN stated the legislature could reject the contracts by not appropriating them. However, he didn't think they could roll back to anything except what had existed before the contract was before them. Number 274 REPRESENTATIVE ELTON stated there was nothing in HB 236 prohibiting a 5 percent pay cut and a four-day work week. For example, under the terms of the contract, you could have a four- day work week of eight hours a day, for 32 hours. That would reduce the package by 5 percent. Number 295 REPRESENTATIVE PORTER thought the bill provided the wage scale would be reduced for the nonrepresented employees. CHAIRMAN KOTT asked if there were any further questions for Mr. McMullen and made the point the Administration was against HB 236. MR. McMULLEN replied yes. CHAIRMAN KOTT asked Ms. Ellerbee from the Department of Health & Social Services to talk about the threshold of state employees on public assistance and the number of potentially eligible employees. Number 314 MYRTLE ELLERBEE, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH & SOCIAL SERVICES (HESS), said she would explain the chart provided to the committee along with the basic eligibility criteria for Aid to Families with Dependent Children (AFDC). She stated in regards to how earned income is used and how they apply the disregards, they use gross earned income. They allow the family to have an earned income disregard of $90 from the gross. Ms. Ellerbee said households are allowed a $30 deduction which runs for 12 months, and an additional one-third of the remainder for the first four months. This means the first four months on AFDC, if the net income is $891 for a family of two or less, they apply the ratable reduction. Therefore, if a family's earned income, with all the disregards, equals $891, they would pay them $821 per month. Ms. Ellerbee stated there is also an allowance for up to $200 for child care deductions. They use the net earned income, subtracted from the needs standard. Number 345 REPRESENTATIVE KUBINA asked if there were state employees receiving aid for dependent children. MS. ELLERBEE said she didn't have that information, but would research the matter. REPRESENTATIVE KUBINA stated he would like to know that information and if we cut salaries 5 percent, how much more will they have to pay in aid to dependent children. REPRESENTATIVE PORTER asked with regard to that, if she would separate how much is state money and how much federal. MS. ELLERBEE replied that it was always 50/50. REPRESENTATIVE KUBINA said they are referring to the full-time employees. Number 358 CHAIRMAN KOTT noted the federal poverty level for a family of four was $1,579. MS. ELLERBEE stated the need standard for a family of four was $1,113. REPRESENTATIVE KUBINA asked Ms. Ellerbee to explain what the need standard was. MS. ELLERBEE replied the federal government mandated they set the need standard. The legislature has set the need standard at $1,113, which is the minimum to live on. That is illustrated on the AFDC Needs and Payment Standard Chart. Number 380 REPRESENTATIVE PORTER asked her to define the application of the rate of the reduction. MS. ELLERBEE stated in 1993, the legislature said they were going to reduce the payment by a percentage of the need. That started out at 2.84 percent. She said it is now 7.85 percent of need. They previously paid 100 percent of need, until October 1993, and now they will pay only a portion. That is why there is a difference between the need and the maximum payment. Ms. Ellerbee related the maximum payment will not change until the legislature changes it. The percentage of need will constantly change as social security doesn't increase every January. CHAIRMAN KOTT noted this was gross. MS. ELLERBEE agreed this was gross, prior to taxes and any other deductions. Number 407 REPRESENTATIVE SANDERS asked if they pay federal income taxes on this money. MS. ELLERBEE replied no. They take their gross income and give them the $90 earned income disregard, which is supposed to include the amount they pay for federal tax. Number 408 REPRESENTATIVE SANDERS asked if she had said taxes and other reductions. MS. ELLERBEE replied that employers often take deductions to cover other benefits out of paychecks. For example, part of their health care, but it does not come out of this money. REPRESENTATIVE ROKEBERG asked if they make more money would they have to give it back to the state. MS. ELLERBEE said if the state has overpaid them, they would have to pay it back. If they are working and make too much money and they declared it on their monthly report, the state would close the case. She stated in some cases, depending on how long they have been on assistance, they are entitled to extended benefits, as in Medicaid and child care assistance. Number 420 REPRESENTATIVE SANDERS asked if people on assistance have health benefits for hospital stays. MS. ELLERBEE answered they would have Medicaid because it is related to this particular program. If they have insurance from their employer, that insurance would cover them first, then Medicaid would pick up the balance. REPRESENTATIVE SANDERS commented he wasn't thinking of working state employees. He's thinking of them not working. He said when you add all of the programs up, the people on assistance would be making more than some of the people who have testified on the teleconference line. He asked how many people are working for the state who could be on welfare if they lost 5 percent from their pay. MS. ELLERBEE said she didn't have the number of employees and what their salaries are. Number 438 CHAIRMAN KOTT asked what the minimum amount that a family of four must gross to be above Alaskan poverty standards. MS. ELLERBEE didn't have the exact figures with her. CHAIRMAN KOTT commented they could have quite a number of people below poverty standards who are presently working, who might opt for assistance if they get hit with a 5 percent cut. He asked the department to supply the committee with a breakdown of the number of employees in the different ranges. REPRESENTATIVE KUBINA pointed out that page 3 of the bill shows the monthly salaries. The lowest range is $1,425 per month. Number 463 REPRESENTATIVE PORTER referred to the previously mentioned comparison of what would result from this legislation passing, as relating to the benefits provided to current welfare recipients, and the assumption that the benefits that are provided to current welfare recipients are going to stay static. He said he would submit that's probably not the case. Number 469 REPRESENTATIVE ROKEBERG stated there were too many variables to take the chart. They are dealing with elusive numbers and could be drawing some incorrect conclusions. REPRESENTATIVE SANDERS commented that in two days of testimony, he had come up with many more questions than answers. He hesitates sending the bill out without knowing more. CHAIRMAN KOTT stated HB 236 would go to a subcommittee, which Representative Sanders would chair. Number 485 REPRESENTATIVE ELTON concurred with Representative Sanders. He said at some point, they essentially would be encouraging people at the lower end of the pay scale to get off that pay scale and on to public assistance. Number 497 REPRESENTATIVE ROKEBERG commented if the Alaska poverty level is $15,000 for a family of four, is that what their target is? Number 504 REPRESENTATIVE ELTON said an easier way to look at it, perhaps, is not focusing on people coming off the state payroll and onto public assistance but, rather the disincentive for people to go off public assistance and into an entry level state job. CHAIRMAN KOTT asked if it was worth going to work 40 hours a week for $200. REPRESENTATIVE ROKEBERG said they should give the Department of Administration some prototype comparisons so they could figure the variables. For example, a single mother with one child; also, a family of four. Number 519 REPRESENTATIVE PORTER said he had no doubt the lowest paid full- time, state salaried employee makes more than 50 percent of many of the employees in small businesses, considering the total package of the state. To say we have to have the lowest paid full-time salaried employees be able to sustain a family of seven is ridiculous. This bill is part of the package that is looking at reducing every section of state spending. He also said some of the items they are comparing against it, in terms of welfare, are not going to be there either. Number 537 REPRESENTATIVE ROKEBERG agreed they should have entry level jobs to provide more employment for everyone, but they are not going to pay the freight for raising the payments they have. Number 560 CHAIRMAN KOTT asked if there were more people wishing to testify on HB 236. Hearing none, he said it was the committee's intent to hold the bill over to be heard in a subcommittee chaired by Representative Sanders along with Representatives Masek and Kubina, which will look at the possibility of a graduated scale. Number 574 CHAIRMAN KOTT stated they did have an amendment yet to be adopted. Number 577 REPRESENTATIVE PORTER made a motion to adopt amendment one K-1, dated March 8, 1995. CHAIRMAN KOTT restated the motion to adopt amendment one, K-1 dated March 8, 1995, by Kramer. He asked if there was any objection. Number 581 REPRESENTATIVE ELTON was uncomfortable in increasing the disparity they have, for example, with the new CEO of Alaska Housing Finance Corporation (AHFC) and the Governor. He has a philosophical objection with increasing the disparity with the Governor and a captain of the ferry system. We are requiring the commissioner of Natural Resources to run an oil company, and we are not paying them much to do this. He feels they are compounding a problem they already have. Representative Elton said if people think they are correcting unfairness in the salary code by reducing the Governor's salary by $4,000 a year, we're not getting to the heart of any of the state's spending or revenue problems. CHAIRMAN KOTT appreciated his comments and added if the amendment was adopted they could deal with the inequities on an equitable basis. Number 604 REPRESENTATIVE PORTER believes they both ran on reduced spending and would probably want be part of it. Number 608 REPRESENTATIVE ROKEBERG associated himself with the comments of Representative Porter. CHAIRMAN KOTT asked for a roll call. Representatives Porter, Masek, Rokeberg and Sanders voted in favor of the amendment. Representatives Elton, Kubina and Kott voted against the amendment. The amendment was adopted. Chairman Kott restated the bill would be held in committee until further considerations could be made. Number 626 REPRESENTATIVE PORTER said they should try to keep in mind the number the Finance Committee had in mind and target that number with whatever scenario they came up with. CHAIRMAN KOTT stated he preferred they iron out the details before sending it on. ADJOURNMENT There being no further business to come before the House Labor and Commerce Standing Committee, Chairman Kott adjourned the meeting at 4:43 p.m.