Legislature(2013 - 2014)BARNES 124
02/05/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Overview: Department of Administration by Commissioner Curtis Thayer | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 5, 2014
3:16 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Bob Herron
Representative Dan Saddler
Representative Andy Josephson
MEMBERS ABSENT
Representative Charisse Millett
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF ADMINISTRATION BY COMMISSIONER CURTIS
THAYER
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CURTIS THAYER, Acting Commissioner
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Presented an Overview on Department of
Administration.
MIKE BARNHILL, Deputy Commissioner
Office of the Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the Department of
Administration's overview presentation.
ACTION NARRATIVE
3:16:45 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:16 p.m. Representatives
Reinbold, Saddler, Herron, Josephson, Olson were present at the
call to order. Representative Chenault arrived as the meeting
was in progress.
^Overview: Department of Administration by Commissioner Curtis
Thayer
Overview: Department of Administration Commissioner Curtis
Thayer
3:16:52 PM
CHAIR OLSON announced that the only order of business would be
an overview by Department of Administration Commissioner Curtis
Thayer.
3:17:18 PM
CURTIS THAYER, Acting Commissioner, Department of Administration
(DOA), offered to update the committee on several topics of
interest with respect to the Department of Administration,
specifically the universal space standards and labor contracts.
He characterized the DOA as a "department within a department"
since it consists of ten diverse divisions and five commissions.
The department provides services ranging from the Division of
Motor Vehicles (DMV) and the Public Defender Agency (PDA) to the
Violent Crimes Compensation Board (VCCB) and the Oil & Gas
Conservation Commission (OGCC) [slide 2]. The DOA has over
1,000 employees, a budget of $343 million, and offers services
throughout the state, primarily through its 31 DMV and PDA
locations. Additionally, the Office of Public Advocacy (OPA)
has offices in several locations, and the state owns 15 public
buildings, primarily in Juneau, Palmer, and Anchorage.
3:19:25 PM
ACTING COMMISSIONER THAYER provided an overview of labor
contracts and a status report on contracts [slide 4]. He
reported that this year the state is in the process of
negotiating five contracts, including three maritime unions:
Inland Boatmen's Union of the Pacific (IBU), Marine Engineers'
Beneficial Association (MEBA), and Masters, Mates and Pilots
(MMP), as well as the Alaska Vocational Technical Teachers
Association (AVTECTA) and the Public Safety Employees
Association (PSEA). Last year, the DOA negotiated three-year
contracts for the General Government Unit (GGU), the Alaska
Public Employees Association (APEA), Supervisory Unit (SU), and
the Confidential Employees Association (CEA) covering the period
July 1, 2013 through June 30, 2016. He said that the contracts
are for three-year terms so they constantly rotate.
3:19:58 PM
ACTING COMMISSIONER THAYER said that negotiations are mandated
by the Public Employment Relations Act (PARA) and generally
begin in October, and, by statute the department must have an
agreement to the legislature for consideration by the 60th day
of session. He reported the DOA met this deadline last year
with all three contracts and he hoped to have the current five
contracts completed timely. He anticipated that one union's
bargaining negotiations should be completed this month.
ACTING COMMISSIONER THAYER explained that if negotiations do not
lead to an agreement and mediation fails, employees have the
right to strike [slide 6]. He noted some exceptions, such as
the Alaska State Troopers, as Class 1 employees are subject to
binding arbitration, and the Alaska Marine Highway System (AMHS)
workers, who would likely be subject to an injunction due to the
life and safety aspects that require service. While the
department doesn't plan on [binding arbitration or injunctions],
it could happen. The department's goals are to reach fair and
balanced agreements.
ACTING COMMISSIONER THAYER said the classes of striking are
Class 1, Class 2, and Class 3. He said that "Strike Class 1"
relates to public safety, "Strike Class 2" relates to AMHS
vessel employees, and "Strike Class 3" primarily consists of
public employees covered under contracts that were negotiated
last year.
3:21:37 PM
ACTING COMMISSIONER THAYER turned to a listing of bargaining
units (BU) by contract negotiation year [slide 8]. He detailed
the number of employees in each bargaining unit, such that
AVTECTA has 41 employees, IBU has 669, MEBA has 107, MMP has 98,
and PSEA has 508 employees or a total of approximately 1,300
employees as compared to the nearly 12,000 employees covered
under contracts negotiated last year.
ACTING COMMISSIONER THAYER turned to a listing of the average
yearly base salaries for fiscal year 2013 (FY 13). He reported
the yearly average pay is approximately $76,000 for AVTECTA
employees, $51,000 for IBU, $73,000 for MEBA, and $85,000 for
MMP employees. Additionally, the department adds 49 percent to
cover benefits. He stated that this year the department is
negotiating with highly-compensated public safety employees. He
pointed out that the MMP (Mates and Pilots) are the highest paid
employees in state government, with some salaries approaching
$180,000 to $190,000.
3:23:13 PM
REPRESENTATIVE REINBOLD asked for the long-term impacts of SB
95, which passed the legislature last year, and how it will
affect the state's Public Employees' Retirement System (PERS)
and the Teachers' Retirement System's (TRS) unfunded liability.
ACTING COMMISSIONER THAYER offered to provide the committee with
details; however, he related that nearly 50 percent of state
employees fall under the defined contribution (DC) and not under
the PERS and TRS. He noted last year was the largest take back
the state has ever had with employees. He said that last year
the state employee increase was [1 percent effective July 1,
2013, another 1 percent increase effective 1, 2014 and a final
2.5 percent increase effective July 1, 2015 (often referred to
as 1, 1, and 2.5)].
3:24:05 PM
REPRESENTATIVE REINBOLD more specifically requested the fiscal
note for SB 95 and how passage of the bill will affect the
Public Employees' Retirement System (PERS)/Teachers' Retirement
System (TRS) unfunded liability.
ACTING COMMISSIONER THAYER said he did not have those figures
today but offered to provide the committee with the information.
3:24:33 PM
REPRESENTATIVE REINBOLD referred to page 9 of the DOA's
presentation and asked if the number of IBU employees is 41.
ACTING COMMISSIONER THAYER answered yes.
3:24:52 PM
REPRESENTATIVE JOSEPHSON asked for clarification on the term
"take back" used to describe the 1, 1, and 2.5 percent
negotiated increases.
ACTING COMMISSIONER THAYER responded that the 1, 1, and 2.5
percent increases represent the Cost of Living Allowance (COLA).
He explained that the DOA and the unions have worked to address
concerns, including the unfunded leave liability. He elaborated
that the department did not cap leave so employees could
accumulate an unlimited amount of leave and then cash it out.
In some instances, the department experienced employees leaving
service or retiring with $200,000 to $300,000 payment for leave
balances, thus, the DOA negotiated a cap of 1,000 hours and
increased the mandatory leave usage from one to two weeks.
Further, employees with 400 hours or more accumulated leave must
take three weeks of leave or cash in one week of leave.
Additionally, the state negotiated a lower leave accrual rate
for new hires effective July 2013. Finally, the merit increases
were negotiated from 3.75 to 3.25 percent for outlying years.
Additionally, the state also paid a health care premium of $700
to $800 per member per year, which totaled about $20 million.
He estimated that the state saved $14 million by providing a
one-time lump sum and no longer paying ongoing premiums.
3:27:01 PM
REPRESENTATIVE JOSEPHSON acknowledged that he is a fan of public
workers, but accumulating $200,000 to $300,000 in leave seems to
represent "another retirement." He asked whether the policy
changes will result in more absent workers since workers will
exercise their leave rights more liberally.
ACTING COMMISSIONER THAYER answered yes. He explained more
details on the leave earnings, noting employees could
essentially bank five weeks of leave each year, which
contributed to such high leave balances.
REPRESENTATIVE JOSEPHSON understood it would likely be
impossible to measure the impact the policy changes will have on
the functioning of government.
3:28:20 PM
REPRESENTATIVE HERRON asked the commissioner to add to the
information he'll provide the committee and identify the
location of where all the employees live.
ACTING COMMISSIONER THAYER agreed to do so. He reported that 10
percent of IBU's members, 20 percent of MMP's members, and 40
percent of MEBA's members reside outside of Alaska. He said
that this is a concern during negotiations since 40 percent of
the members may not understand some of the cost constraints and
issues the state faces in operating the Alaska Marine Highway
System.
3:29:33 PM
CHAIR OLSON asked whether this includes the Ocean Ranger program
since he recalled about 90 percent of its participants
previously resided outside Alaska.
ACTING COMMISSIONER THAYER offered to confirm the figures.
3:29:58 PM
ACTING COMMISSIONER THAYER compared expenses verses revenues for
marine vessel operations [slide 10]. Referring to the chart, he
explained that the green bar represents the personnel services
and the red bar represents the total cost of marine operations.
He estimated that the AMHS will lose $114 million in 2014, of
which personnel costs is the largest driver. He said that the
state can't afford to continue on this trend.
REPRESENTATIVE JOSEPHSON understood this to mean that the state
must subsidize the AMHS.
3:31:08 PM
REPRESENTATIVE REINBOLD offered her belief that the disparity
between revenues and expenditures couldn't happen in the private
sector. She asked how the department plans to remedy this.
ACTING COMMISSIONER THAYER answered that the DOA negotiates
contracts, but the department also works very closely with the
Department of Transportation & Public Facilities (DOT&PF), which
is the agency responsible for the AMHS. While the DOA works
with the DOT&PF on operational issues and personnel costs, the
fundamental operational costs for the AMHS rest with the DOT&PF.
REPRESENTATIVE REINBOLD surmised that there isn't a plan to fix
the [revenue shortfall].
3:31:42 PM
ACTING COMMISSIONER THAYER reiterated that the DOA negotiates
contracts, but the DOT&PF operates the AMHS, so he deferred to
the DOT&PF to respond.
REPRESENTATIVE REINBOLD asked whether the state will lose $117
million. She said she definitely would like to know what the
plan is to fix this.
CHAIR OLSON asked whether the $117 million includes any costs
for fuel charges in excess of the budgeted amount.
ACTING COMMISSIONER THAYER answered yes.
3:32:33 PM
REPRESENTATIVE HERRON, referring to the graph on the marine
vessel operations on page 10, asked for a similar graph that
shows the expenses versus revenues for Alaska's highway system.
ACTING COMMISSIONER THAYER indicated the next slide, page 11,
entitled "Per Capita Transportation Cost," might answer the
question. He highlighted the approximate number of primary
users of the highway system is 675,000, the net cost to the
state at $28 million, with a per capita cost of $42. He
reported the rural aviation per capita cost is $166, and the
AMHS per capita cost is $1,100.
3:34:15 PM
REPRESENTATIVE HERRON reiterated his request to obtain a
breakout of the total expenditures, cost, and expenditures of
Alaska's highway system using the graph format as on slide 10.
ACTING COMMISSIONER THAYER answered that the graph was obtained
from a University of Alaska study. Further, the state doesn't
charge the public to use the highway system; however, he offered
to work with the DOT&PF to try to provide the requested graph.
REPRESENTATIVE HERRON indicated that [Acting] Commissioner
Thayer's response illustrates his point, which is to identify
the amount of revenue the highway system generates.
3:34:59 PM
REPRESENTATIVE SADDLER asked whether he could estimate the
number of Alaska residents versus non-resident passengers using
the Alaska Marine Highway System's ferries.
ACTING COMMISSIONER THAYER answered that he was unsure of the
break out of resident and non-resident passengers, but he
offered to obtain the figures from the DOT&PF. In further
response, he answered he couldn't even offer a rough estimate.
3:35:19 PM
REPRESENTATIVE JOSEPHSON asked whether uncompensated travel time
is subject to collective bargaining.
ACTING COMMISSIONER THAYER answered that the issue of travel has
been brought up, but at this point travel is not negotiated as
part of the collective bargaining process.
REPRESENTATIVE JOSEPHSON asked whether he was aware of employees
who are not compensated for their travel time.
ACTING COMMISSIONER THAYER said he has observed state employees
at the airport; however, the state tries to encourage employees
to travel during business hours. He reiterated that it is not
currently part of the contract.
3:37:26 PM
REPRESENTATIVE REINBOLD referred to the graph on page 10 with
the green bar representing personnel services. She pointed out
that the 2014 figures are approximately $90 million of the $150
million of the operational costs for the ferry system. She
asked the commissioner to identify who serves on the contract
negotiating team.
ACTING COMMISSIONER THAYER answered that the Division of
Personnel & Labor Relation's employees are the primary
negotiators. Also, employees within the AMHS, including Deputy
Commissioner Yost, also sit on two of the three bargaining
teams. He explained that having DOT&PF's management involved in
the process is important since complex business rules apply to
the AMHS system.
REPRESENTATIVE REINBOLD asked the department to provide a long-
term 20-year projection for the effects of SB 95 as well as a
list of negotiators.
ACTING COMMISSIONER THAYER asked for clarification and responded
that he could provide a list of the negotiators for all five of
the current contracts being negotiated.
CHAIR OLSON clarified that his office will post additional
information received for each hearing on the legislature's
website.
3:39:41 PM
ACTING COMMISSIONER THAYER explained that negotiations are
confidential in nature; however, he discussed three items
contained in current contracts that are public information
[slide 12]. For example, the cost of living differential (COLD)
was established in 1977 and initially provided for a cost-of-
living differential between Seattle and Anchorage. The COLD
currently ranges from $450 to $650 per pay period for some
employees. He said some studies show it could be argued that a
COLD does not exist so the department would like to address this
issue with bargaining teams. Second, he highlighted that travel
pay, which is pay for time spent traveling outside of work hours
to temporary work assignments, is a provision the maritime
unions have in their contracts, but it is not a provision in
other contracts. Thus, the DOA would like more alignment in
this area. Third, some employees are paid nonwatch pay in lieu
of certain overtime entitlements, in particular, for higher
level of employees. For example, maritime employees are not
eligible for overtime so they receive "watch pay." He
summarized that these three items will be discussed during the
contract negotiations for maritime employees.
3:41:27 PM
REPRESENTATIVE REINBOLD referred to the COLD on page 12. She
returned to SB 95, to a chart within the bill indicating Juneau
employees will receive an additional five percent Cost of Living
Allowance (COLA). She asked for the justification for the COLA
contained in SB 95.
ACTING COMMISSIONER THAYER responded that the COLA was derived
from a 2008 study. He offered to provide the information to the
committee. He said that COLA has been negotiated into most of
the contracts. He pointed out that the study showed that the
COLD between Anchorage and Seattle is zero; however, it
identified Juneau as having a 5 percent geographical
differential, although Fairbanks experienced a reduction from 11
percent to 4 percent geographical differential.
3:42:42 PM
REPRESENTATIVE SADDLER asked whether travel pay is paid at
straight time.
ACTING COMMISSIONER THAYER answered yes.
3:42:57 PM
ACTING COMMISSIONER THAYER, with respect to monetary terms, said
that if the state negotiates a 1 percent raise in FY 15 it will
cost $500,000 in the first year, but cumulatively, when the
raise is compounded over three years it represents $5 million
[slide 13]. He noted that it is easy to consider a proposed 1
percent raise theoretically, but he cautioned that the increases
are in "real dollars," which is something the DOA is concerned
about. He said that COLD costs the state and IBU about $8
million, with an additional $1 for MMP and MEBA for a total of
$10 million. He emphasized that these costs are based on a 1977
study that is in statute. He characterized these issues as some
of the challenges the state faces during contract negotiations.
CHAIR OLSON remarked that conceivably the statutory language
just referenced could be addressed by the legislature.
ACTING COMMISSIONER THAYER agreed. He reported that between the
years 2007-2013, the MMP and MEBA received a 31 percent
increase. Additionally, the MMP and MEBA received a lump sum.
Further, the IBU received similar increases. For comparison,
the PSEA would have received a 33 percent increase, but since
that union also receives merit increases the total increases
would actually have been closer to 50 percent for the prior ten
years. Ironically, he noted that the largest increases for MMP
and MEBA fell during [former Governor] Murkowski's
administration, with increases of "7 percent, 7 percent, and 2
percent." He noted that the MMP, MEBA, and IBU unions do not
receive merit or pay increments, but negotiate the COLA.
3:46:07 PM
REPRESENTATIVE JOSEPHSON remarked that it was interesting to
note the absence of any pay increases in 2011, 2012, and 2013,
when the state was particularly "flush." He asked for an
explanation.
ACTING COMMISSIONER THAYER offered to find out and report back
to the committee.
CHAIR OLSON commented that some other items may be negotiated
besides wages.
ACTING COMMISSIONER THAYER agreed. He highlighted that the
negotiations might also cover leave and operational or shift
differential pay, which are typically provided as "packages."
3:47:27 PM
REPRESENTATIVE JOSEPHSON asked whether the pilots are captains
of large cruise ships.
ACTING COMMISSIONER THAYER answered no; these employees are all
AMHS workers. He said he also chairs the Board of Marine
Pilots, and the marine pilots are often retired captains who
will apply to be a pilot on one of the larger vessels.
CHAIR OLSON commented that the pilots are independent
contractors.
ACTING COMMISSIONER THAYER agreed.
REPRESENTATIVE REINBOLD asked to discuss the statutory merit
increases. She related her understanding that the private
sector links merits to pay increases based on their employees'
performance. She asked whether the state's merit increases are
given automatically or if they are linked to performance.
ACTING COMMISSIONER THAYER explained that if a state employee's
performance is less than satisfactory, the employee will not
receive a merit increase, otherwise, for steps "A-F," the
increase happens automatically without a performance evaluation.
Once a state employee reaches the "F" step, his/her evaluation
must be given or the employee will not receive a raise. He said
the department encourages supervisors to complete evaluations
since otherwise the department must pay the merit increases
retroactively. He offered his belief that the state does not
have a robust evaluation of its employees. Evaluations help
monitor employee performance but the way the system is designed,
an employee doesn't need an evaluation in the first six years
unless performance is unsatisfactory. He said it seems as
though employees should have their strengths and weaknesses
identified, which would be helpful to supervisors, too. He
acknowledged that some departments are better than others in
completing evaluations. In fact, some are fantastic at getting
their evaluations in, but others are not.
3:50:21 PM
REPRESENTATIVE REINBOLD related her understanding that almost
all state employees receive their raises, although a tiny
percentage do not receive any merit increases.
ACTING COMMISSIONER THAYER answered that for the most part she
is correct.
3:50:36 PM
ACTING COMMISSIONER THAYER discussed the top three earners for
the MMP, MEBA, IBU, and PSEA to provide a perspective for the
committee. He reported that the top MMP's master receives
approximately $165,000, the MEBA's chief engineer and first
assistant's salaries range from $161,000-$183,000, and the IBU's
average salary is $51,000, with the highest wages ranging from
$116,000-$138,000, and the top PSEA's Alaska state trooper earns
approximately $202,000. He explained that the top PSEA earners
are typically in rural Alaska and receive geographical
differential pay and sea duty, which is considered premium pay.
He reiterated these are the salaries for personnel for unions
currently under contract negotiations.
3:51:50 PM
REPRESENTATIVE SADDLER asked whether sea duty applied to the
ocean.
ACTING COMMISSIONER THAYER answered that these AST operate a
fish and wildlife protection boat. In response to a question,
he agreed the AST operates in coastal waters and tend to work
more overtime since shift relief is not necessarily available.
3:52:15 PM
ACTING COMMISSIONER THAYER discussed the growing leave liability
[slide 16]. He acknowledged that the leave liability is capped
for most of the unions. He anticipated that FY 14 will show a
reduction and the threshold has likely been reached at
$169,765,136. He stated that this figure represents the total
amount if everyone cashed out their leave banks; however,
capping the leave and increasing the mandatory leave will help
to shift that figure down. He reported that the new leave rules
became effective on December 13 and the new measure will be in
December 2014.
3:53:07 PM
REPRESENTATIVE CHENAULT referred to page 15, to the MEBA section
and for clarification of "other pay."
ACTING COMMISSIONER THAYER answered that it usually represents
cashed-out leave.
REPRESENTATIVE CHENAULT noted several were in the $20,000 range.
3:53:48 PM
REPRESENTATIVE JOSEPHSON asked whether some personnel are
prevented from taking leave due to their work loads, which is
something he experienced as a state prosecutor in Kotzebue. In
fact, he said he could have been sanctioned by the court if he
had taken leave so his leave time piled up. He wondered if that
might explain some of the large leave balances.
ACTING COMMISSIONER THAYER answered that it depends on the job
function. He acknowledged that some employees have the
availability of relief workers. He noted that the state
contracts have a provision to carry leave forward with the
supervisor and commissioner's approval.
3:55:10 PM
ACTING COMMISSIONER THAYER turned to page 17 entitled, "Leave
Liability Example - Top Ten," which identifies the specific
concern. He pointed out the ten employees depicted on the slide
represent $1.6 million in accrued leave. He provided some
details, including that the confidential bargaining unit has the
most accumulated hours, at 4,469 hours, but their salary rates
are $31.80. He reiterated that caps have been negotiated but
some employees, such as correctional officers, are up for
negotiations next year and the department will continue to
strive to negotiate a cap on its future negotiations.
3:56:27 PM
REPRESENTATIVE REINBOLD expressed her concern, noting she has
recently been attending education meetings and some teachers are
being laid off. She offered her belief that the contract
negotiators were possibly negligent in not fixing these
loopholes. She did not believe this could happen in the private
sector and indicated she supports negotiations going "public."
CHAIR OLSON asked whether some of these issues go back to
statehood.
ACTING COMMISSIONER THAYER agreed that leave liabilities are the
"800-pound gorilla in the room when we walk into negotiations."
He also said, "This is what the state negotiated. This is what
bright light brought to the subject." He indicated that when
the department shared the leave liability obligations with union
representatives, they also recognized the problem and the union
negotiated and worked together with the administration to come
up with a solution. In fact, Alaska was the only state that
does not have a cap on leave. He provided a brief history, such
that the state moved from sick/annual leave to personal time;
however, a cap was not negotiated until the department
highlighted the leave liability. He predicted that the leave
balance figures were cut by two-thirds last year. He
characterized last year's negotiations as very well done by the
negotiating team and unions.
REPRESENTATIVE REINBOLD thanked him for identifying the issue
although she wished it had been addressed sooner. She expressed
concern that the state is at risk of failure as has occurred in
other states, such as California. She hoped that negotiations
take into consideration the future so funding for education,
disasters, and the elderly will be available to Alaskans.
ACTING COMMISSIONER THAYER responded that he couldn't agree
more. He reiterated his support for a cap on leave benefits.
He related his understanding that in order for contracts to
receive legislative approval they must include a cap.
4:00:27 PM
REPRESENTATIVE JOSEPHSON agreed [the leave liability issue] is
alarming. He surmised that some people like their work and did
not exercise leave.
ACTING COMMISSIONER THAYER was uncertain of the reasons for the
high leave balances. He acknowledged that as some employees get
close to retirement they save their leave. He also remarked
that the state could have done a better job by counseling its
employees on retirement planning since there are a number of
ways to better accomplish savings.
4:02:40 PM
ACTING COMMISSIONER THAYER discussed the bargaining priorities
and concerns for the marine units, noting that much of it has
been covered. He read from a list of contract priorities, such
as fiscally prudent cost-of-living increases, operational
flexibility, and conflicts of interest on board vessels between
masters and fellow union members. Also, the department will
negotiate limiting pass privileges for dependents and family
members and eliminate cash draws on board vessels. The DOA
strives for voluntary and balanced agreements, and if a strike
occurs, to work to provide essential services to citizens.
Finally, DOA has been working to clarify the limitation on the
right to strike or cross a picket line. He said, "We're not
there yet," but there is plenty of time to negotiate.
4:04:38 PM
ACTING COMMISSIONER THAYER turned to the "Public Safety
Employees Association (PSEA) [slide 19]." He said that the
department's approach has been to mirror last year's contracts,
in terms of being prudent with cost-of-living allowances,
reducing longevity steps, addressing leave liability, creating
operational flexibility, and striving for voluntary, balanced
agreements. He suggested that the department is close to
reaching an agreement with the PSEA, and it will submit monetary
terms of an agreement by mid-March to allow time for the
legislature to decide whether to fund it [slide 20].
ACTING COMMISSIONER THAYER turned to slide 21 entitled,
"Universal Space Standards." He said the primary reason for
implementing universal space standards is to save the state over
$125 million in the next 20 years [slide 22]. He provided some
details, including that the state will save on system furniture
by contracting with the Western States Contracting Alliance
(WSCA). The department believes that the new spaces will
provide improved space for employees with better airflow,
additional natural lighting, as well as achieving reduced costs
by sharing printers and copiers. He emphasized that if it does
not make good fiscal sense, DOA won't do it. The department has
focused on state-owned buildings, and the photographs depict
"before and after" spaces of the accounting department. He said
that by using shared printers, general services will save
$30,000-$40,000 per year on its space that serves 30 people.
4:09:59 PM
CHAIR OLSON asked whether the commissioner could set up tours of
the State Office Building.
ACTING COMMISSIONER THAYER answered yes. He said the DOA also
encourages a clean desk policy, which means that confidential
information should not be left on the desk at the end of the
day. He said that DOA manages 17 buildings totaling 1,623,383
square feet and $70 million in annual lease costs. He indicated
the department believes that the legislature must ultimately
decide whether to cut programs, people, or space costs.
ACTING COMMISSIONER THAYER briefly referred to a list of state
buildings, including the Robert B. Atwood building, the Palmer
State Office building, and the Dimond Courthouse building. Most
of the larger buildings, such as the State Office Building were
initially built with an open concept design as shown [slide 25].
4:12:57 PM
ACTING COMMISSIONER THAYER discussed the recent history of lease
costs, noting that they have risen by $15 million in the past 11
years [slide 26]. He explained that the most expensive private
lease per square foot cost in Anchorage is $3.75, in Juneau it
is $2.86, in Nome it is $3.00, and in Fairbanks it is $2.63. He
compared that to state lease costs to maintain the building per
square foot, noting the State Office Building is $2.06 and the
Atwood building plus the parking garage is $1.89. He pointed
out that one agency, the Department of Natural Resources,
believes that implementing universal space standards will result
in over $1 million in savings once completed, primarily due to
current inefficient use of space.
4:14:08 PM
REPRESENTATIVE REINBOLD referred to slide 23 to the 1.6 million
total square feet of space at an annual cost of $20 million.
She asked the total space when new standards are implemented.
ACTING COMMISSIONER THAYER explained that the department plans
on consolidating some of the current space owned and move in
other agencies that currently have private leases.
REPRESENTATIVE REINBOLD asked if the state will still own it.
ACTING COMMISSIONER THAYER provided an example. He said that
once the standards are applied in the Atwood building, the
department will save 40,000 square feet of space and will be
able to move additional agencies currently under private lease
to the Atwood building. The DOA estimates some of these private
lease costs range from $3.00 to $3.50 per square foot.
Therefore, reducing the cost to $1.89 per square foot represents
the cost savings.
4:15:49 PM
REPRESENTATIVE REINBOLD reiterated her question is to identify
the state's total lease space after the standards are applied.
ACTING COMMISSIONER THAYER answered that the DOA charges the
agencies for the actual square footage used and the costs are
not split equally between divisions. For example, the DNR will
shrink from nine floors to six floors, which will free up three
empty floors in the Atwood building. As private leases expire,
the DOA will be able to relocate the employees to the three
available floors in the Atwood building.
REPRESENTATIVE REINBOLD said it seemed that a lot of malls were
purchased by the government over the years. Additionally, the
state doesn't pay property taxes so that has an impact.
ACTING COMMISSIONER THAYER agreed.
REPRESENTATIVE REINBOLD asked whether he could identify the
total square feet of space the state owns for all its buildings.
ACTING COMMISSIONER THAYER answered no; the DOA owns and
operates 17 office buildings and the DOT&PF maintains
facilities, such as warehouses and public facilities. He
offered to consult with DOT&PF and report back to the committee.
4:18:06 PM
ACTING COMMISSIONER THAYER explained that DOA evaluates existing
space and works with the other departments [slide 27]. For
example, the Department of Corrections consolidated its space on
the 18th floor of the Atwood building and collaborated with the
DOA on the layout, conference rooms, and phone rooms. The DOC
consolidated its offices from three floors to one, which also
achieved additional efficiencies since its staff needed to
interact and can now do so more efficiently. He summarized that
the DOA's analysis includes considering the agency's mission,
public interface, employee needs, parking, and current lease
terms. The DOA will not implement the space standards unless
savings can be achieved.
ACTING COMMISSIONER THAYER said that a significant number of
small appliances, including refrigerators, microwaves, and
toasters, were seen in the Atwood building. Once the space
standards are implemented, employees will have break rooms and
the policy doesn't allow many small appliances in personal
spaces and limits employees to the ones listed [slide 28].
4:21:47 PM
REPRESENTATIVE HERRON asked whether the 3rd floor of the Capitol
building has implemented the appliance restrictions.
ACTING COMMISSIONER THAYER said the office has a break room.
The Fairbank's governor's office has a space-standard credenza
and desk, and has implemented universal space standards.
REPRESENTATIVE HERRON asked whether the legislature should
consider restricting appliances as per slide 28 for its floor.
4:23:02 PM
REPRESENTATIVE JOSEPHSON remarked that he appreciated the work.
He asked whether employees' morale has been affected.
ACTING COMMISSIONER THAYER answered that the department surveys
employees about three months after implementing space standards
and asks for suggestions. For example, in Anchorage, sliding
pocket doors were used in conference rooms, but employees
reported they could hear private conversations so the doors were
replaced. In some instances the acoustical panels in the
existing spaces were old and inefficient so the new standards
reduced the overall noise levels.
4:24:35 PM
REPRESENTATIVE JOSEPHSON recalled efficiencies suggested by
Frederick Law Olmsted in the late 1800s, and he hoped the
measures being taken are not Draconian and will allow for some
personality.
ACTING COMMISSIONER THAYER agreed and provided examples of
personal effects allowed.
4:27:16 PM
ACTING COMMISSIONER THAYER reviewed some changes to the Atwood
building's 4th floor, noting the department gained training and
conference rooms and that the space standards were accomplished
primarily with federal funds [slide 29]. He pointed out "before
and after" photographs that showed improvements [slide 30]. He
remarked that employees like the new break rooms and have made
positive comments.
4:28:14 PM
ACTING COMMISSIONER THAYER discussed space standard changes to
the Atwood's 18th floor for the Department of Corrections,
detailing the "before and after" changes made to workstations,
reductions in the number of private offices, plus eliminating 37
appliances [slide 32-33].
REPRESENTATIVE CHENAULT acknowledged the Atwood building has
great views, especially looking south.
ACTING COMMISSIONER THAYER turned to slide 33 entitled, "Sample-
Juneau SOB 7th Floor," which replaced 30-year-old outdated
systems, furniture, carpet, and paint using agency funds.
Before the change 12 windows were available to 4 staff but now
24 windows are available to 31 staff. He showed photographs
showing significantly improved work space by de-cluttering,
removing partitions, and providing lots of natural light.
4:30:37 PM
ACTING COMMISSIONER THAYER discussed funding, including that
some departmental operating funds are used or the cost can be
amortized within the monthly lease payment [slide 35]. Finally,
departments have realized savings in the overall reduction of
leased space. He pointed out that the new space standards,
including an analysis and report, have all been posted on the
website at www.doa.alaska.gov/dgs [slide 36].
4:31:17 PM
CHAIR OLSON asked for an update on the state's health care
conversion from Blue Cross to Aetna.
ACTING COMMISSIONER THAYER explained that the department
received four bids for the $100 million health care contract,
awarded the bid with zero protests, and converted 84,000 active
and retired employees from Health Smart to Aetna. He lauded
Deputy Commissioner Mike Barnhill and his team as being
instrumental in the conversion. He stated that the state spends
$600 million per year on medical claims for retirees and active
employees not in union trusts. The component in the request for
proposal (RFP) was to reprice medical costs all four vendors.
He said Aetna believes it can reduce claims by $50 million and
stated that previously the DOA focused on the third party
administrator rather than the total claims. The state and Aetna
have focused on the network and subsequent savings.
CHAIR OLSON expressed concern that in the smaller communities
the doctors, internists, and dentists that have signed up to be
in the network are limited. He wondered how the federal health
care plays into the limited providers in the network.
4:34:39 PM
MIKE BARNHILL, Deputy Commissioner, Office of the Commissioner,
Department of Administration, stated that network issues for
health insurance plans have been problematic for decades. He
explained that Alaska has a small market with little competition
between providers so many providers don't see the benefit in
joining a network and negotiating a discount for fees and
abiding by the standards that the third-party administrator or
network provider impose. He hoped that providers will recognize
the benefits through Aetna. Thus far, he has been impressed
with Aetna's efforts to reach out to providers across the state
to create "win-win" situations. Last fall in Juneau there
weren't any major providers, and now three primary care
practices are in the network, including pediatrics and Bartlett
Regional Hospital, noting that BRH has never fully been in the
network. He said that at this point no one is being penalized,
and active employees or retirees may use providers out of
network for care, but it is common in the Lower 48 to be subject
to network differential. For example, the insurance company
would reimburse 60 percent of an allowed cost as opposed to 80
percent or 90 percent for network providers. He concluded that
this practice drives people into the network for care; however,
the state doesn't have network differential since the network is
not fully robust across Alaska.
4:37:04 PM
MR. BARNHILL indicated that if constituents have concerns about
the health care coverage to pass them on since Aetna has been
very responsive. He acknowledged that people take their health
care coverage very seriously and any changes are viewed as a
potential hardship. He assured members that this is not the
department's intention and the DOA will consider all concerns.
4:37:44 PM
REPRESENTATIVE REINBOLD recognized the transition in the federal
health care changes and asked how the [Patient Protection and
Affordable Care Act (PPACA)] has affected Alaska's residents and
businesses. She offered her belief that 3 million people in the
Lower 48 and 3,000 Alaskans have signed up so far.
MR. BARNHILL answered that Alaska's retiree plan is not directly
subject to the PPACA and although the active plan is somewhat,
it is a grandfathered plan so the state can maintain current
plan design so long as certain changes are not made to the cost
structure. He said that it is hard to overstate the impact the
PPACA has had in the medical marketplace throughout the U.S. He
explained that Alaska's plans have been affected even though the
plans are not directly subject to the PPACA. First, the PPCA
has impacted expectations for coverage, in particular, for
dependents up to 26. While the retiree plan is not legally
subject to that provision, many members would like coverage to
be expanded. Thus, the DOA has engaged in discussions with
retirees on whether to do so and the state may make some
changes. He cautioned that any time additional coverage happens
it results in cost more money. Additionally, some restrictions
occur if the state loses its grandfathered status. Finally, the
state is subject to some of the PPACA's taxing provisions so the
state contributes a $2 fee per person to the Patient-Centered
Outcomes Research Institute (PCORI), as well as a reinsurance
fee at $63 per head for the first year, which is reduced to $25
per person in the third year. He summarized that these are
additional financial burdens placed on the state's plans that
the DOA seeks funding from the legislature to cover.
4:40:57 PM
REPRESENTATIVE REINBOLD asked for the projected costs if the
state adds coverage for dependents ages 26 and under.
MR. BARNHILL answered that the state made the change in the
active plan, but has not done so in the retiree's plan. He
offered to share the actuarial letter, noting that initially the
projections were higher than the actuals. He emphasized that
the state is reluctant to add any costs to the retiree health
care plan since it is underfunded. One aspect under discussion
is that enhanced benefits for dependents up to age 26,
preventive care, or shingles vaccines, raises the issue of how
to cover the additional costs. For example, the state could
raise deductibles, increase out of pocket maximums, or decrease
other coverage. He said it is an important discussion.
4:42:34 PM
REPRESENTATIVE REINBOLD asked how many retirees live out of
state and for clarification on the $2 per head cost.
MR. BARNHILL answered that 42,000 retirees are in the Public
Employees' Retirement System (PERS) and Teachers' Retirement
System (TRS), and 40 percent live out-of-state; however, based
on where medical care is provided that it could be as high as 50
percent. He explained that retirees living in Alaska receive a
Cost of Living Allowance (COLA). He explained that the PCORI is
an entity created by the PPACA as a federal research entity
designed to research patient-centered outcomes.
4:43:45 PM
REPRESENTATIVE REINBOLD asked whether the department is asking
the state to cover the federal program.
MR. BARNHILL answered that the state must comply with the law.
REPRESENTATIVE REINBOLD related her understanding that the state
will pay for this. She asked who will be making the decision
and when will it be made.
CHAIR OLSON said that DOA is responding to a federal mandate.
MR. BARNHILL answered that the federal mandate requires the tax
be paid.
CHAIR OLSON remarked that the state doesn't have a choice.
REPRESENTATIVE JOSEPHSON asked whether he could receive a copy
of the recent actuarial letter mentioned earlier.
MR. BARNHILL offered to provide a copy to committee members.
4:45:17 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:45 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DOA-DeptOverview 02-05-14.pdf |
HL&C 2/5/2014 3:15:00 PM |
Dept. of Administration Presentation To HL&C 2-5-2014 |