Legislature(1999 - 2000)
04/06/2000 08:09 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 6, 2000
8:09 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Joe Green
Representative Jim Whitaker
Representative Bill Hudson
Representative Beth Kerttula
Representative Hal Smalley
Representative Scott Ogan
MEMBERS ABSENT
All members present
OTHER HOUSE MEMBERS PRESENT
Representative Jerry Sanders
COMMITTEE CALENDAR
CONFIRMATION HEARING:
Alaska Commission for Human Rights
Lisa Fitzpatrick - Anchorage
- CONFIRMATION ADVANCED
HOUSE BILL NO. 438
"An Act permitting certain emergency medical personnel in police
or fire departments or employed by the state troopers to convert
their credited service under the public employees' retirement
system to credited service as peace officers; and providing for
an effective date."
- MOVED CSHB 438(STA) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 247(FIN)
"An Act relating to eligibility of certain veterans for longevity
bonus payments; and providing for an effective date."
- MOVED CSSB 247(FIN) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 49
Proposing an amendment to the Constitution of the State of Alaska
to guarantee the permanent fund dividend, to provide for
inflation proofing, and to require a vote of the people before
changing the statutory formula for distribution that existed on
January 1, 2000.
- MOVED CSHJR 49(STA) OUT OF COMMITTEE
HOUSE BILL NO. 439
"An Act relating to the compensation of certain public employees
and officials not covered by collective bargaining agreements;
and providing for an effective date."
- MOVED CSHB 439(STA) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 438
SHORT TITLE: PERS BENEFITS FOR EMERGENCY MEDICAL TECHS
Jrn-Date Jrn-Page Action
3/24/00 2686 (H) READ THE FIRST TIME - REFERRALS
3/24/00 2686 (H) STA, FIN
4/04/00 (H) STA AT 8:00 AM CAPITOL 102
4/04/00 (H) Heard & Held
4/04/00 (H) MINUTE(STA)
4/06/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: SB 247
SHORT TITLE: VETERANS' ELIGIBILITY FOR LONGEVITY BONUS
Jrn-Date Jrn-Page Action
2/04/00 2196 (S) READ THE FIRST TIME - REFERRALS
2/04/00 2196 (S) STA, FIN
3/02/00 (S) STA AT 3:30 PM BELTZ 211
3/02/00 (S) Heard & Held
3/02/00 (S) MINUTE(STA)
3/16/00 (S) STA AT 3:30 PM BELTZ 211
3/16/00 (S) Moved CS(STA) Out of Committee
3/16/00 (S) MINUTE(STA)
3/20/00 2659 (S) STA RPT CS 2DP 1NR NEW TITLE
3/20/00 2659 (S) DP: WARD, WILKEN; NR: ELTON
3/20/00 2659 (S) FISCAL NOTE (ADM)
3/28/00 (S) FIN AT 9:00 AM SENATE FINANCE 532
3/28/00 (S) Moved CS(Fin) Out of Committee
3/28/00 2757 (S) FIN RPT CS 5DP 2NR 1AM NEW TITLE
3/28/00 2757 (S) DP: TORGERSON, PARNELL, ADAMS,
WILKEN,
3/28/00 2757 (S) LEMAN, NR: PHILLIPS, PETE KELLY;
3/28/00 2757 (S) AM: GREEN
3/28/00 2757 (S) PREVIOUS FISCAL NOTE (ADM)
3/29/00 (S) RLS AT 11:30 AM FAHRENKAMP 203
3/29/00 (S) MINUTE(RLS)
3/29/00 2776 (S) RLS TO CALENDAR 03/29/00
3/29/00 2777 (S) READ THE SECOND TIME
3/29/00 2777 (S) FIN CS ADOPTED UNAN CONSENT
3/29/00 2778 (S) ADVANCED TO THIRD READING UNAN
CONSENT
3/29/00 2778 (S) READ THE THIRD TIME CSSB 247(FIN)
3/29/00 2778 (S) COSPONSOR(S): MACKIE, ELLIS, DONLEY
3/29/00 2778 (S) PASSED Y20 N-
3/29/00 2778 (S) EFFECTIVE DATE(S) SAME AS PASSAGE
3/29/00 2782 (S) TRANSMITTED TO (H)
3/30/00 2778 (H) READ THE FIRST TIME - REFERRALS
3/30/00 2779 (H) STA, FIN
3/30/00 2797 (H) CROSS SPONSOR(S): KERTTULA
4/04/00 2862 (H) CROSS SPONSOR(S): MULDER
4/06/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 49
SHORT TITLE: CONST AM: PERM FUND INCOME DISTRIBUTION
Jrn-Date Jrn-Page Action
1/31/00 2044 (H) READ THE FIRST TIME - REFERRALS
1/31/00 2044 (H) STA, JUD, FIN
2/02/00 2075 (H) COSPONSOR(S): DYSON
2/11/00 2188 (H) COSPONSOR(S): MASEK
2/21/00 2259 (H) COSPONSOR(S): KOTT
4/04/00 (H) STA AT 8:00 AM CAPITOL 102
4/04/00 (H) Scheduled But Not Heard
4/06/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 439
SHORT TITLE: PAY RAISE FOR NON-UNION STATE EMPLOYEES
Jrn-Date Jrn-Page Action
3/28/00 2728 (H) READ THE FIRST TIME - REFERRALS
3/28/00 2728 (H) STA, FIN
3/28/00 2728 (H) FISCAL NOTE (GOV/ALL DEPTS)
3/28/00 2728 (H) GOVERNOR'S TRANSMITTAL LETTER
4/06/00 Text (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
LISA FITZPATRICK, Appointee
to the Alaska Commission for Human Rights
2822 Iliamna Avenue
Anchorage, Alaska 99517
POSITION STATEMENT: Testified as appointee to the Alaska
Commission for Human Rights.
BILL CHURCH, Retirement Supervisor
Division of Retirement & Benefits
Department of Administration
PO Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: Answered questions regarding HB 438.
MARIE MARKS, Legislative Secretary
to Senator Loren Leman
Alaska State Legislature
Capitol Building, Room 115
Juneau, Alaska 99801
POSITION STATEMENT: Presented sponsor statement for SB 247.
NANCY WELLER, Division of Medical Assistance
Department of Health & Social Services
PO Box 110660
Juneau, Alaska 99811-0660
POSITION STATEMENT: Answered questions regarding SB 247.
LADDIE SHAW, Coordinator
Veterans' Affairs
Department of Military and Veterans' Affairs
PO Box 5800
Fort Richardson, Alaska 99505-0800
POSITION STATEMENT: Testified in support of SB 247.
MARY GRISWOLD
PO Box 1417
Homer, Alaska 99603
POSITION STATEMENT: Testified in opposition to HJR 49.
MARY RAYMOND
Homer, Alaska 99603
POSITION STATEMENT: Testified in opposition to HJR 49.
ALISON ELGEE, Deputy Commissioner
Department of Administration
PO Box 110200
Juneau, Alaska 99811-0200
POSITION STATEMENT: Presented HB 439.
JEFF JESSEE, Executive Director
Alaska Mental Health Trust Authority
3601 C Street, Suite 742
Anchorage, Alaska 99503
POSITION STATEMENT: Commented on HB 439.
DON ETHERIDGE
AFL-CIO
710 W 9th Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 439.
CHRIS CHRISTENSEN, General Counsel
to the Judicial Branch of Government
Alaska Court System
820 West 4th Avenue
Anchorage, Alaska 99501-2005
POSITION STATEMENT: Commented on HB 439.
ACTION NARRATIVE
TAPE 00-29, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:09 a.m. Members present at the
call to order were Representatives James, Whitaker, Smalley and
Ogan. Representatives Green, Hudson and Kerttula arrived as the
meeting was in progress.
Number 0033
CONFIRMATION HEARING
Alaska Commission for Human Rights
CHAIR JAMES announced that the committee would consider one
nominee for the Alaska Commission for Human Rights. Committee
members would not vote for the nominee but would pass the
nominee's name out of committee for consideration of the full
House and Senate.
Number 0087
LISA FITZPATRICK, Appointee to the Alaska Commission for Human
Rights, came forward to testify. She said she felt that everyone
had a duty to fulfill some sort of public service, which she
feels is within her capabilities. As a lawyer, she believes she
is certainly capable of understanding the statutory scheme.
Furthermore, she has been a hearing officer and is familiar with
the administrative process. It is a good time in her life to
take on this kind of commitment because she is not on a full-time
job right now and has young children. She can commit to this
undertaking, she is comfortable with it, she is interested in the
substantive law, and she thinks it would be a fine thing to do.
CHAIR JAMES mentioned that she is happy that there are people
like Ms. Fitzpatrick who are willing to do this kind of job. She
said she knows that sometimes it can be quite emotional.
Number 0210
REPRESENTATIVE OGAN inquired as to Ms. Fitzpatrick's attitude
about affirmative action.
MS. FITZPATRICK replied that she thinks the law about affirmative
action has become quite confusing. She indicated that she is not
really up to speed on the state of the law. She recognized that
it is a great concept; beyond that, she thinks it has taken so
many twists and turns in its evolutionary process that it is hard
to comment on it at this point.
REPRESENTATIVE OGAN asked Ms. Fitzpatrick if she thinks that
someone should be hired based on his or her qualifications and
experience or other criteria.
MS. FITZPATRICK said she does not have an opinion, other than to
say that whatever the state of the current law is with respect to
affirmative action, the law should be followed.
Number 0348
REPRESENTATIVE KERTTULA moved to forward the confirmation of Ms.
Fitzpatrick to the full body. There being no objection, the
confirmation of Ms. Fitzpatrick was advanced.
HB 438-PERS BENEFITS FOR EMERGENCY MEDICAL TECHS
CHAIR JAMES announced the next order of business would be HOUSE
BILL NO. 438, "An Act permitting certain emergency medical
personnel in police or fire departments or employed by the state
troopers to convert their credited service under the public
employees' retirement system to credited service as peace
officers; and providing for an effective date." [A proposed
committee substitute (CS), version 1-LS1574\G, Cramer, 4/5/00,
was in committee packets.]
Number 0417
CHAIR JAMES called for an at-ease at 8:14 a.m. and called the
meeting back to order at 8:15 a.m.
Number 0496
BILL CHURCH, Retirement Supervisor, Division of Retirement &
Benefits, Department of Administration, said he has worked with
Mr. Harman from Representative Kott's office and Ms. Cotting from
Representative James' office regarding the proposed CS. He noted
that based on the comments of testimony on Tuesday (4/4/00),
there was some concern that there would be groups of people that
should be covered under the proposed CS, and that the intent was
to cover them; however, because of the organization's makeup and
title designation, they would not be covered. For example, in
the Matanuska-Susitna (Mat-Su) Borough, they are considered a
public safety organization and yet have no police activities
under their organization. Therefore, what was done was to change
the title by removing from the proposed CS "employed by the state
troopers".
MR. CHURCH commented that also the original line 8 talks about "a
state emergency medical service (EMS) officer or an emergency
medical technician (EMT) in a state trooper office or in a police
or fire department"; removal of that makes the proposed CS broad
enough to cover these other potential agencies, but it keeps the
proposed CS focused on these specific job qualifications of only
the EMS and EMT. He indicated the key was to make sure that the
proposed CS only applied to that group, which certainly addresses
the concerns of Representative Ogan.
Number 0691
CHAIR JAMES asked if the [EMS and EMT groups] are included
wherever they work.
REPRESENTATIVE HUDSON made a motion to adopt the proposed CS for
HB 438, version 1-LS1574\G, Cramer, 4/5/00, as a work draft.
There being no objection, Version G was before the committee.
REPRESENTATIVE OGAN said he is concerned that a trend has been
started. He explained that he could think of a lot of different
groups that have high stress that do not usually retain 30 years
of service. He commented that probably all state employees could
be allowed to retire after 20 years if they want to pick up the
cost. He is not entirely satisfied that there is not going to be
a long-term cost that is not reflected in the fiscal note. He
mentioned that as these additional people get into the retirement
system at a young age, especially if someone goes to work as an
EMT right out of high school or shortly after some technical
training, they can retire at 38 years old and start drawing on
the PERS. He indicated that life expectancy is high, so these
young people could live a long time. Therefore, he would like to
hear a discussion on how longevity affects the PERS over the long
run.
Number 0860
CHAIR JAMES stated that the retirement system is considered to be
appropriate based on certain guidelines as to how many retirees
there are and what the life span is. Originally, she also had a
problem with a 20-year retirement as opposed to a 30-year
retirement. However, she observed, retirement then was not the
same as retirement now: today, retirement is not retirement.
Therefore, she remarked, if Representative Ogan is talking about
people going to work in their 20s and retiring in their 50s, that
is not necessarily the case. She indicated her belief that the
retirement income that young people would be receiving on the 20-
year plan is not going to keep them for the rest of their lives
because it is too small.
REPRESENTATIVE JAMES said the amount is not known. Looking at
her own life, she has had four careers. She envisions that the
future will generate a different lifestyle. People are going to
be living and working longer. She said "retirement" is not a
good term for the proposed CS; rather, "a savings account" would
be better. She noted that she is comfortable with the proposed
CS. As soon as the committee started talking about people who
had stress on their jobs and wanted to get out in 20 years
instead of 30 years, then everybody came forward with all the
stresses that they had on their jobs. She explained that living
is a stress these days, and she does not know anybody that does
not have stress on the job. She said learning to live with
stress is better. She thinks the committee has to be flexible.
If there is no direct cost to the state, she thinks that it is
the same idea as putting money into an individual retirement
account (IRA). She reiterated that the proposed CS is an option,
not mandatory.
Number 1103
REPRESENTATIVE OGAN asked what the effect is of the proposed CS.
He said surely when people retire ten years earlier, they are
going to be drawing on that retirement system, because a person
does not just get the money that he or she paid into the
retirement system. He reminded the committee that other people
in investments and everything else help to support that payout.
He asked Mr. Church to address the [20-year payout impact].
MR. CHURCH replied that the retirement system is based on the
actuarial principle that a benefit is funded each year. In other
words, each year that he is an employee of the state, money is
being set aside to pay his benefits down the road when he
retires. The retirement system is based on pre-funding
retirement benefits, as opposed to the Social Security model that
pays as it goes. The funding process has three components:
employee contributions, employer contributions, and investment
earnings on that money. Each year, an actuarial firm reviews the
money that comes in to determine if enough money was earned and
contributed to fund that year of service. He mentioned that
[because of the actuarial review], various employers notice that
employer rates go up and down year by year. He indicated that
his division is always reviewing the actual five-year history of
the fund, and so it is updating actuarial assumptions based on
real experience. He informed the committee that actuarial
projections are also adjusted by mortality. He said
Representative Ogan is correct that mortality is increasing. The
division is taking that into consideration as it predicts the
cost of benefits.
Number 1282
MR. CHURCH agreed that HB 438 is very expensive because a person
belonging to a 30-year retirement program may choose to go to a
20-year program. He emphasized that a 20-year program is
inherently more expensive to fund. He remarked that his division
does a calculation when an employee requests a 20-year retirement
of what the difference will be from the 30-year to the 20-year
retirement. He reminded the committee that the person who
chooses a "20 and out" retirement is going to have to pay the
difference in those costs; the person can either pay the cost up
front or he/she can take a lifetime reduction to pay for the
difference. He added that depending on the person's age and what
tier he/she is, these costs may also include the present value of
health insurance that the system is required to pay. He observed
that the division does try to take in the true value of these
costs. He stated that the division has also built in an anti-
selection factor on the theory that only those who are advantaged
will take advantage of the benefit. He reiterated that actuarial
science calls this factor anti-selection. He said that the
division tries to take in all of these known and unknown factors
into the process.
REPRESENTATIVE OGAN asked if it costs more to others who are
contributing to PERS when people opt out early.
MR. CHURCH replied that there is no additional cost to either
employees or employers for affording an individual this type of
an option.
Number 1365
REPRESENTATIVE OGAN asked if it costs more to the PERS because
these people are going to be drawing upon the PERS ten years
longer. Therefore, he asked if Mr. Church was saying that all of
the costs of drawing ten years longer are borne by the employer
and the employee.
Number 1391
MR. CHURCH answered that the costs are borne by the employee
taking advantage of a "20 and out" program. He said that the
division had done a workup on "20 and out" through its actuary,
and it was found that a Tier I employee who has worked 20 years
in employment addressed by one of these "20 and out" bills will
pay a total of $282,000 to fund their 20-year benefits. He noted
that non-peace officer "20 and out" retirement liability is
$107,700 so the employee would have to pay the difference of what
has been funded versus the money necessary to fund the 20-year
peace officer benefit. He reiterated that the employee either
has to pay the difference up front or take a lifetime reduction
and explained that his example was based on someone who had an
average salary of $50,000 because each one of these calculations
is individual specific based on their age, service accruals, and
salary.
REPRESENTATIVE HUDSON asked if the actuarial value of the PERS
program was about 108 percent at the present time.
Number 1491
MR. CHURCH replied that on the next report to come out the
actuarial value will be a little higher.
REPRESENTATIVE HUDSON pointed out for the benefit of
Representative Ogan that investment earnings on monies that have
been collected from employees and employers are now greater than
what it would take to literally pay off every single employee in
the state of Alaska. He mentioned that this is very unusual
because, typically, most actuarially-based retirement funds rest
at about 80 percent across the nation. He indicated that here in
Alaska investment earnings have done quite well, and in fact,
there is extra money in the program to actually expand benefits
or for other purposes.
REPRESENTATIVE HUDSON informed the committee that the money in
PERS belongs to the employees; that is important because when
speaking about cost, there are no costs to HB 438. He remarked
that he differs from Chair James because he would not want to see
the entire state program rolled over to a "20 and out." He added
that he thinks there are some big disadvantages to having every
state employee be able to literally opt out at 20 years. He
recognized that in the particular case of HB 438, where employees
have working conditions and stress relationships similar to peace
officers, he thinks that it is probably a reasonable thing to
consider; that is the reason he is supporting HB 438.
Number 1612
CHAIR JAMES said career employees are needed, but she does not
know that just because they can retire at 20 years does not mean
that they will. She explained that she thinks that if some
people have the [20-year] option then everybody should have the
option. She agreed that there is a benefit for long-term
employees. She noted that since the retirement system actuarial
account is over 100 percent she thinks that employer and employee
charges should be equally reduced.
MR. CHURCH commented that at the last [PERS] board meeting
employer rates were adjusted down because of the very favorable
funding ratio that the division is experiencing now. Therefore,
employers (including the state) are receiving a benefit similar
to the one that was given a number of years ago.
REPRESENTATIVE GREEN asked if the division had considered what
would happen when someone wants to share his or her retirement
with a spouse.
Number 1784
MR. CHURCH replied that the division actually starts from one
point when figuring all of its benefit structures. He stated
that the one point is a normal retirement benefit calculation and
noted that every other benefit or option available under the
retirement system is the actuarial equivalent of the normal
benefit. Therefore, he reiterated, when the division does its
calculations, it just uses the normal retirement benefit because
it would make no difference whether retirement benefit was
calculated on a normal benefit, an early benefit, or one of the
survivor options. He said that all calculations go back to the
actuarial equivalent of the normal benefit.
REPRESENTATIVE HUDSON noted that the member who is retiring must
pay for a widow's benefit if the member chooses that option.
Number 1850
MR. CHURCH explained that even if a member chooses a survivor
option, there is no need to change the calculation because every
calculation is figured from the normal benefit base calculation.
REPRESENTATIVE GREEN asked if the survivor option needed to be
considered in the shorter retirement plan.
MR. CHURCH replied no.
REPRESENTATIVE HUDSON made a motion to move CSHB 438, version 1-
LS1574\G, Cramer, 4/5/00, out of committee with the attached zero
fiscal note and individual recommendations; he asked for
unanimous consent. There being no objection, CSHB 438(STA) moved
from the House State Affairs Standing Committee.
SB 247-VETERANS'ELIGIBILITY FOR LONGEVITY BONUS
Number 1928
CHAIR JAMES announced the next order of business is CS FOR SENATE
BILL NO. 247(FIN), "An Act relating to eligibility of certain
veterans for longevity bonus payments; and providing for an
effective date."
MARIE MARKS, Legislative Secretary to Senator Loren Leman, Alaska
State Legislature, presented the sponsor statement for SB 247.
She said that during the interim, Senator Leman was contacted by
several constituents regarding veterans entering nursing homes
and subsequently losing their longevity bonus checks because
their stay in the nursing home was to be paid for by veterans'
benefits. She explained that the crux of the problem is the
Division of Longevity Bonus' interpretation of the definition of
"private" versus "funding." She noted that under current law an
individual who enters a nursing home and pays for his/her care
does not lose his/her longevity bonus check. She commented that
veterans' benefits were included in the interpretation of a non-
private source since anything that is not paid for directly by
the individual is considered a non-private source.
MS. MARKS mentioned that SB 247 restores the eligibility to
receive longevity bonus payments of certain veterans who are
being cared for in nursing homes. She indicated that veterans'
benefits are federal benefits earned by those who have served our
country in the armed forces. It is not fair to include veterans'
benefits in the same category as needs-based state benefits such
as Medicaid, the receipt of which disqualifies a nursing home
patient from receiving longevity bonus payments. She emphasized
that SB 247 is not retroactive. She remarked that persons who
had been disqualified solely because they are paying for nursing
care with veterans' benefits may re-apply beginning July 1, 2000;
then they would receive their longevity bonus check from the time
of qualification until such time as they are disqualified for
other reasons. She added that between Legislative Audit and the
Department of Administration, it is estimated that about six
veterans will be affected by SB 247. She acknowledged that there
is a fiscal note of $12,000 attached to SB 247 as the
department's best guess of how much this change to the program
would cost, but it could be less.
Number 2060
REPRESENTATIVE HUDSON asked if there was a correlation between
this proposal and the Alaska Longevity Bonus (ALB) "hold
harmless" proposal.
NANCY WELLER, Division of Medical Assistance, Department of
Health & Social Services, replied that the ALB "hold harmless" is
paid through the Medicaid program when a person becomes
ineligible due to too high of an income; veterans' benefits
actually has nothing to do with the ALB "hold harmless."
MS. MARKS said that as soon as a veteran receives even one penny
of other benefits, Medicaid or Medicare, the veteran is no longer
eligible for longevity bonus.
Number 2129
REPRESENTATIVE OGAN asked Ms. Marks to explain Title 47, Section
2.
MS. WELLER replied that Section 2 applies to people who were
bounced off the longevity bonus program because they received
veterans' benefits and would now be able to reapply and get back
into the program. Section 2 states that a person who was
receiving veterans' benefits, then entered a nursing home and
subsequently was disqualified from receiving a longevity bonus,
which the person had previously been receiving, can reapply for
the longevity bonus. She said that longevity bonus program
benefits are $250 and have been pared down to $100 so with SB 247
the division is just trying to reinstate what the veteran had
before he/she had been denied the longevity bonus. She noted
that in Section (b) a person who applies will be eligible for the
amount that the person would have received had he/she qualified
when he/she first applied for longevity bonus. She explained
that all longevity bonus applications are filed and kept with the
division. She commented that if a veteran living in a nursing
home had never received a longevity bonus he/she can apply now
and will receive the amount that he/she would have originally
received had the application been filed.
LADDIE SHAW, Coordinator, Veterans' Affairs, Department of
Military and Veterans' Affairs, testified via teleconference from
Anchorage in support of SB 247.
Number 2330
CHAIR JAMES stated that SB 247 is straightforward and she
apologized for leaving these veterans out of the loop. She said
she hoped that the damages had not been too severe.
Number 2344
REPRESENTATIVE WHITAKER made a motion to move CSSB 247(FIN) out
of committee with the attached fiscal note and individual
recommendations. There being no objection, CSSB 247(FIN) moved
from the House State Affairs Standing Committee.
HJR 49-CONST AM: PERM FUND INCOME DISTRIBUTION
Number 2419
CHAIR JAMES announced the next order business is HOUSE JOINT
RESOLUTION NO. 49, Proposing an amendment to the Constitution of
the State of Alaska to guarantee the permanent fund dividend, to
provide for inflation proofing, and to require a vote of the
people before changing the statutory formula for distribution
that existed on January 1, 2000.
REPRESENTATIVE OGAN presented the sponsor statement for HJR 49.
He had a sponsor substitute [1-LS1340\H, Cook, 4/3/00] that he
would like to put on the table for discussion, but right now he
would discuss HJR 49 itself. He explained that HJR 49 was
introduced after the September 14, 1999, advisory vote regarding
spending the permanent fund (PF) earnings and the plan that a
bipartisan group of legislators had put forth last year, which he
said was endorsed by Republicans, Democrats and the governor. He
commented that in all his 25 years of living in the state, he
does not recall any vote that was as overwhelmingly negative as
the September 14 vote. He acknowledged that there has been a
great deal of discussion about what "no" means since then, and a
number of plans have been brought forward.
REPRESENTATIVE OGAN remarked that he had come to the conclusion
that the earnings of the PF were intended at some point to be a
rainy-day account for the state. However, it is a policy call
whether or not the rainy day has arrived or clouds are just
gathering in the sky. He recognized that regardless of how the
committee feels about that particular issue, he believes that the
public will have neither confidence in the legislature nor trust
that the permanent fund dividend (PFD) program is safe until the
legislature constitutionally protects the PFD. Therefore, he
stated that HJR 49 enshrines the existing formula for
distributing and inflation proofing the PF into the Alaska State
Constitution.
REPRESENTATIVE OGAN said that the opponents of HJR 49 - and the
concept of HJR 49 - believe that there is a stake driven into the
heart of this issue by saying that implementation of HJR 49 will
result in federal taxation of the PF itself. He suggested that
if the PF is not taxable now, it would not be taxable then, so he
had come up with a possible solution [to the federal PF taxation
threat]. He said that is why he would like to possibly move a
proposed CS to HJR 49 at this time and put that before the
committee. He explained that his proposed sponsor substitute
does exactly the same thing as the original HJR 49 except that
Section 3 adds the "Effective Date of Permanent Fund Amendment."
Number 2561
CHAIR JAMES suggested that the sponsor substitute could be
offered instead as an amendment.
REPRESENTATIVE OGAN replied that he would like to offer it as an
amendment to HJR 49.
CHAIR JAMES said the committee could do that, but first she would
like to discuss the issue. She noted that she will take
testimony on the original HJR 49. She explained that she thinks
it is worthwhile to talk about all the different long-term plan
changes, but believes the legislature ought not to pass anything
this year. She commented that on the surface, she would agree
with Representative Ogan's concern that the public at this point
is demanding - or would demand if it were asked to vote again -
some protection for the dividend over the long term before the
legislature spends one cent out of the PF. However, she also
believes that the legislature has a huge education process that
needs to be done, and the legislature is saved by the bell in the
form of high-priced oil this year which is going to extend the
value of the constitutional budget reserve (CBR) for a few years.
Therefore, she indicated that the legislature has time to discuss
the PF issue with the public, and she has been doing that in her
district.
CHAIR JAMES informed the committee that the day after the
September 14 vote she had done a little survey to find out what
the "no" vote meant and published it in the Fairbanks paper. She
emphasized that the results of the survey were very, very
enlightening, and she had found that the top reason why people
voted "no" was because they do not trust the legislature. She
agrees with the people and does not trust the legislature either.
Yet she does believe that every legislator is sincere and honest
in their ability and desire to do the right thing, but when 40
different districts are being represented, 40 different ideas
will be presented. She recognized that to get anything done, the
legislators representing the 40 different districts have to come
to an agreement.
Number 2660
CHAIR JAMES said whatever [fiscal] plan she supports must include
a healthy, long-term PFD for the public because she thinks a PFD
is needed to protect the fund itself. She never has any
intention of spending one cent of the fund. However, she is
hearing people talk out of both sides of their mouths since they
say they want more spending done on one hand, and on the other
hand, they do not want the legislature to spend PF earnings. She
has said consistently that to balance the budget over the long
term (and she does not know what long term means, it may be five
or six years from now) and provide services that the public
demands without continuing to make efficiencies in government,
there will have to be some combination of taxes and use of
earnings (not any particular amount) of the PF. She said that
the legislature should not foolishly jump to a quick conclusion
this year in reaction to such a convoluted vote because the
question was too vague and advertising on both sides was so
misleading in many ways.
Number 2808
CHAIR JAMES commented that she understood the purpose behind HJR
49 and certainly agrees that the amendment under discussion does
something to close the door on the opportunity for the Internal
Revenue Service (IRS) to determine that the PF is not currently
being used for a public purpose. She noted that HJR 49 does
allow some room in the Alaska State Constitution for a public
purpose, nevertheless, it is still very vague. She is not sure
it would work, but it is moving in the right direction.
Number 2845
REPRESENTATIVE HUDSON asked if he could speak about
Representative Ogan's amendment or if it could be brought before
the committee for discussion purposes.
REPRESENTATIVE OGAN offered Amendment 1, which would change
Section 3 and add Section 4 of what he has written as a sponsor
substitute to HJR 49. The change read as follows:
Sec. 3. Article XV, Constitution of the State of
Alaska, is amended by adding a new section to read:
Section 30. Effective Date of Permanent Fund
Amendment. The 2000 amendment to the Alaska permanent
fund (art. IX, sec. 15) takes effect on the day after
the date of a final decision by the Internal Revenue
Service deciding that, under the language of the 2000
amendment, the income of the permanent fund will not be
subject to federal taxation while it is under the
control of the State or an entity of the State. In
this section, "final decision" means a ruling, order,
or decision that cannot be appealed to the agency, all
possible appeals to the agency have been taken, or the
time for taking an appeal to the agency has expired
without appeal.
Number 2897
REPRESENTATIVE HUDSON objected. He said he reads the amended
version in such a way that everything that exists in statute
today would be embodied constitutionally when adopted by the
public. He noted that essentially the formula that predicates
the PFD is the earnings of the PF or half of the earnings reserve
account (ERA) minus unrealized gains in the PF (whichever is
less). He explained that the problem some of the legislators had
with the existing language is now embodied in the constitution,
and the concern he has is that if the legislature embodies HJR 49
in the constitution, the legislature is asking the people to vote
on elimination of the PFD. He commented that this is so because
income in the ERA is accessible by 21 votes even now and would
continue to be available, but the dividend would be gone by the
year 2007 at the earliest and by 2010 at the latest.
REPRESENTATIVE HUDSON mentioned that he has tried to recognize
all along that the current PFD formula deals with inflation
proofing and distribution of income for the dividend but does not
discuss the balance of the PF. Nevertheless, he indicated that
the balance of the PF is left available. He informed the
committee that by passing HJR 49 the legislature would be
constitutionally leaving those monies available, and he thinks
that it would almost guarantee elimination of the PFD all with
the understanding that maybe the legislature was fixing the PF by
putting it in the Alaska State Constitution. He emphasized that
unless the PF formula is changed and something is done similar to
what he was talking about in HB 411, he thinks the PFD will be
eliminated by the HJR 49 constitutional fix.
TAPE 00-29, SIDE B
Number 2984
CHAIR JAMES said she thinks [Representative Hudson's reasoning]
is an assumption. She acknowledged that if no taxes were imposed
and no budget cuts were made, then Representative Hudson is
speaking truly but she still thinks the legislature needs to look
for efficiencies in government. She noted that there are many
things on which the legislature is not spending money but should
be; during the interim this year she is going to work on
producing a zero-based budget to find out just exactly what she
thinks a reasonable amount for state spending should be. She
explained that the legislature could be spending PF earnings as
they come in if the legislature had the appropriation to do that.
Consequently, she commented that half of the earnings of the PF
would be less than the dividend calculation so it could certainly
affect the dividend, but it takes many assumptions to come to
that conclusion. She mentioned that one of the problems with
this whole [budget] situation is assumptions; yet the legislature
has to base its decisions on something. She inquired as to
Representative Ogan's response to the [assumptions] issue.
Number 2900
REPRESENTATIVE OGAN indicated that he would support using some of
the PF earnings if some PF earnings were re-deposited into the
PF, which the legislature has not done in the last few years, and
constitutionally protect the PFD. He reiterated that he would
support some use of PF earnings if the PFD program was off the
table. He said that anybody that thinks that the legislature is
going to be able to use those PF earnings without
constitutionally protecting them is fooling themselves because he
does not think that the public will allow it. He noted that HJR
49 is the key to opening discussion of what the legislature is
going to use for money after the PFD program is protected.
Number 2821
CHAIR JAMES noted that the PF is currently managed so that all
earnings (including unrealized gains) of the fund go into the ERA
and the dividend is calculated on a five-year average (thus
lowering the average) of the income. The reason is so that
current income, which is probably a lot higher than it was five
years ago, would not be the determining dividend calculation
factor. She said she believes that [investments] are going to go
down because she is just waiting for somebody to tell her that
the bubble has burst. She stated that she sees a whole different
investment concern on the stock market - where it is not
necessarily tied to income and/or dividends - as the reason why
people are willing to pay more for shares. She noted that when
[the stock market] starts going [up], the high income brings the
average of the income this year up, yet the PF is being paid out
of the current income stream, which could be a problem.
CHAIR JAMES explained that calculating the PFD on an average in
conjunction with the overall system as an endowment percentage
that is good over time certainly does a couple of things. She
commented that first, it would make the dividend more stable
because she thinks people do count on the dividend. She
mentioned that people know how much the dividend was last year,
and they think it will be at least that much and maybe a little
bit more next year.
CHAIR JAMES indicated that second, it gives the PF board more
flexibility in its investment policy because it knows how much
money is going to be drained off. She informed the committee
that one of the things that the legislature has done consistently
and will probably do again this year is put some more money back
into the PF from the ERA. She emphasized that one of the
advantages of putting money back into the PF, which is protected
from ever being spent, is it gives PF managers more opportunities
to make money with longer investments and different kinds of
investments. She recognized that putting money back into the PF
is one of the reasons why the PF has been so successful. She
acknowledged that she is not convinced at this time that the
current PF system is what the state ought to have over the long
term, but she thinks the legislature needs to spend much time
thinking about it. She remarked that she is convinced, however,
that the state does need to have a healthy dividend over the long
term, but she does not know what the long term is; that is yet to
be discussed in the whole concept of everything. She reiterated
that she thinks that it would be a huge mistake to put everything
into law today.
CHAIR JAMES reminded the committee that she does have a bill in
the [House] Finance Committee that would first inflation-proof
[the PF]. She'd presented her bill because the PF should be
inflation proofed first before anything is calculated. She
recognized that some people argue that the PF has already been
inflation proofed, but she contends that it is not because the
way the PF is designed, inflation is not taken into account at
all unless the legislature puts inflation proofing in the PF.
She said she would have no problem making a constitutional
amendment, but the PF must be inflation proofed before the
legislature does any spending whatsoever because she thinks that
the value of the money there needs to be protected over the long
term.
Number 2714
CHAIR JAMES noted that there needs to be a "fence" around state
spending. She inquired as to how much the budget can be
increased each year without obtaining a "supermajority" vote to
cover emergencies and/or special projects. She acknowledged that
with 21 votes only so much can be done; the issue under
discussion today is not simple. She reminded the committee that
the legislature had tried to solve the issue in a simple way last
year, and that did not work, but the legislature did get some
ideas out there. She explained that now the people are tuned in,
and the legislature needs to concentrate seriously on coming up
with a plan that will work over the long term.
REPRESENTATIVE OGAN said he agreed with much of what Chair James
had stated, especially regarding putting a fence around state
spending, since that is another piece of the puzzle not yet under
consideration. He noted that he'd heard Chair James say a number
of times that she'd moved things she did not support, but she
needed to get the bill to the Finance Committee so that it could
have tools to build a solution; without at least HJR 49 being
moved on to Finance, this committee would not be giving Finance a
full tool box.
Number 2561
CHAIR JAMES reminded the committee that she had a tax bill in
this committee and had not moved that either because she had no
intention of her bill passing this year. She added that she had
moved HB 137, the Municipal Dividends bill, because there is an
interest in it, and a number of folks thought it might be
something they wanted to do. She observed that she moved HB 411
not because she liked it but because she had promised some people
that she would move it. She stated that she does not think that
HJR 49 has any chance, but she could put it to Finance, but she
does not want to unless she gets permission from Finance
Committee due to the pressure it might get with HJR 49 in the
committee.
Number 2490
MARY GRISWOLD testified via teleconference from Homer in
opposition to HJR 49. She read her testimony as follows:
I am opposed to HJR 49. HJR 49 is a poor idea from a
policy perspective because it takes away the
legislature's authority to appropriate funds.
HJR 49 is a poor idea from a financial perspective for
all the reasons that changing to a percentage of market
value distribution is a better idea. Although there
are no performance guarantees with the market value
approach, it does remove the dependence on volatile
realized earnings and offers a more stable dividend
distribution based on the real return of the Permanent
Fund investments. By guaranteeing the dividend in the
Constitution, this bill may also trigger a federal
income tax assessment on the Permanent Fund's earnings.
However, the most important consideration of HJR 49 is
a philosophical one: whether decreasing our Permanent
Fund dividend should be an option to help bridge our
growing fiscal gap. I support a healthy dividend
distribution. I think a long range fiscal plan
including better control of government spending and a
combination of reasonable taxes should be developed
before the dividend program or the fund's undistributed
income is tapped. However, adjusting the dividend
should remain a legislative option for balancing
personal benefit and the common good for all Alaskans
as other general fund revenue sources are depleted.
Shortchanging funding for essential public services or
raising exorbitant taxes in order to sustain a large
personal dividend does not serve our best interests or
the purposes for which the Permanent Fund was
established.
Many people who support HJR 49 believe it will preserve
the value of their dividend. There are no guarantees
for a continued high dividend, no matter what formula
is applied. Other people want the government to keep
its hands off the dividend program no matter how much
essential public services must be cut. I hope that
with continued discussion the public will come to
understand the real fiscal picture and agree to a well-
reasoned long-term financial plan that controls
spending, taps additional sources of revenue including
a combination of taxes, and then uses Permanent Fund
earnings to balance personal and common good for the
benefit of all Alaskans. I think you have your work cut
out for you to develop this plan and sincerely hope you
are willing to tackle it soon.
Number 2352
MARY RAYMOND testified via teleconference from Homer in
opposition to HJR 49. She said she thinks it would be folly to
tie into such an agreement, and she does not think that the
people of Alaska really put their PFDs ahead of services, ahead
of the importance of the whole, and goodness to the state because
Alaskans are reasonable. She noted that in referring to the vote
of September 14, one of the committee said it best "they are
going to say no because they do not trust us", and people did not
understand what this was all about. She commented that a plan
was referred to, but there was no plan offered to the people;
they had no idea of what that meant just to say "yes, do
whatever." She mentioned that if the committee wanted to listen
to its constituents and believes that citizens do want to further
and better the life of everyone in Alaska, she thinks the
committee will do alright.
Number 2260
CHAIR JAMES asked if there was any further objection to Amendment
1. There being no objection, Amendment 1 was adopted.
REPRESENTATIVE OGAN made a motion to move HJR 49 [as amended] out
of committee.
REPRESENTATIVE HUDSON objected.
A roll call vote was taken. Representatives Green, Ogan,
Whitaker, and James voted in favor of moving the bill.
Representatives Hudson, Kerttula, and Smalley voted against it.
Therefore, CSHJR 49(STA) moved from the House State Affairs
Standing Committee by a vote of 4-3.
HB 439-PAY RAISE FOR NON-UNION STATE EMPLOYEES
Number 2171
CHAIR JAMES announced the next order business is HOUSE BILL NO.
439, "An Act relating to the compensation of certain public
employees and officials not covered by collective bargaining
agreements; and providing for an effective date."
ALISON ELGEE, Deputy Commissioner, Department of Administration,
explained that HB 439 is the statutory amendment to the pay
schedule that governs non-covered employees. She explained that
these are employees in the court system, the legislature, and
non-covered employees in the executive branch. She explained
that HB 439 proposes amendments that correspond to agreements
that the department has reached with groups with whom the
department has collectively bargained new contracts, and the new
contracts are presently before the legislature for consideration.
MS. ELGEE said she envisions that in fiscal year (FY) July 2001,
the department would propose paying all non-covered employees a
one-time lump-sum payment up to $1200, prorated at $50 for each
pay period that the employee was in pay status in FY 2000. She
mentioned that there is a special provision for legislative
session employees to recognize the peculiar time frame of that
particular employment. She indicated that she had requested an
amendment to the section with the lump sum to clarify the fact
that the lump-sum payments are intended to be reduced by
mandatory employer and employee deductions. She informed the
committee that the amendment would be in keeping with provisions
that are in collectively bargained agreements. She remarked that
the department is proposing two-percent and three-percent
adjustments to the pay schedule in FY 2002 and FY 2003
respectively. She added that committee members have received a
sectional analysis in their packets, and there is a fiscal note
on HB 439.
Number 2018
REPRESENTATIVE HUDSON said yesterday (4/5/00) he had heard from
the co-chairman of the Senate Finance Committee regarding
elements in the employee pay package presented for legislative
consideration. He surmised that whatever has been done on the
collective bargaining side is being offered now by the Department
of Administration to non-covered employees. He stated that one
of the elements that was brought to his attention was that
apparently the administration has agreed to prevent an employee
from selling all of his/her sick leave or transferring it over as
regular leave and cashing it in. He asked if it were true that
some of those cash-ins could be up into the $50,000 bracket.
MS. ELGEE replied that what he is referring to is a provision of
the agreement that the department bargained with the general
government unit (GGU). She said that GGU is the only large
employee group still remaining on an annual sick-leave accrual
instead of a personal-leave accrual, and what is included in the
collective bargaining agreement is a conversion to a personal-
leave environment. She noted that the personal-leave environment
provides for a sick-leave balance to be converted to personal
leave at a rate of 50 percent of what that balance is. In the
past when other employee groups have converted from the sick-
leave-and-annual-leave environment, there has also been a
conversion of sick leave so that the entire amount of sick-leave
accrual is not lost to an employee in making that switch. She
commented that there are a variety of benefits to a personal-
leave accrual environment, not the least of which is that the
total amount of accrual is actually less than what is seen in a
sick-leave-and-annual-leave accrual. She mentioned that the
sick-leave switch is a specific provision in the GGU contract
because everybody else is on the personal-leave system now.
Number 1892
REPRESENTATIVE HUDSON asked if any employee covered by HB 439
would fall under the new leave provision.
MS. ELGEE replied no. She stated that non-covered employees have
been in a personal-leave environment since 1978 and any
conversion that occurred has already occurred back when the
statute was amended in 1978.
CHAIR JAMES asked if an employee's sick- and annual-leave days
would be totaled together and half put into personal leave, or is
half of the sick leave put into personal leave.
MS. ELGEE answered that at present, annual-leave accrual has a
cash value, and the accrual is not amended. She said that HB 439
amends sick-leave accrual and proposes converting 50 percent of
sick-leave accrual to a personal-leave environment. In the
future, the accrual rate on an on-going monthly basis is also
amended to reflect a personal-leave accrual rate which represents
both annual and sick leave. She explained that the employee has
discretion as to how personal leave is used.
Number 1802
CHAIR JAMES inquired what happens to the other half of the sick
leave that has been accrued.
MS. ELGEE replied that the other half of the sick leave is put
into basically a catastrophic medical bank which is maintained on
behalf of the employee. She commented that the employee has to
be ill for a threshold number of days before he/she can access
the medical leave bank. If the employee terminates, the medical
leave bank goes away at no cost to the state. She reiterated
that the employee's medical leave only remains on the books as
long as the employee is consistently employed.
CHAIR JAMES inquired as to how accrued sick leave was funded into
the reserve account.
Number 1795
MS. ELGEE answered that the department funds leave on basically a
cash flow basis rather than on approved liability basis, and it
is funded through the department's working reserve account. She
said that the factor to generate those monies is part of the
personnel services budgeting factors. She noted that there are
two accounts: 1) a leave cash-in account and 2) a terminal leave
account. She explained that the leave cash-in account is
calculated for each department based on their own historical
cash-in usage by employees, and that account is funded annually
in $10 million. She commented that the terminal leave account is
used when an employee actually terminates service and at that
time receives whatever the cash value is of accrued leave that
has not been used. She mentioned that the terminal leave account
also is $10 million. The two accounts are constantly being
refilled because they are part of the department's personnel
services budgeting factor.
CHAIR JAMES asked if the two accounts are funded by money that is
appropriated or is the money just a number.
Number 1685
MS. ELGEE replied that the two accounts are funded by money that
is appropriated for personnel services expenses and included in
that budget line.
REPRESENTATIVE OGAN noted that HB 439 covers legislative
employees and asked if it also covers legislators.
MS. ELGEE answered that as drafted, HB 439 does cover
legislators, governor and lieutenant governor. She said
legislators are no longer tied to the pay scale and are addressed
separately with a set salary, but HB 439 would adjust those
salaries in future years.
REPRESENTATIVE OGAN asked if a vote for HB 439 would give
legislators a raise.
CHAIR JAMES replied yes.
REPRESENTATIVE GREEN asked what would happen if in the bargaining
process a problem arises with funding. He added that the
bargainers would go back to the drawing board and subsequently
could remove the benefits now under discussion from bargaining
unit contracts. He observed that if HB 439 passes then non-union
people might have a better deal than bargaining unit people.
Number 1569
MS. ELGEE acknowledged that the outcome as described by
Representative Green could happen, but she anticipates that HB
439 would be a part of the larger decision relative to the
collective bargaining agreements as those continue to be
considered. She noted that the reverse has also been true in
past years when the department has collectively bargained
agreements, and legislation has not subsequently passed to amend
non-covered pay schedules.
REPRESENTATIVE GREEN asked if that meant yes.
MS. ELGEE replied that all things are possible, yes.
REPRESENTATIVE GREEN asked if Ms. Elgee thought there was any
possibility that passing HB 439 would have a tendency to box in
negotiations between the legislature and the administration in
regard to funding bargaining unit contract increases.
MS. ELGEE requested clarification.
REPRESENTATIVE GREEN explained that there is an ongoing
negotiation between 12 bargaining units very similar to HB 439,
and there has been some agreement made without the benefit of
funding. The legislature is reviewing negotiated agreements and
may not fund the agreements, in which case a problem arises with
passing HB 439. He asked if, in her opinion, passing HB 439
would have any influence on what happens with those bargaining
unit negotiated contracts. He asked if HB 439 is placing "the
cart before the horse."
Number 1496
MS. ELGEE answered that the department did not request
introduction of HB 439 until agreements had been negotiated with
all the collective bargaining units because the department was
sensitive to not trying to box in the bargaining negotiations by
suggesting something for non-covered employees that was different
from what was being discussed at the table. She commented that
agreements have been reached with all the bargaining units, and
many contracts have been ratified; so now HB 439 can be brought
before the committee. She stated that she does not think that
passage of HB 439 would, in essence, box people in. She
emphasized that the first-year provision of the lump-sum payment
proposed in HB 439 is subject to appropriation; so the funding
decisions were made in such a way as to not include money for any
of these agreements.
Number 1372
REPRESENTATIVE HUDSON said he had heard that the governor has
signed off on all of the negotiated contracts at the present time
so all of the contracts have been duly negotiated, and now it is
up to the legislature to fund or not to fund. He noted that
those contracts have gone to the Finance Committee. He explained
that because the administration does not negotiate directly with
non-covered employees, HB 439 is essentially a parity bill to
present to the Finance Committee just as negotiated contracts
have been presented to Finance so that both covered and non-
covered employees would be considered. He said that it is still
up to the legislature to determine whether or not the legislature
agrees with increases in the collective bargaining contracts and
those presented in HB 439. He asked Ms. Elgee if his
understanding was correct.
MS. ELGEE replied in the affirmative.
REPRESENTATIVE GREEN agreed that what Representative Hudson said
was true, but HB 439 has a fiscal note, and the governor was
instructed not to increase bargaining unit costs. He stated that
funding for the bargaining units has not been approved so if the
committee approves HB 439, the committee also approves the fiscal
note. Therefore, he reiterated that if the committee passes HB
439, the fiscal note is approved whereas no approval has been
given for bargaining unit contracts, yet HB 439 has been
presented as a parity bill. He said HB 439 is getting "the cart
before the horse."
Number 1300
REPRESENTATIVE HUDSON explained that he thought that fiscal notes
for the bargaining unit contracts were already in Finance
Committee.
CHAIR JAMES said the fiscal notes did not come to the House State
Affairs Standing Committee.
REPRESENTATIVE GREEN stated the fiscal notes have not been
approved.
Number 1287
CHAIR JAMES noted that this committee is the first committee of
referral on HB 439 before it goes to the House Finance Committee,
because this is a policy issue. She commented that she is not
passing anything out of committee that has the legislature
getting a raise. She explained that she does not have any
problem sending HB 439 up to the Finance Committee because House
State Affairs Standing Committee does not approve fiscal notes,
but the committee could send HB 439 without a fiscal note. She
indicated that she does not have a problem sending HB 439 up to
Finance not knowing what it might do about the contracts, but she
told the committee that if the legislature does anything with the
contracts, she thinks the legislature ought to do the same thing
for non-covered employees. She mentioned that the committee is
not going to make that decision in this committee because that
decision is a finance issue more than it is a policy issue. She
informed the committee that if improvement of state benefits for
state workers was a policy issue and not a finance issue, this
committee could make policy decisions here.
REPRESENTATIVE WHITAKER agreed that HB 439 is a policy issue, but
there is a broader policy issue which is a balanced budget. He
said that the legislature does not have a balanced budget and
until the legislature comes to grips with that, it is incredibly
disingenuous of this committee to pass HB 439 as a matter of
policy.
Number 1184
MS. ELGEE asked if she could clarify the money issue. She
explained that the administration had included the cost of
implementing HB 439 in the budget amendments that were presented
to Finance in February [2000] in order to meet the budget
amendment deadline along with all the rest of the collectively
bargained agreement funding. She stated that Finance was aware
at that time of what the complete picture would be. She
commented that the administration cannot simply implement [pay
changes] with non-covered employees without legislation.
MS. ELGEE mentioned that Section 1 implements pay raises for
legislators in years two and three. She indicated that Section 8
would need to be amended to strike the word "legislators" from
line 5.
Number 1100
REPRESENTATIVE HUDSON informed the committee that HB 439 is a $40
increase for legislators.
REPRESENTATIVE OGAN moved to adopt conceptual Amendment 1, to
eliminate the word "legislators" from HB 439.
CHAIR JAMES noted that technically removal of "legislators" is
Section 1; on page 4, line 5, [conceptual Amendment 1] would
remove the word "legislators."
REPRESENTATIVE OGAN asked if that would be acceptable.
CHAIR JAMES called it Amendment 1 and asked if there were any
objections.
REPRESENTATIVE GREEN objected. He asked if Amendment 1 would
adversely affect legislative aides.
CHAIR JAMES replied no.
MS. ELGEE answered no, because legislators are specifically
addressed in a section of statute reference in Section 1, and
legislative aides are covered by a pay schedule.
Number 0955
REPRESENTATIVE HUDSON admitted that getting $40 more a month is
up to his constituents. He said that he had never been
embarrassed to accept range 10 legislative pay. even though the
lowest paid position in his office is a range 15 and in some
cases range 19. He noted that he for one is willing to stand up
and say that he is worth $40 more. He commented that he cannot
support Amendment 1 to take the word "legislators" out of HB 439.
CHAIR JAMES explained that she has another bill which takes 10
percent off of legislators' salaries, but this committee has not
heard the bill. She mentioned that she thinks the salary gives
each legislator ability to have someplace to offset their health
insurance and an opportunity to have a little retirement, but the
salary is so small that it is almost nonexistent in her life as
to what it provides.
CHAIR JAMES indicated she does not have any problem [with
legislative pay] as long as she gets paid for what it costs her
to do the job, and that is why she is so protective of per diem
because she could not [be a legislator] without it. She informed
the committee that she could not do this job if per diem were not
at its current rate and even that hardly reaches from payday to
payday. She agreed that legislators are paid what people believe
legislators are worth, and people do not believe that legislators
are worth much. She emphasized that legislators ought not to
change their pay until people believe legislators are worth more,
and she thinks that the legislature's biggest challenge is to
convince people that legislators are worth more.
Number 0670
REPRESENTATIVE KERTTULA remarked that she is really torn about HB
439 because she thinks the public perception is that legislators
are all overpaid and perhaps do not deserve their pay. One of
the ways to fight that perception is to pay a decent salary in
order to attract diverse people to become legislators. She
reminded the committee that with decent pay, a legislator could
work all year long and participate in interim committees. She
added that she is going to vote with Representative Hudson
because she thinks "you pay peanuts, you get monkeys."
REPRESENTATIVE OGAN stated that he thinks removing the word
"legislators" from HB 439 is a small, symbolic gesture and is
leading by example. He recognized that the state is asking state
workers to do more with less money, and he thinks it is
disingenuous for legislators to give themselves a raise. He said
that he would rather people vote on whether or not legislators
could have a raise because he thinks it is an inherent conflict.
He reiterated that every year he gets beat up [by constituents]
for anything that happens to legislator pay because there is this
perception that legislators can vote to line their pockets. He
said that it is appropriate that the committee remove the word
"legislators" from HB 439 because it is just not worth bleeding
for him to get $40 a month.
REPRESENTATIVE WHITAKER noted that legislators do not deserve an
extra $40 a month until, in a body as a whole, the legislature
steps forward and deals with the budget.
Number 0381
REPRESENTATIVE HUDSON offered that if legislators refuse or fail
to honor the negotiated labor contracts and HB 439 for non-
covered employees then legislators will get nothing. He
commented that he is not suggesting that legislators get
something and his constituents get nothing. He emphasized that
he does not want anything if his constituents are not first of
all treated similar to what is agreed for all other employees
because he is for parity and treating employees of the state with
dignity. He stated that he did not want one dime if the
legislature does not approve the contracts for all other
employees. In fact, he added, he would vote for Chair James' 10
percent reduction.
CHAIR JAMES called for the vote on conceptual Amendment 1.
A roll call vote was taken. Representatives Green, Ogan,
Whitaker, and James voted for the amendment. Representatives
Hudson, Kerttula, and Smalley voted against it. Therefore,
conceptual Amendment 1 was adopted by a vote of 4-3.
Number 0086
JEFF JESSEE, Executive Director, Alaska Mental Health Trust
Authority, testified via teleconference from Anchorage. He said
that the Trust has an amendment to present which would basically
correct an oversight in the drafting of the Mental Health Trust
Settlement legislation. He explained that the oversight was in
failure to explicitly direct that Trust Authority employees are
in the exempt service sector. He noted that Trust Land office
employees in the Department of Natural Resources (DNR) were
placed in the exempt service, but due to an oversight, Mental
Trust Authority employees were not placed in the exempt service.
He commented that the reason the trustees feel this oversight is
important to them is because the Trust does have a very small
staff and has found that having to follow all of the various
complex personnel rules dramatically limits the Trust's
flexibility. He indicated that the Trust is requesting that this
amendment be placed in HB 439, but the Trust does not have a
particular position on the bill itself.
TAPE 30, SIDE A
Number 0024
CHAIR JAMES remarked that she does not think HB 439 is a good
bill on which to tack Mr. Jessee's amendment. She added that the
amendment sounds like it could stand on its own as a separate
piece of legislation and have a better chance of getting passed.
She does not know what is going to happen to HB 439 even if the
committee moves it on.
MR. JESSEE said he felt that trying to place the amendment in a
separate piece of legislation and going through the whole process
would be perhaps more trouble than the amendment would be worth.
He said that he did understand that his amendment would be tied
to the ultimate fate of HB 439.
Number 0122
CHAIR JAMES noted that the committee could have accepted the
amendment if it had been presented sooner.
REPRESENTATIVE HUDSON asked if Mr. Jessee's amendment just lies
on the table and is not attached to HB 439.
CHAIR JAMES replied yes.
DON ETHERIDGE, AFL-CIO, said he is here to speak in favor of HB
439 and against Amendment 1 which just passed. He noted that
many union leaders are speaking out in different public forums on
this very issue. He explained that legislators should have more
of a living salary than what they have now due to the fact that
it is difficult to get candidates who can do the job without
receiving a living wage.
Number 0290
CHAIR JAMES replied that she wants to get a living salary for the
next legislators who come in and not for legislators of today.
She commented that she does not want to argue about Amendment 1.
MR. ETHERIDGE mentioned that when reviewed from her point of
view, there is never going to be change of all 60 legislators,
therefore, it cannot be viewed from her point because there is
always going to be a next guy. He indicated he gets real
frustrated when listening to people talk about the wages of
legislators. He emphasized that when legislators review how much
of the state falls under their responsibility - budget wise,
operational wise and everything - legislators should recognize
that the responsibility upon their shoulders matches more than
most executives in any large company in this country. He
reminded the committee that company executives make much more
money than legislators.
Number 0401
CHAIR JAMES acknowledged that maybe company executives numbers
should be included in a consideration of exactly what the state
should be spending. She agreed that Amendment 1 does eliminate
many good people from being able to come down here because coming
here as a legislator is a big challenge, and people do not
understand what it is like to move away from home for four months
and still try to care for things at home. She remarked that
maybe the legislature does want to open the door so that more
people can be able to do legislative work. She has the same
argument about foster care; she is not doing well on that one
either because she believes people should only be reimbursed
their cost for providing foster care. She added that she
believes people should provide foster care because they are
dedicated to the cause and not for the money. She is a
legislator because she is dedicated to the cause, and she would
not put herself through this if it were a way to make a living.
MR. ETHERIDGE reiterated that the AFL-CIO believes it is only
fair that non-covered employees get benefits and wages that
everybody is getting because they deserve it and are working just
as hard as the rest of the public employees.
Number 0595
CHRIS CHRISTENSEN, General Counsel to the Judicial Branch of
Government, Alaska Court System, said HB 439 was drafted to apply
to all non-covered employees of the state, not just the executive
branch, and was intended to give all judicial and non-judicial
employees of the judicial branch a cost-of-living adjustment
(COLA). He noted that judge and magistrate salaries are set out
in statute differently than salaries of other non-covered
employees. He explained that four years ago a bill similar to
this had worked its way through the legislature and during the
process it was realized that there was a way to read language in
the bill so that judges could get two pay raises instead of one.
MR. CHRISTENSEN commented that in memory of that situation, HB
439 was very tightly drafted to make sure that such an argument
could not be made this year; unfortunately he thinks the opposite
has occurred. He mentioned that the better way to read HB 439
language is to say that judges and magistrates get the exact same
COLA as other non-covered employees. He indicated that while the
fiscal note certainly provides funding, there is a way to read HB
439 language to say that judges and magistrates do not get a COLA
at all. He informed the committee that he has prepared some
language which would clarify the intent of HB 439 to provide the
same COLA for judges and magistrates as that provided to other
non-covered employees.
Number 0720
REPRESENTATIVE HUDSON asked if the proposed amendment would amend
the fiscal note as well.
MR. CHRISTENSEN replied that the fiscal note does provide for
COLA.
CHAIR JAMES said that the committee had reduced the fiscal note
just a tad with Amendment 1.
REPRESENTATIVE HUDSON moved to adopt Amendment 2, which read:
Page 4, line 24, after "BRANCH." insert:
"a)"
Page 5, following line 1, insert a new paragraph:
"b) Justices of the supreme court, judges of the
court of appeals and the superior and district courts,
and magistrates are entitled to receive salary
adjustments provided for in sec. 5 and 6 of the Act, in
accordance with AS 22.05.140(d), AS 22.07.090(c), AS
22.10.190(d), AS 22.15.220(b), and AS 22.15.220(3)."
REPRESENTATIVE OGAN objected. He said the state cannot afford
it.
A roll call vote was taken. Representatives Hudson, Kerttula,
Smalley, Whitaker, and James voted for the amendment.
Representative Ogan voted against it. Representative Green was
absent. Therefore, Amendment 2 was adopted by a vote of 5-1.
CHAIR JAMES announced that now the committee had before it
Amendment 3 as presented by Mr. Jessee.
Number 0852
REPRESENTATIVE HUDSON objected.
CHAIR JAMES said Amendment 3, Cramer, A.1, had not been moved yet
and asked for a motion.
REPRESENTATIVE HUDSON explained that he does not support
Amendment 3 because he thinks it is mixing apples and oranges.
He commented that the committee has before it HB 439, which deals
with non-covered employees in the state minus the legislature and
another amendment that changes the conditional status of the
Mental Health people. He agrees that Amendment 3 ought to be put
into a bill, but he thinks putting the two together could sink
the designation if the legislature does not approve the pay
raises. He suggested that Amendment 3 be a stand-alone bill.
CHAIR JAMES asked Mr. Jessee if the committee could wait on
Amendment 3 and do it next year.
MR. JESSEE replied yes. He indicated that the Trust was just
trying to take what it thought was a simple approach to do what
it wanted. He agreed that if it is determined that the best
thing to do is wait and submit a separate bill then the Trust
will certainly do so.
Number 0920
CHAIR JAMES remarked that she could have a bill drafted for next
year.
MR. JESSEE answered that the committee could do as it wished.
Number 0960
REPRESENTATIVE KERTTULA said she would commit to helping with the
bill, but she agrees with Representative Hudson at this point
that it is probably best not to mix the two topics; however, she
is supportive of Mr. Jessee's idea.
CHAIR JAMES announced that now the committee will go on to Ms.
Elgee's amendment, which is now Amendment 3. It read:
Section 7(a)
Pg. 3, line 26:
Following "in pay status in fiscal year 2000." Add a
new sentence:
The lump sum payment will be reduced by amounts
necessary to pay mandatory employee and employer
deductions.
She mentioned that Amendment 3 includes mandatory deductions from
the lump sump payment.
Number 1017
REPRESENTATIVE HUDSON made a motion to adopt Amendment 3 to HB
439. There being no objection, Amendment 3 was so adopted.
CHAIR JAMES announced that she would get HB 439 re-drafted into a
proposed CS and bring it up at the next meeting.
REPRESENTATIVE OGAN said he shakes his head in amazement at the
cavalier irresponsibility of the administration in continuing to
ratchet up the cost of government in light of the fiscal
situation. He stated he will not support HB 439, and he thinks
it is like funding a lifestyle on a credit card. He reiterated
that HB 439 is basically credit-card spending; it appears that
the legislature views the CBR as the fund from which the
legislative/administrative credit card is paid. He emphasized
that he would not run his household finances that way, and he
thinks it is irresponsible of the administration to do so.
Number 1133
REPRESENTATIVE WHITAKER acknowledged that he also has a problem
with HB 439. He remarked that parity and dignity certainly are
important words and concepts. He added that he does not think
that Alaska should be the land of the lowest paid employees but,
nonetheless, trust was discussed earlier in this meeting and the
lack of trust or the disconnect between the electorate and the
legislature [is apparent]. He observed that the legislature
refuses to deal with the looming, ominous problem of an
incredibly out-of-balance budget which should embarrass all
legislators, and yet legislators exacerbate the problem by adding
to the cost.
REPRESENTATIVE WHITAKER stated that he is not an advocate of
mindless cuts; rather. he is an advocate of sound fiscal and
budgetary policy. He reiterated that Alaska's budget is out of
balance, and HB 439 adds to the imbalance; then legislators
wonder why the public lacks trust. He said it is not too
difficult to answer why legislators are not trusted and asked
from which side of its face is the legislature speaking. He
asked if the legislature was saying that it needed to balance the
budget or was it saying proceed with more imbalance.
Furthermore, he refused to be part of the [doublespeak]. He
stated that the legislature should balance its budget and then
deal with parity and dignity but first deal with responsibility.
He reiterated that it is the legislature's responsibility to
balance the budget.
REPRESENTATIVE HUDSON made a motion to move HB 439, as amended,
out of committee.
REPRESENTATIVE OGAN objected.
A roll call vote was taken. Representatives Hudson, Kerttula,
Smalley and James voted in favor of moving the bill.
Representatives Ogan and Whitaker voted against it.
Representative Green was absent. Therefore, CSHB 439(STA) moved
from the House State Affairs Standing Committee by a vote of 4-2.
ADJOURNMENT
Number 1312
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 10:00
a.m.
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