Legislature(1999 - 2000)

04/20/1999 08:01 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
       HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                                   
                   April 20, 1999                                                                                               
                     8:01 a.m.                                                                                                  
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Representative Jeannette James, Chair                                                                                           
Representative John Coghill                                                                                                     
Representative Scott Ogan                                                                                                       
Representative Jim Whitaker                                                                                                     
Representative Bill Hudson                                                                                                      
Representative Beth Kerttula                                                                                                    
Representative Harold Smalley                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
* HOUSE BILL 199                                                                                                                
"An Act relating to compensation for certain state employees; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
CS FOR SENATE BILL 33(FIN)                                                                                                      
"An Act relating to contracts for the performance of certain state                                                              
functions previously performed by state employees and to the                                                                    
Commission on Privatization and Delivery of Government Services;                                                                
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
* HOUSE BILL 144                                                                                                                
"An Act relating to access to public buildings or public facilities                                                             
by legislators and to audits of public buildings or public                                                                      
facilities."                                                                                                                    
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL 132                                                                                                                  
"An Act relating to allowable absences from the state for purposes                                                              
of eligibility for permanent fund dividends; and providing for an                                                               
effective date."                                                                                                                
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL 16                                                                                                                   
"An Act transferring to the Department of Health and Social                                                                     
Services the authority to license all assisted living facilities;                                                               
eliminating the authority of the Department of Administration to                                                                
license assisted living facilities; and providing for an effective                                                              
date."                                                                                                                          
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL 159                                                                                                                  
"An Act granting certain employees in correctional facilities                                                                   
status as peace officers under the public employees' retirement                                                                 
system."                                                                                                                        
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
(* First public hearing)                                                                                                        
                                                                                                                                
PREVIOUS ACTION                                                                                                                 
                                                                                                                                
BILL: HB 199                                                                                                                    
SHORT TITLE: STATE EMPLOYEE COMPENSATION                                                                                        
SPONSOR(S): FINANCE                                                                                                             
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 4/15/99       824     (H)  READ THE FIRST TIME - REFERRAL(S)                                                                   
 4/15/99       824     (H)  STA, FIN                                                                                            
 4/20/99               (H)  STA AT  8:00 AM CAPITOL 102                                                                         
                                                                                                                                
BILL: SB  33                                                                                                                    
SHORT TITLE: TASK FORCE ON PRIVATIZATION                                                                                        
SPONSOR(S): SENATOR(S) WARD                                                                                                     
                                                                                                                                
Jrn-Date    Jrn-Page           Action                                                                                           
 1/21/99        49     (S)  READ THE FIRST TIME - REFERRAL(S)                                                                   
 1/21/99        49     (S)  STA, FIN                                                                                            
 1/28/99               (S)  STA AT  3:30 PM BELTZ ROOM 211                                                                      
 1/28/99               (S)  MOVED OUT OF COMMITTEE                                                                              
 1/28/99               (S)  MINUTE(STA)                                                                                         
 2/01/99       125     (S)  STA RPT  2DP 1NR 1DNP                                                                               
 2/01/99       125     (S)  DP: WARD, PHILLIPS; NR:MACKIE;                                                                      
                            DNP:ELTON                                                                                           
 2/01/99       126     (S)  INDETERMINATE FN (GOV)                                                                              
 2/25/99               (S)  FIN AT  9:00 AM SENATE FINANCE 532                                                                  
 3/04/99               (S)  FIN AT  8:00 AM SENATE FINANCE 532                                                                  
 3/04/99               (S)  HEARD AND HELD                                                                                      
 3/04/99               (S)  MINUTE(FIN)                                                                                         
 3/09/99               (S)  FIN AT  9:00 AM SENATE FINANCE 532                                                                  
 3/09/99               (S)  HEARD AND HELD                                                                                      
 3/09/99               (S)  MINUTE(FIN)                                                                                         
 3/15/99               (S)  FIN AT  9:00 AM SENATE FINANCE 532                                                                  
 3/15/99               (S)  HEARD AND HELD                                                                                      
 3/15/99               (S)  MINUTE(FIN)                                                                                         
 3/22/99               (S)  FIN AT  9:00 AM SENATE FINANCE 532                                                                  
 3/22/99               (S)  SCHEDULED BUT NOT HEARD                                                                             
 3/24/99               (S)  MINUTE(FIN)                                                                                         
 3/31/99               (S)  FIN AT  8:00 AM SENATE FINANCE 532                                                                  
 3/31/99               (S)  SCHEDULED BUT NOT HEARD                                                                             
 4/01/99               (S)  RLS AT 11:50 AM FAHRENKAMP 203                                                                      
 4/01/99               (S)  MINUTE(RLS)                                                                                         
 4/01/99       767     (S)  FIN RPT  CS  4DP 2NR      NEW TITLE                                                                 
 4/01/99       767     (S)  DP: PARNELL, TORGERSON, GREEN, LEMAN;                                                               
 4/01/99       767     (S)  NR: PETE KELLY, DONLEY                                                                              
 4/01/99       767     (S)  PREVIOUS INDETERMINATE FN (GOV)                                                                     
 4/06/99       793     (S)  FORTHCOMING (FIN) CS RECEIVED                                                                       
 4/07/99       804     (S)  RULES TO CALENDAR AND 1DNP 4/7/99                                                                   
 4/07/99       805     (S)  READ THE SECOND TIME                                                                                
 4/07/99       805     (S)  FIN  CS ADOPTED UNAN CONSENT                                                                        
 4/07/99       805     (S)  AM NO 1      FAILED  Y6  N14                                                                        
 4/07/99       806     (S)  ADVANCED TO THIRD READING UNAN                                                                      
                            CONSENT                                                                                             
 4/07/99       806     (S)  READ THE THIRD TIME  CSSB 33(FIN)                                                                   
 4/07/99       806     (S)  PASSED Y15 N5                                                                                       
 4/07/99       807     (S)  EFFECTIVE DATE(S) SAME AS PASSAGE                                                                   
 4/07/99       807     (S)  ELLIS  NOTICE OF RECONSIDERATION                                                                    
 4/08/99       828     (S)  RECONSIDERATION NOT TAKEN UP                                                                        
 4/08/99       829     (S)  TRANSMITTED TO (H)                                                                                  
 4/09/99       698     (H)  READ THE FIRST TIME - REFERRAL(S)                                                                   
 4/09/99       698     (H)  STA, FIN                                                                                            
 4/20/99               (H)  STA AT  8:00 AM CAPITOL 102                                                                         
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
DENNIS DEWITT, Legislative Assistant                                                                                            
House Finance Committee                                                                                                         
Alaska State Legislature                                                                                                        
Capitol Building, Room 507                                                                                                      
Juneau, Alaska  99801                                                                                                           
Telephone:  (907) 465-2647                                                                                                      
POSITION STATEMENT:  Presented HB 199.                                                                                          
                                                                                                                                
ALISON ELGEE, Deputy Commissioner                                                                                               
Department of Administration                                                                                                    
P.O. Box 110200                                                                                                                 
Juneau, Alaska  99811                                                                                                           
Telephone:  (907) 465-2200                                                                                                      
POSITION STATEMENT:  Provided information and testified in                                                                      
                     opposition to sections of HB 199.                                                                          
                                                                                                                                
GUY BELL, Director                                                                                                              
Division of Retirement and Benefits                                                                                             
Department of Administration                                                                                                    
P.O. Box 110203                                                                                                                 
Juneau, Alaska  99811                                                                                                           
Telephone:  (907) 465-4471                                                                                                      
POSITION STATEMENT:  Provided information on HB 199 and expressed                                                               
                     some concerns.                                                                                             
                                                                                                                                
CHUCK O'CONNELL, Member                                                                                                         
General Government Bargaining Unit                                                                                              
3510 Spenard Road                                                                                                               
Anchorage, Alaska  99503                                                                                                        
Telephone:  (907) 277-5200                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199 and to                                                                   
                     SB 33.                                                                                                     
                                                                                                                                
PAUL LYLE                                                                                                                       
665 Aspen Hights Drive                                                                                                          
Fairbanks, Alaska  99712                                                                                                        
Telephone:  (907) 457-6650                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199.                                                                         
                                                                                                                                
DON ETHERIDGE                                                                                                                   
Local 71                                                                                                                        
District Council Laborers                                                                                                       
710 West 9th Street                                                                                                             
Juneau, Alaska  99801                                                                                                           
Telephone:  (907) 586-3707                                                                                                      
POSITION STATEMENT:  Testified on behalf of Local 71 in opposition                                                              
                     to SB 33.                                                                                                  
                                                                                                                                
JOHN ATHENS                                                                                                                     
1955 Raven Drive                                                                                                                
Fairbanks, Alaska  99709                                                                                                        
Telephone:  (907) 479-4172                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199.                                                                         
                                                                                                                                
CRAIG PERSSON, Representative                                                                                                   
Public Safety Employees Association                                                                                             
P.O. Box 6044                                                                                                                   
Fairbanks, Alaska  99706                                                                                                        
Telephone:  (907) 456-4167                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199                                                                          
                     and to SB 33.                                                                                              
                                                                                                                                
CAMERON LEONARD                                                                                                                 
562 Dalton Trail                                                                                                                
Fairbanks, Alaska  99709                                                                                                        
Telephone:  (907) 455-6230                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199.                                                                         
                                                                                                                                
TIM BECK                                                                                                                        
3470 Pluck Road                                                                                                                 
Fairbanks, Alaska 99705                                                                                                         
Telephone:  (907) 488-3320                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 199.                                                                         
                                                                                                                                
MARK HODGINS, Legislative Assistant                                                                                             
  to Senator Ward                                                                                                               
Alaska State Legislature                                                                                                        
Capitol Building, Room 423                                                                                                      
Juneau, Alaska  99801                                                                                                           
Telephone:  (907) 465-4522                                                                                                      
POSITION STATEMENT:  Presented SB 33 on behalf of Senator Ward.                                                                 
                                                                                                                                
JUANITA HENSLEY, Administrator                                                                                                  
Division of Motor Vehicles                                                                                                      
Department of Administration                                                                                                    
P.O. Box 110200                                                                                                                 
Juneau, Alaska  99811                                                                                                           
Telephone:  (907) 465-5648                                                                                                      
POSITION STATEMENT:  Expressed concerns with certain sections of                                                                
                     SB 33.                                                                                                     
                                                                                                                                
DON ETHERIDGE                                                                                                                   
District Council Laborers                                                                                                       
710 West 9th Street                                                                                                             
Juneau, Alaska  99801                                                                                                           
Telephone:  (907) 586-3707                                                                                                      
POSITION STATEMENT:  Testified on behalf of Local 71 in opposition                                                              
                     to HB 199 and SB 33.                                                                                       
                                                                                                                                
PAM LaBOLLE, President                                                                                                          
Alaska Chamber of Commerce                                                                                                      
217 Second Street                                                                                                               
Juneau, Alaska  99801                                                                                                           
Telephone:  (907) 586-2323                                                                                                      
POSITION STATEMENT:  Asked if SB 33 was going to be held over.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 99-26, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIR JEANNETTE JAMES called the House State Affairs Standing                                                                   
Committee meeting to order at 8:01 a.m.  Members present at the                                                                 
call to order were Representatives James, Coghill, Ogan, Whitaker,                                                              
Kerttula and Smalley.  Representative Hudson arrived at 8:10 a.m.                                                               
                                                                                                                                
CHAIR JAMES noted that, depending on how much activity the                                                                      
committee has on the first two pieces of legislation, the committee                                                             
might not be able to hear the other bills scheduled.                                                                            
                                                                                                                                
HB 199-STATE EMPLOYEE COMPENSATION                                                                                              
                                                                                                                                
CHAIR JAMES announced HB 199, "An Act relating to compensation for                                                              
certain state employees; and providing for an effective date," is                                                               
the first item up in committee.                                                                                                 
                                                                                                                                
Number 031                                                                                                                      
                                                                                                                                
DENNIS DEWITT, Legislative Assistant, House Finance Committee,                                                                  
presented HB 199, noted that a sectional analysis and a proposed                                                                
committee substitute were distributed to the committee members last                                                             
evening.                                                                                                                        
                                                                                                                                
CHAIR JAMES asked the members if they had a chance to review the                                                                
committee substitute.                                                                                                           
                                                                                                                                
REPRESENTATIVE SMALLEY replied that he has not because he only                                                                  
received it this morning.                                                                                                       
                                                                                                                                
CHAIR JAMES indicated that the members reviewed the original bill.                                                              
                                                                                                                                
REPRESENTATIVE WHITAKER informed the chair even that was received                                                               
the original bill late yesterday afternoon and that he has had                                                                  
difficulty in reviewing that.                                                                                                   
                                                                                                                                
Number 076                                                                                                                      
                                                                                                                                
MR. DEWITT explained Sections 1-5 make conforming changes.  The                                                                 
original Sections 2-5 errantly excluded judicial increases after                                                                
July 30 of this year.  Currently the judiciary would receive an                                                                 
increase if there was an increase in Range 28, Step E.  He said,                                                                
"In this bill we have removed Step E, the original draft simply                                                                 
terminated any relationship - the CS changes that relationship to                                                               
Step C so that, if in Range 28-C there's an increase, the judiciary                                                             
gets and increase.  That was our intent originally."                                                                            
                                                                                                                                
MR. DEWITT explained the other changes:                                                                                         
                                                                                                                                
     Section 6 of the bill makes the cost-of-living differential                                                                
     adopted in this bill the maximum allowed in any collective                                                                 
     bargaining agreement.                                                                                                      
                                                                                                                                
     Section 7 makes any part of a collective bargaining agreement,                                                             
     including longevity programs, subject to specific reporting to                                                             
     the legislature.  Unlike the geographical differential, it's                                                               
     not taken out of bargaining (it can be bargained) it simply                                                                
     must be reported and approved as a monitory term to the                                                                    
     legislature.                                                                                                               
                                                                                                                                
     Section 8, is a conforming amendment for salary ranges, it                                                                 
     reduces the pay of the principal head of an executive                                                                      
     department from Step E to Step C at Range 28.  Those currently                                                             
     in office are grandfathered in Section 21.                                                                                 
                                                                                                                                
Number 129                                                                                                                      
                                                                                                                                
     Section 9 establishes a new salary schedule by eliminating                                                                 
     Steps B, D, and E, at the current schedule.  Section 9 also                                                                
     has housekeeping language that a wage or salary scheme                                                                     
     different from the statutory schedule may be established by a                                                              
     collective bargaining agreement so that collective bargaining                                                              
     agreements have the freedom to establish their own salary                                                                  
     schedules.  And again, those come to the legislature for                                                                   
     review and approval.                                                                                                       
                                                                                                                                
     Section 10 amends AS 39.27.011 by adding (h).  This amendment                                                              
     sets out the means by which a statutory employee progress from                                                             
     step to step.  And the amendment changes the step progression                                                              
     from each year to a three-year cycle.  The "progressively                                                                  
     greater value" language is the language developed by                                                                       
     arbitrators over the years as the standard by which step                                                                   
     increases may be awarded or denied.                                                                                        
                                                                                                                                
     Section 11 places all statutory employees under the same                                                                   
     geographic differential plan that applies to the bulk of our                                                               
     unionized employees.  This plan is taken from the current                                                                  
     agreements governing the General Government Bargaining Unit                                                                
     (GGU) and Supervisory Unit.  Subsection (c) of this section                                                                
     gives the director of Personnel the authority to set                                                                       
     differentials in other states, that office already has the                                                                 
     authority to set differentials in foreign countries.                                                                       
                                                                                                                                
     Section 12 is merely housekeeping to correct statutory                                                                     
     references, conforming statutory changes in the cost-of-living                                                             
     survey.                                                                                                                    
                                                                                                                                
Number 175                                                                                                                      
                                                                                                                                
     Section 13 (a) imposes the salary schedule in Section 9 on all                                                             
     state agencies who have adopted 39.27.011 (a) as their salary                                                              
     schedule.  Unlike the geographic differential, it is not                                                                   
     mandated, but it requires specific action if the agency is                                                                 
     currently using 39.27.011 schedule and chooses not too in the                                                              
     future.                                                                                                                    
                                                                                                                                
     Section 13 (b) makes all non-collectively bargained longevity                                                              
     programs also subject to specific reporting and legislative                                                                
     approval, similar to union contracts.  Again, those in exempt                                                              
     service can choose to have longevity programs, but they must                                                               
     be reported to and receive legislative approval.                                                                           
                                                                                                                                
     Section 14 is merely housekeeping to correct statutory                                                                     
     references.                                                                                                                
                                                                                                                                
     Section 15 ends state participation in the SBS [Supplemental                                                               
     Benefits system] system for all employees hired after July 1,                                                              
     1999.  It grandfathers all employees who are participants in                                                               
     this system (in the pay period ending June 30, 1999) so long                                                               
     as they remain continuously employed.                                                                                      
                                                                                                                                
     Section 16 is housekeeping to correct statutory reference.                                                                 
                                                                                                                                
Number 210                                                                                                                      
                                                                                                                                
     Section 17 repeals the former geographic differential and                                                                  
     longevity systems that are currently in place so that we can                                                               
     replace them.                                                                                                              
                                                                                                                                
     Section 18 freezes the pay of employees subject to the former                                                              
     statutory geographic differential pay schedule for two years                                                               
     as long as they remain in the same location and range.                                                                     
                                                                                                                                
     Section 19 (a) and (b) freezes the pay of employees in former                                                              
     Steps B, D, and E, until they qualify under the new plan for                                                               
     Steps C or F.  The language in (c) freezes the pay of                                                                      
     employees in longevity status for two years as long as they                                                                
     were receiving longevity pay on June 30, 1999.                                                                             
                                                                                                                                
     Section 20 freezes the pay of commissioners currently serving                                                              
     until the next governor takes office.                                                                                      
                                                                                                                                
     And Section 21 sets an effective date of July 1, 1999.                                                                     
                                                                                                                                
Number 233                                                                                                                      
                                                                                                                                
MR. DEWITT explained the purpose of HB 199 is basically to do three                                                             
things: It establishes a maximum geographic differential for all                                                                
state employees by reducing the current differential for statutory                                                              
employees.  It ends longevity steps and reduces the steps in our                                                                
wage-scale for classified and partially-exempt employees, and those                                                             
employees that are exempt where the employer is using our schedule                                                              
unless they change their system (and several have established their                                                             
own system) and they have the authority to adopt separate systems.                                                              
Those would become reportable issues to the legislature in the                                                                  
budgetary process.  The third thing is the elimination of SBS for                                                               
new employees after June 30, 1999.                                                                                              
                                                                                                                                
MR. DEWITT pointed out that the original draft and the current                                                                  
proposed CS indicate that if someone were employed, left state                                                                  
service and were re-employed, SBS would not be available to them on                                                             
rehire.  He noted that the Finance Committee will correct for                                                                   
new-hires only to resolve some of the concerns of that section.                                                                 
                                                                                                                                
CHAIR JAMES mentioned Representative Hudson is present.                                                                         
                                                                                                                                
Number 273                                                                                                                      
                                                                                                                                
REPRESENTATIVE HUDSON asked if there is intent to reinstate social                                                              
security in lieu of SBS, or are we doing away with the                                                                          
employer/employee contributed program.                                                                                          
                                                                                                                                
MR. DEWITT replied it is the intent to do away with that as a                                                                   
benefit over the long term.  He added that it is "our"                                                                          
understanding that the PERS (Public Employees' Retirement System)                                                               
and TRS (Teachers' Retirement System) system covers the obligation                                                              
required by social security except for temporary employees.  It's                                                               
also "our" understanding that without SBS temporary employees will                                                              
default to the social security system.                                                                                          
                                                                                                                                
REPRESENTATIVE HUDSON asked if the State would be paying for social                                                             
security for the temporary employees.                                                                                           
                                                                                                                                
MR. DEWITT replied that's his understanding.                                                                                    
                                                                                                                                
REPRESENTATIVE HUDSON said this issue bothers him somewhat.  He                                                                 
mentioned that he was involved when the state gave the employees                                                                
the option of leaving social security and going into the SBS                                                                    
program, and they moved to it.  Representative Hudson said, "I'd                                                                
like to see something from a legal perspective as to whether or not                                                             
we, or perhaps even through the bargaining Act, as to whether or                                                                
not we have the right to unilaterally ... take away a benefit.  And                                                             
I admit that your grandfathering in everybody (that's in the                                                                    
program) - it's a good thing you're doing that because I think that                                                             
you'd find yourself directly into court if you didn't."                                                                         
Representative Hudson said he believes these are the kinds of                                                                   
things that are handled at the bargaining table.  For example, if                                                               
you want to make a major changes to pay structures or benefits you                                                              
should take those things to the bargaining table.  That's the                                                                   
problem he has with HB 1999.                                                                                                    
                                                                                                                                
Number 323                                                                                                                      
                                                                                                                                
CHAIR JAMES asked, what about employees who are not here for five                                                               
years, are they considered temporary employees.  Chair James said                                                               
she visited the Social Security Administration because the doctor                                                               
told her that she had to have Medicare.  She was informed that her                                                              
social security payments were going down because she was working                                                                
and has a substitute.  In addition, if she had taken her PERS she                                                               
had gained nothing in five years in her retirement benefits.  Chair                                                             
James said, "I lost almost all my social security"  She asked, if                                                               
people have to be here five years, and they're not temporary                                                                    
employees, how do they gain any retirement at all.                                                                              
                                                                                                                                
MR. DEWITT said he can't answer that, but he will get that                                                                      
information.                                                                                                                    
                                                                                                                                
Number 358                                                                                                                      
                                                                                                                                
REPRESENTATIVE KERTTULA asked if continuous employment means you                                                                
can't quit and come back, and if you do you are dropped out of SBS.                                                             
                                                                                                                                
MR. DEWITT responded the co-chairs of Finance Committee intend to                                                               
eliminate that.  He noted that it was found to be problematic and                                                               
that it will be redrafted to only effect new employees.  He                                                                     
reiterated that if you left State service you would not lose your                                                               
SBS eligibility if you returned.                                                                                                
                                                                                                                                
CHAIR JAMES asked Representative Kerttula if that statement makes                                                               
her feel good.                                                                                                                  
                                                                                                                                
REPRESENTATIVE KERTTULA replied no.                                                                                             
                                                                                                                                
Number 381                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY pointed out that he had worked for a number                                                              
of years in a school district that went to a second-tier-type                                                                   
structure for different classes of employees.  The intent was to                                                                
save money and the result was the exact opposite.  He mentioned                                                                 
that was the first year his past school district went outside to                                                                
recruit for 70 positions and that they came back with zero                                                                      
applicants.  Therefore, hey started school short of counselors and                                                              
short of elementary classroom teachers.  It also caused moral                                                                   
problems with the different structures.  Representative Smalley                                                                 
pointed out that people with the same background, same                                                                          
classification, and same the category were making less money due to                                                             
when they came into this system.  The school district found it very                                                             
difficult to retain individuals that were hired and that it was                                                                 
costly to retrain them.  He emphasized that the State of Alaska is                                                              
going to find the same possible problems here.  He said, "I think                                                               
it's going to create difficulty in wanting to hire employees for                                                                
the State.  Constant turnover, high cost of retraining, to me                                                                   
appears to be a punitive bill for State employees, especially those                                                             
that have been appointed by this Governor, and I find it very very                                                              
difficult to support this bill in any way shape or form."                                                                       
                                                                                                                                
REPRESENTATIVE OGAN remarked, this doesn't affect people who                                                                    
currently have jobs, it affects new-hires.                                                                                      
                                                                                                                                
Number 416                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY said he heard there was a section which                                                                  
freezes wages of those commissioners hired by the Governor.                                                                     
                                                                                                                                
     Sec. 20.  COMMISSIONERS' SALARIES.  Notwithstanding the                                                                    
     amendments to AS 39.20.080(a), made by sec. 8 of this Act, and                                                             
     to AS 39.27.011(a) made by sec. 9 of this Act, the head of a                                                               
     principal executive department of the state who was serving in                                                             
     that capacity on June 30, 1999, is entitled to receive a                                                                   
     monthly salary in the amount of $7,234 until the date on which                                                             
     the next governor is sworn into office.                                                                                    
                                                                                                                                
CHAIR JAMES explained that the next governor's appointees will fall                                                             
under this.                                                                                                                     
                                                                                                                                
Number 431                                                                                                                      
                                                                                                                                
ALISON ELGEE, Deputy Commissioner, Department of Administration,                                                                
came forward noting that the department opposes HB 199 because it                                                               
jeopardizes the ability of the Administration to attract and retain                                                             
good qualified employees.                                                                                                       
                                                                                                                                
MS. ELGEE said the department supports the change to the statutory                                                              
geographic differential which takes the statutory scheme and                                                                    
conforms it to the scheme that is currently used by the General                                                                 
Government Unit and the supervisors.  She explained that the                                                                    
change, on the side of the unions, was made back in the                                                                         
mid-eighties as the result of a cost-of-living study which                                                                      
reestablished differentials throughout the state.                                                                               
                                                                                                                                
MS. ELGEE noted that the statutory schedule has never been amended,                                                             
that there have been attempts by the legislature, however, the                                                                  
provisions never passed.  She said HB 199 will bring the                                                                        
non-covered employees, subject to the statutory scheme, in                                                                      
conformance with the union employees and correct the disparity in                                                               
places like Fairbanks.  For example, State attorneys are subject to                                                             
the statutory scheme and are currently receiving a 14 percent                                                                   
differential.  The secretaries who are working in that same office                                                              
are members of the union and only receive a 4 percent differential.                                                             
Therefore, the department believes this section corrects that                                                                   
inequity.                                                                                                                       
                                                                                                                                
MS. ELGEE referred to Section 6 which takes the geographic                                                                      
differential out of collective bargaining.  She noted that not all                                                              
of our unions negotiate a geographic differential along this kind                                                               
of a scheme.  She said the "Trades and Crafts Union" has a very                                                                 
different type of application of geographic differential (and while                                                             
she doesn't believe it compensates employees to a greater degree)                                                               
it's not comparable.                                                                                                            
                                                                                                                                
MS. ELGEE said the other reason the Department of Administration                                                                
would suggest the committee not approve Section 6, is that the                                                                  
unions have been much more willing to adopt to a new cost-of-living                                                             
study (at the times that they have been conducted), the statutory                                                               
schedule has limits, and is slow to be amended.  Ms. Elgee                                                                      
emphasized that the department would recommend the deletion of                                                                  
Section 6 for those reasons.                                                                                                    
                                                                                                                                
     An agreement concerning the wages of state employees may not                                                               
     establish a geographic differential or other cost-of-living                                                                
     allowance that is greater than the differential set out in AS                                                              
     39.27.021.                                                                                                                 
                                                                                                                                
Number 483                                                                                                                      
                                                                                                                                
MS. ELGEE noted that the conforming sections for municipal                                                                      
assistance and revenue sharing have been removed.  She said                                                                     
municipal assistance and revenue sharing have always been tied to                                                               
the old statutory geographic differential scheme, and by                                                                        
eliminating the hold-harmless sections that were contained in the                                                               
original bill, you removed that protection for local government                                                                 
assistance, that it would also be reduced.                                                                                      
                                                                                                                                
     The following was deleted:                                                                                                 
                                                                                                                                
     Payments to a municipality or other eligible recipient under                                                               
     AS 29.60.110 - 29.60.130 shall reflect area cost-of-living                                                                 
     differentials.  Payments shall be based on the sum of per                                                                  
     capita, per mile, and per bed or facility grants due each                                                                  
     municipality or other recipient multiplied by the appropriate                                                              
     area cost-of-living differential.  The area cost-of-living                                                                 
     differential for each recipient shall be determined annually                                                               
     by election district under the provisions of former AS                                                                     
     39.27.020 and AS 39.27.030.  Application of the area                                                                       
     cost-of-living differential may not result in distribution of                                                              
     an amount less than the amount of the payment determined                                                                   
     without reference to application of this section.                                                                          
                                                                                                                                
MS. ELGEE said, "The other section, relating to the geographic                                                                  
differential ... is a policy call, is the two-year freeze on                                                                    
employees.  In the past, when we have negotiated new geographic                                                                 
differential schemes for employees, in the collective bargaining                                                                
environment, we have frozen those employees so that they are not                                                                
harmed by diminishment of wages.  The new schedule takes effect                                                                 
with new employees, or as an employee was to separate or move out                                                               
the district, and the proposal here is a two-year freeze.  That is                                                              
a policy consideration that I think needs to be discussed."                                                                     
                                                                                                                                
Number 502                                                                                                                      
                                                                                                                                
CHAIR JAMES referred to revenue sharing which is tied to the old                                                                
system.  She said it seems that, if we are going to implement the                                                               
"real" geographic pay differential, that ought be the same amount                                                               
used for revenue sharing.  It doesn't seem that we ought to use two                                                             
different numbers on that.                                                                                                      
                                                                                                                                
MS. ELGEE replied it is a policy call of the legislature as to                                                                  
whether or not they want to do that.  But revenue sharing amounts                                                               
have been relatively flat, with some small reductions over the last                                                             
several years.  This would greatly reconfigure the distribution of                                                              
what other dollars are made available between communities.  She                                                                 
said the communities that presently enjoy a differential (under the                                                             
statutory scheme are significantly greater than what is contained                                                               
in the proposed schedule) would lose revenue sharing dollars in a                                                               
reconfiguration of the same amount of money.  She reiterated that                                                               
Fairbanks is significantly higher at 14 percent than what's                                                                     
proposed at 4 percent.  The statutory scheme also has differentials                                                             
in it for the Mat-Su [Matanuska-Susitna] Borough and the Kenai                                                                  
Peninsula that go to zero in the context of the proposed statutory                                                              
schedule contained in HB 199.  So those communities lose that                                                                   
differential advantage in the distribution of dollars.  She said                                                                
she wasn't sure that the legislators were aware of that direct                                                                  
connection and the original bill did have the hold-harmless                                                                     
provisions in it which has been removed by the proposed CS.                                                                     
                                                                                                                                
Number 538                                                                                                                      
                                                                                                                                
GUY BELL, Director, Division of Retirement and Benefits, Department                                                             
of Administration, testified that Section 15 excludes any State                                                                 
employee, hired or rehired after June 30, from the Supplemental                                                                 
Benefits System, and the annuity and the benefit components of the                                                              
SBS plan.                                                                                                                       
                                                                                                                                
MR. BELL emphasized that all State employees are effected.  He                                                                  
explained that employee's contribution to SBS is 6.13 percent of                                                                
pay, and that the employer contributes an equivalent amount (up to                                                              
the social security wage-base).  He noted that the social security                                                              
system currently requires 6.2 percent from the employer and                                                                     
employee, so by going to SBS the State has actually saved some                                                                  
money because we're paying less than we would have for social                                                                   
security.                                                                                                                       
                                                                                                                                
MR. BELL further explained that newly-hired, temporary, seasonal                                                                
and part-time employees fall short of the IRS required                                                                          
contributions under the internal revenue code (Mr. DeWitt mentioned                                                             
some of those issues).  Mr. Bell said the department believes                                                                   
temporary employees would need to move into social security and                                                                 
that there would be a small net increase in cost to the system.                                                                 
Currently temporary employees are not in PERS; they're in the SBS                                                               
only.  He said the State's contribution is 6.13 percent of those                                                                
employees' salaries to SBS.  For social security, the State would                                                               
shift that to 6.2 percent.                                                                                                      
                                                                                                                                
Number 570                                                                                                                      
                                                                                                                                
MR. BELL pointed out that IRS requires that a minimum of 7.5                                                                    
percent of an individual's salary be set aside annually for that                                                                
person's retirement benefit and that it has to be vested                                                                        
immediately; it can't be vested in five years because it has to be                                                              
available to that person he or she leaves.  He said the Public                                                                  
Employee Retirement System requires a 6.75 percent contribution,                                                                
which a person vests in immediately, the rest of the PERS benefit                                                               
is not vested in until the person reaches five years of service.                                                                
So under the IRS requirement we're .75 percent short if this HB 199                                                             
were to pass of the minimum amount required to be set aside for                                                                 
retirement benefits for seasonal and part-time employees.                                                                       
                                                                                                                                
CHAIR JAMES said she is not familiar with that IRS requirement.                                                                 
                                                                                                                                
MR. BELL explained that it has to do with whether you have to be in                                                             
or out of social security, if you stay out of social security you                                                               
have to provide the benefit of 7.5 percent.                                                                                     
                                                                                                                                
REPRESENTATIVE HUDSON asked when the last effective change took                                                                 
place on social security.                                                                                                       
                                                                                                                                
MR. BELL replied that he doesn't know that answer but his staff can                                                             
pull the history of the social security system since 1980.  He said                                                             
he believes the major changes were in 1986 when Medicare was made                                                               
mandatory for newly-hired employees.  He indicated that there may                                                               
have been some other changes.                                                                                                   
                                                                                                                                
CHAIR JAMES said it might have been the Tax Reform Act of 1986.                                                                 
The only changes have been in the level of coverage.                                                                            
                                                                                                                                
Number 616                                                                                                                      
                                                                                                                                
MR. BELL stated that the Department of Administration is concerned                                                              
with people who are rehired after July 1, especially through the                                                                
general constitutional arguments over the retirement and benefit                                                                
issue.  But that will be addressed in the Finance Committee.                                                                    
                                                                                                                                
MR. BELL explained that SBS is not just an annuity plan; it's also                                                              
a benefit plan.  Under SBS a person can select a disability                                                                     
benefit, survivor benefits, and accidental death benefits.  Those                                                               
are additional benefits that are available to folks.  Without SBS,                                                              
newly-hired employees won't have access to those benefits and an                                                                
example of the kind of problem you might run into with newly-hired                                                              
permanent employees, with less than five years of service,                                                                      
(although the department doesn't believe there's any requirement                                                                
that they be in social security) there will be some issues about                                                                
what happens if this person becomes disabled if that disability                                                                 
plan is not available to them.  He noted that under PERS a person                                                               
must have five years of service to be eligible to receive a                                                                     
non-occupational disability benefit.  An occupational disability                                                                
can occur any time and a person would be entitled to a benefit at                                                               
the time they are disabled, but if the injury was not the result of                                                             
an occupational hazard (indisc.), a person with less than five                                                                  
years of service is not eligible to receive the benefit.  Basically                                                             
a person can become "non-occupational disabled" and have no benefit                                                             
available.                                                                                                                      
                                                                                                                                
CHAIR JAMES asked, isn't that currently true under social security.                                                             
                                                                                                                                
MR. BELL replied that he is not sure.                                                                                           
                                                                                                                                
CHAIR JAMES commented that they have to have a certain number of                                                                
quarters to be able to qualify for the extra social security (SSI).                                                             
                                                                                                                                
REPRESENTATIVE HUDSON said he believes it is income related.                                                                    
                                                                                                                                
CHAIR JAMES agreed that it is income related.                                                                                   
                                                                                                                                
Number 648                                                                                                                      
                                                                                                                                
MR. BELL pointed out HB 199 eliminates both the employer and the                                                                
employee contributions to SBS (an employee contributes 6.13 percent                                                             
and the employer is contributing 6.13) and, of course, nothing is                                                               
saved by eliminating the employees' contribution; nothing is saved                                                              
by the State.                                                                                                                   
                                                                                                                                
MR. BELL referred to the general area of social security reform and                                                             
what's happening in Congress.  He said, "Congress is very                                                                       
concerned, and the President is performing social security.  We                                                                 
have taken a position to one of the components of that social                                                                   
security reform (which is mandatory inclusion of newly-hired public                                                             
employees).  That's an issue that is raised fairly frequently at                                                                
the Congressional level.  That as of a certain date newly-hired                                                                 
public employees will be required to be in social security.  One of                                                             
the arguments that we have is that while we have a defined benefit                                                              
plan in PERS and we have a defined contribution plan with SBS,                                                                  
social security added on top of that, that would be a costly                                                                    
addition to the employer and we feel that it would be unnecessary,                                                              
given that we do have a combined SBS and PERS system at this time."                                                             
                                                                                                                                
Number 672                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY asked if the State employees strike, are                                                                 
they terminated.  If they are terminated and return, do they become                                                             
new-hires.                                                                                                                      
                                                                                                                                
CHAIR JAMES replied no, it applies only to the people who have not                                                              
previously worked for the State.                                                                                                
                                                                                                                                
REPRESENTATIVE SMALLEY asked what happens to employees that take a                                                              
leave, to improve their educational background, technical training                                                              
or skills, and then return.                                                                                                     
                                                                                                                                
MR. BELL explained the same issue would apply: Is the person                                                                    
rehired?  He said, if that is amended in the Finance Committee, to                                                              
remove the provision for rehired employees it becomes a moot issue.                                                             
                                                                                                                                
CHAIR JAMES asked what if, when they leave for educational                                                                      
purposes, they take their SBS out and decide to return.                                                                         
                                                                                                                                
MR. BELL responded, currently in PERS, a person can leave and take                                                              
their contributions out.  If that person returns, he or she is                                                                  
still in the tier based on the original date of hire; the original                                                              
date of hire sets a person's PERS tier.  He said he would assume                                                                
that, if the bill is amended for SBS, the same kind of provision                                                                
would apply.                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUDSON asked if a person can pay it back to the SBS                                                              
program.                                                                                                                        
                                                                                                                                
MR. BELL replied a person cannot pay back their SBS contribution                                                                
after they have taken it out.                                                                                                   
                                                                                                                                
Number 726                                                                                                                      
                                                                                                                                
CHUCK O'CONNELL, Member of the General Government Bargaining Unit,                                                              
testified via teleconference from Fairbanks in opposition to HB
199.  Mr. O'Connell gave the following statement:                                                                               
                                                                                                                                
     I'm speaking in behalf of all members in our union.  We have                                                               
     approximately 7,200 members in the General Government                                                                      
     Bargaining Unit.  And I'm speaking from the perspective of we                                                              
     have an obligation as an employee organization to protect the                                                              
     merit principle, and that obligation is legal, and we are                                                                  
     extremely interested in maintaining the highest quality                                                                    
     workforce possible.  And we feel that these changes that were                                                              
     represented in HB 199 would in fact create a second-class                                                                  
     workforce within our group and we are opposed to that approach                                                             
     to state government.                                                                                                       
                                                                                                                                
     Most people who go to work for the State of Alaska are looking                                                             
     at the State of Alaska as an opportunity for a career ... and                                                              
     if you compare any large employer in the private sector you                                                                
     will find that they have social security and they also have a                                                              
     retirement system.  What you are doing with the changes                                                                    
     promoted here is you are removing the replacement for social                                                               
     security within the framework of the employer and employee                                                                 
     relationship.  And we do not believe that it will do anything                                                              
     to promote and encourage and sustain a high-quality workforce.                                                             
     ... People are leaving state service and to set up a system                                                                
     where we replace those people in the future with a                                                                         
     lower-valued worker is a (indisc.--teleconferencing) to                                                                    
     quality workforce.                                                                                                         
                                                                                                                                
     We also feel that this bill would create a very significant                                                                
     problem in the area of temporary workers.  We have seasonal                                                                
     employees, we have hundreds of "on-call" nonpermanent                                                                      
     employees who function as substitute workers in 24-hour                                                                    
     facilities, and this bill would have the direct effect into                                                                
     the social security system, which would create a dual-payroll                                                              
     system statewide and we do not believe that it's in the best                                                               
     interest of the state.                                                                                                     
                                                                                                                                
     Finally, I would like to report to you that in going through                                                               
     our membership we currently have in the GGU 984 members who                                                                
     are below the federal poverty level and qualify for public                                                                 
     assistance in the areas of medical care and other areas.  And                                                              
     to even further diminish their value (indisc.--paper                                                                       
     shuffling) of the workforce and we certainly hope that all of                                                              
     you on the committee oppose this bill vigorously.                                                                          
                                                                                                                                
Number 781                                                                                                                      
                                                                                                                                
PAUL LYLE testified in opposition to HB 199 from Fairbanks, and                                                                 
noted that he is representing himself and is not speaking for the                                                               
Administration.  He read the following testimony:                                                                               
                                                                                                                                
     I'm a partially-exempt employee. ... HB 199 is a punitive                                                                  
     bill.  It takes 20 percent of my pay effective July 1, 2001.                                                               
     The geographic differential is a vital part of the                                                                         
     compensation package for professionals in Fairbanks.  It is                                                                
     not a cost-of-living (COLA) adjustment like the unions have,                                                               
     that is why it's different than the union's COLA.  It is not                                                               
     left over from the "giddy" days of the pipeline.  The                                                                      
     geographic differential has been in place since 1966.  It is                                                               
     an incentive payment to attract high-quality professionals to                                                              
     work in the less hospitable areas of the state.  Fairness                                                                  
     should be the touchstone of how you treat those professionals                                                              
     whose only sin in remaining employed with the state in                                                                     
     Fairbanks has been their reliance upon the promises that past                                                              
     legislatures have made and kept over 30 years.  Fairness                                                                   
     dictates that those presently receiving the geographic                                                                     
     differential be grandfathered into the old system if it is                                                                 
     changed.  That's how university professors were treated when                                                               
     they lost their differential in 1994.                                                                                      
                                                                                                                                
     There are good [reasons] and valid reasons why professionals                                                               
     who have a high degree of schooling and skill should be                                                                    
     treated differently than secretaries.  But if you have to                                                                  
     treat us the same as secretaries were treated, which is fine                                                               
     with me, then don't cut my pay because their pay was not cut                                                               
     when they lost their COLA.                                                                                                 
                                                                                                                                
     The 2001 step decreases and the repeal of the longevity                                                                    
     increases should be rejected as unfair.  House Bill 199 takes                                                              
     the most money away from those professionals who have devoted                                                              
     the most service to the state and who, as a result of their                                                                
     age, cannot easily change careers at this point.  HB 199 will                                                              
     cause an unprecedented brain drain, a serious loss of                                                                      
     institutional memory, and the loss of irreplaceable skills and                                                             
     experience.                                                                                                                
                                                                                                                                
Number 815                                                                                                                      
                                                                                                                                
     HB 199 is a disguised income tax so far as I'm concerned.  It                                                              
     takes about 20 percent of my income for the sole purpose of                                                                
     funding general government.  Isn't that what an income tax                                                                 
     does?  The only difference is that this income tax falls on a                                                              
     few state employees who don't happen to have any collective                                                                
     bargaining agreement or union to protect them while all other                                                              
     citizens of the state (including other state workers) get a                                                                
     free ride on the income tax.  Is that fair?  Fairness dictates                                                             
     that all citizens should be subject to an income tax, not just                                                             
     a few.                                                                                                                     
                                                                                                                                
     You do not write on a clean slate.  Many years ago, the State                                                              
     of Alaska decided to build and maintain a career force of                                                                  
     professionals who would devote their entire careers to state                                                               
     service, some in the less hospitable areas.  You need to keep                                                              
     faith with those who responded to the State's call.                                                                        
                                                                                                                                
     It is easy to support draconian cuts in our salaries, despite                                                              
     the promises made to us over many years, when you do know who                                                              
     we are, the quality of the work we perform, or the honesty and                                                             
     integrity that we bring to the interaction of government with                                                              
     its citizens.                                                                                                              
                                                                                                                                
     State professionals in my department acquire the property you                                                              
     need to build capital projects in your districts.  They advise                                                             
     agencies to ensure that the civil rights of Alaskans are left                                                              
     untrammeled.  They file lawsuits to vindicate the policy                                                                   
     decisions made by the legislature.  They protect children                                                                  
     under laws you pass, enforce the familial obligations of                                                                   
     parents under the laws you design, protect cities and villages                                                             
     from those who commit crimes, and preserve the public fisk                                                                 
     against unwarranted and unsupported claims.  For their                                                                     
     dedication, professionals working for the State of Alaska                                                                  
     deserve to be treated fairly for their service rather than                                                                 
     being made a target for personal political gain.  They need to                                                             
     be grandfathered into the system of pay that they are                                                                      
     currently compensated on.                                                                                                  
                                                                                                                                
     WE ARE NOT NUMBERS ON YOUR BALANCE SHEET.  WE ARE PEOPLE WHO                                                               
     DESERVE TO BE TREATED FAIRLY.  And I hope this committee will                                                              
     summons the courage to KILL HB 199, which is a mean-spirited,                                                              
     vindictive and ultimately unproductive approach to the state's                                                             
     budget shortfall.                                                                                                          
                                                                                                                                
Number 846                                                                                                                      
                                                                                                                                
DON ETHERIDGE, Local 71, District Council Laborers, told the                                                                    
members that the laborers are opposed to this bill in its entirety,                                                             
they don't like any of it.  He said they believe this is just                                                                   
another attack on the public employee because they're an easy                                                                   
target.                                                                                                                         
                                                                                                                                
MR. ETHERIDGE noted that the workforce for the state is changing.                                                               
When he began to work for the State in the early 70s the comment at                                                             
that time was that it was a home for the aged and a school for the                                                              
young.  However, it's not that way any longer.  We don't send out                                                               
unqualified help anymore, they have to be fully qualified in their                                                              
job.                                                                                                                            
                                                                                                                                
TAPE 99-26, SIDE B                                                                                                              
Number 001                                                                                                                      
                                                                                                                                
MR. ETHERIDGE continued, "For some of these jobs that the public                                                                
employees are required to do.  We've had several jobs where we've                                                               
had to go out there and do a letter of agreement with the State,                                                                
giving them a higher wage, starting them at a higher step because                                                               
they could not find the people to do this work.  And if we lose the                                                             
SBS incentive, geographic differentials, and all this other stuff,                                                              
it's even going to make it more difficult to find qualified people                                                              
to do the jobs out there.  It's easy enough to find somebody that                                                               
will go out and pretend to do the job, or go out there and stumble                                                              
through the job, but the State of Alaska deserves and requires top                                                              
employees to do that job.  And we look at this bill as a total way                                                              
of undermining the public employees and our ability to find good                                                                
help for the state."                                                                                                            
                                                                                                                                
Number 035                                                                                                                      
                                                                                                                                
JOHN ATHENS testified in opposition to HB 199 via teleconference:                                                               
                                                                                                                                
     I'm here speaking for myself. ... The more the legislature                                                                 
     cuts the pay and the benefits of partially-exempt (PX)                                                                     
     employees the more the legislature is going to convert these                                                               
     jobs and the starter-jobs for young professionals just out of                                                              
     law school with respect to the Department of Law.  I think                                                                 
     that the legislature needs to discuss the basic philosophical                                                              
     change that is before it in House Bill 199 which is to change                                                              
     the PX employment with the State from career professional jobs                                                             
     to starter-jobs for young professionals (indisc.) where they                                                               
     will pass through for a couple of years.  And I think the                                                                  
     impact of that is whether you want professionals that have                                                                 
     experience and longevity with the State to deal with the                                                                   
     complex problems that face them on a daily basis or if you                                                                 
     want the PX jobs to be a training ground for young                                                                         
     professionals and then they will move on.                                                                                  
                                                                                                                                
     Second, with regard to the geographic differential, I think                                                                
     it's really unfair to cut that from the employees that                                                                     
     currently receive it.  Many of us are career employees who                                                                 
     have held our jobs for many years.  We never understood that                                                               
     the geographic differential was tied to cost-of-living which                                                               
     could fluctuate.  We understood that we got the geographic                                                                 
     differential because of the place we live, because we lived in                                                             
     either a remote place or a place with a harsh climate and this                                                             
     was the incentive for us to remain in those locations.                                                                     
                                                                                                                                
     I disagree with the Administration's point of view that it                                                                 
     would be fair to treat us like the union people in that the                                                                
     geographic differential should be the same. ... Their                                                                      
     geographic differential has changed (I think the                                                                           
     Administration said in the 1980s) they've had the benefit of                                                               
     collective bargaining since the 80s and they've had a                                                                      
     cost-of-living adjustment.  The partially-exempt employees do                                                              
     not have collective bargaining and we don't have the                                                                       
     cost-of-living adjustment.                                                                                                 
                                                                                                                                
     I think that if you want an example of how it would be more                                                                
     fair to treat us, it would be how the university professors                                                                
     were treated in Fairbanks.  Several years ago, as a result of                                                              
     bargaining they did in fact lose their geographic differential                                                             
     but what happened was that they were given raises that were                                                                
     the same amount of the geographic differential that they                                                                   
     received so they did not have any out-of-pocket loss, and new                                                              
     people coming in would be paid at the pay-scale that they                                                                  
     would start new people at.  That would be far more fair.  You                                                              
     shouldn't take money out of the pockets of people who are                                                                  
     career employees that devoted their career to working for the                                                              
     state.                                                                                                                     
                                                                                                                                
     I'm given a signal that I'm out of time.  I actually wanted to                                                             
     discuss (indisc.) more about the bill rolling back salaries to                                                             
     Step F, and I wanted to discuss something about how                                                                        
     demoralizing this bill is to the people who currently work in                                                              
     these positions.  If the committee would accept my written                                                                 
     testimony, I'd be glad to submit that as written testimony [On                                                             
     file].                                                                                                                     
                                                                                                                                
Number 170                                                                                                                      
                                                                                                                                
CRAIG PERSSON, Representing the Fairbanks Public Safety Employees                                                               
Association appeared before the committee in opposition to HB 199.                                                              
He gave the following testimony:                                                                                                
                                                                                                                                
     We represent basically 1,100 State troopers, Fish and Wildlife                                                             
     troopers, correctional officers, and airport safety officers                                                               
     throughout the whole state.  First of all, there are three                                                                 
     different areas in that bill that we don't like: The SBS -                                                                 
     taking that from new employees, the geographic differential,                                                               
     and taking longevity increases basically out of collective                                                                 
     bargaining and giving it to the legislature for appropriation.                                                             
                                                                                                                                
     The SBS, that's a big one for us, attracting and retaining                                                                 
     employees - it is very hard for us to do so.  State troopers,                                                              
     at our last academy we had approximately 700 recruits, out of                                                              
     these 700 we got it down to 30.  It's getting harder and                                                                   
     harder to attract good qualified employees.  By the time you                                                               
     take the employee, and you take him all the way through all                                                                
     the testing process to be a State trooper, it's very difficult                                                             
     to end up with 30 people that are ready to go to the academy.                                                              
                                                                                                                                
     Geographic differential: We have a different formula than the                                                              
     GGU, the formula that we have has basically negotiated over                                                                
     the last 10 to 12 years.  For an example, right here in                                                                    
     Juneau' as you legislators all know, the cost-of-living is                                                                 
     much higher here than it is in a lot of places in the state so                                                             
     our members receive a 3.75 percent one-step differential here.                                                             
                                                                                                                                
Number 213                                                                                                                      
                                                                                                                                
     Longevity increases: Basically longevity increases are for                                                                 
     people hanging in there with the State doing their job                                                                     
     day-after-day and the State says, "You've done this job,                                                                   
     you've been here, you've been a good employee, therefore,                                                                  
     you're going to receive this increase."  There's basically                                                                 
     only three increases in the longevity throughout your last 13                                                              
     years of employment with the State.                                                                                        
                                                                                                                                
     Finally I want to say where does it end.  As you probably all                                                              
     know, the Public Safety Officers Unit was the first union this                                                             
     year to sign an agreement with the Administration.  We took                                                                
     into effect the oil prices and what the legislature was taught                                                             
     in the situation this year of low oil prices and low oil                                                                   
     production.  With this in mind we said, "We're not going to                                                                
     even ask for increases this year," so we signed a three-year                                                               
     agreement that asked for no increases in the fiscal year 2000.                                                             
     For this the legislature comes up with House Bill 199, which                                                               
     basically kicks us in the knees, and I believe it is a                                                                     
     disservice to the men and women who protect us every day.                                                                  
                                                                                                                                
Number 245                                                                                                                      
                                                                                                                                
CAMERON LEONARD testified via teleconference from Fairbanks in                                                                  
opposition to HB 199.  His testimony is as follows:                                                                             
                                                                                                                                
     I'm with the Attorney General's Office here in Fairbanks.                                                                  
     I've been there for a dozen years.  I feel fortunate to have                                                               
     the opportunity to make my career in that office and in the                                                                
     public sector I found it very rewarding.  And I share the                                                                  
     comments and the thoughts that my two colleagues have already                                                              
     offered, Mr. Lyle and Mr. Athens.                                                                                          
                                                                                                                                
     I'm here to ask the committee not to cut my pay by 20 percent.                                                             
     I haven't run the numbers but I think it would be somewhere in                                                             
     that neighborhood, given the 10 percent loss in the geographic                                                             
     differential and loss of longevity, which I am in the                                                                      
     longevity program.  I would like to underscore the comment                                                                 
     that the spokesperson for the Administration made that there                                                               
     is a policy call that the committee should be considering as                                                               
     to how to handle people like myself, whether there should be                                                               
     some sort of a grandfathered approach that would hold harmless                                                             
     the people who have made decisions in reliance upon a certain                                                              
     compensation package, and have a new salary schedule and a new                                                             
     differential apply perspectively to new-hires, or whether you                                                              
     want to pursue the other course of cutting our pay, in many                                                                
     cases somewhat dramatically.                                                                                               
                                                                                                                                
     I think that is an important policy call for you to make, I                                                                
     would urge you to make it in the same way that it's been made                                                              
     in other context such as the professors that would recognize                                                               
     some sort of grandfather rights of people who have made career                                                             
     decisions, bought houses, financial commitments, the usual                                                                 
     kinds of lifetime decisions that we all make.  Obviously, it's                                                             
     difficult to see your pay cut in the neighborhood of 20                                                                    
     percent and still meet those sorts of commitments.  So please                                                              
     consider that policy call carefully and do the right thing by                                                              
     those of us who are effected by this bill.                                                                                 
                                                                                                                                
Number 290                                                                                                                      
                                                                                                                                
TIM BECK testified in opposition to HB 199 via teleconference from                                                              
Fairbanks and presented the following testimony:                                                                                
                                                                                                                                
     I'm speaking in opposition to HB 199.  Not only does this bill                                                             
     fail to plan, it appears to indeed plan to fail.  I've been                                                                
     employed by the State of Alaska for 24 years.  It's my opinion                                                             
     that the State of Alaska has a contract indeed my time and                                                                 
     services, I deliver and continue to do so - I expect no less                                                               
     of the State of Alaska.                                                                                                    
                                                                                                                                
     The Supplemental Benefits System is a substitute for social                                                                
     security benefits.  The vote was only allowed by the federal                                                               
     government if the alternative system was provided by the State                                                             
     of Alaska.  Some of the things that I utilize the Supplemental                                                             
     Benefits System for to provide for my family are: Life                                                                     
     insurance, accidental death and disability, survivor benefits,                                                             
     short term disability, long term disability, additional health                                                             
     care benefits (which I pay for out of my pocket), and another                                                              
     alternative option which I do not utilize is the dependant                                                                 
     care reimbursement.  So this is not just a retirement plan, it                                                             
     is a plan that we have utilized to structure our lives around.                                                             
     If, in fact you do indeed try to pull this wonderful program                                                               
     from the employees of the State of Alaska I would suggest that                                                             
     you can do no less than put us at least back in the social                                                                 
     security where these other things are available to us because                                                              
     I don't want to leave my family without protection.  I've                                                                  
     given my time to the State of Alaska.  I can't get that back.                                                              
     Much like these other folks here that have given testimony, I                                                              
     think that this is a very poor bill and I'm not sure where                                                                 
     it's going other than the fact that I suppose if the                                                                       
     disincentive is there to be employed by the State of Alaska,                                                               
     maybe there's a long-term run, maybe people will hope that                                                                 
     there's going to be less government.  I don't think that's                                                                 
     going to occur.                                                                                                            
                                                                                                                                
     I encourage you to kill this and defeat this bill.  And like                                                               
     I said, take a good look at what the Supplemental Benefits                                                                 
     Program really is.  It's not just another cash-cow for public                                                              
     employees, it provides a protection our families deserve and                                                               
     need.                                                                                                                      
                                                                                                                                
Number 339                                                                                                                      
                                                                                                                                
CHAIR JAMES closed the public testimony on HB 199.  She asked Mr.                                                               
DeWitt, what do you say to those people who are not vested; do we                                                               
automatically put them on social security?  She stated that they                                                                
would have the money taken out but they'll never get it back.                                                                   
                                                                                                                                
MR. DEWITT responded, as he understands it, temporary-hires would                                                               
default into social security.  The folks who are permanent-hires,                                                               
if they left before vesting in five years, would receive their                                                                  
portion of their contribution back.  He said those are the two                                                                  
options for temporary and short-term employees that were permanent.                                                             
He mentioned that he hasn't been able to clarify that to share the                                                              
similarity.                                                                                                                     
                                                                                                                                
CHAIR JAMES stated temporary employees would be eligible for social                                                             
security, but permanent employees who don't stay with the State for                                                             
five years (and become vested) won't receive any credit for social                                                              
security.  She asked if that's how it works.                                                                                    
                                                                                                                                
MR. DEWITT said that was his understanding.                                                                                     
                                                                                                                                
CHAIR JAMES indicated that she doesn't know if that's a good idea.                                                              
                                                                                                                                
Number 396                                                                                                                      
                                                                                                                                
REPRESENTATIVE HUDSON emphasized that it is not a fair idea and                                                                 
that's part of the problem.  He said, if we were going to move out                                                              
of the SBS program and provide social security, he would feel that                                                              
we were at least developing some parity there.  However, we heard                                                               
that would cost the State more money because the contributions to                                                               
social security are higher than the State's contributions to the                                                                
SBS program.  He reiterated that it interrupts a longstanding                                                                   
negotiated agreement between the employees and those who represent                                                              
them in the State of Alaska and the Administration.  He said, to                                                                
arbitrarily eliminate a program for all new-hires and put people                                                                
into a dual-pay status (doing the very same job), doesn't seem that                                                             
will encourage people to stay with the government.  Representative                                                              
Hudson said, "You can understand the moral problems that that might                                                             
generate, for those who wouldn't be receiving a contribution on                                                                 
behalf of the SBS."                                                                                                             
                                                                                                                                
MR. DEWITT remarked, Representative Hudson, we are getting paid                                                                 
differently.                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUDSON interjected, you more than me.                                                                            
                                                                                                                                
MR. DEWITT added, "You are in Tier 1, I'm in Tier 2, and our                                                                    
benefits are different as a result of that."                                                                                    
                                                                                                                                
REPRESENTATIVE HUDSON said, "But we still have a program."                                                                      
                                                                                                                                
CHAIR JAMES asked for a motion to put the proposed committee                                                                    
substitute before the committee.                                                                                                
                                                                                                                                
Number 441                                                                                                                      
                                                                                                                                
REPRESENTATIVE COGHILL made a motion to adopt the proposed                                                                      
committee substitute (CS) for HB 199, version LS0823\G, Cramer,                                                                 
4/19/99, as the working draft.  There being no objection, it was so                                                             
ordered.                                                                                                                        
                                                                                                                                
CHAIR JAMES referred to page 6, Section 39.30.165, Limitation on                                                                
participation by state employees:                                                                                               
                                                                                                                                
     A state employee may participate in the supplemental benefit                                                               
     program under AS 39.50.150 - 39.50.180 only if the employee                                                                
     was in pay status, on approved leave without pay, or on                                                                    
     seasonal leave without pay on June 30, 1999;                                                                               
                                                                                                                                
CHAIR JAMES asked what language would fix the problem for temporary                                                             
employees.                                                                                                                      
                                                                                                                                
MR. DEWITT replied, "It's my belief we don't need to put language                                                               
in for temporary employees.  I believe they default, as I                                                                       
understand it, to the social security system.  The change that we                                                               
were suggesting, ... generally Section 3 would be eliminated, as I                                                              
understand it. ... The substance of the amendment would be that                                                                 
rehired employees would continue in SBS on a separate tier system,                                                              
similar to the other tier systems that we have."                                                                                
                                                                                                                                
Number 482                                                                                                                      
                                                                                                                                
CHAIR JAMES asked Mr. DeWitt, what do you say to the statement                                                                  
that, "Even private sector employees, generally if they're under                                                                
social security, at least larger employees have a retirement system                                                             
too."                                                                                                                           
                                                                                                                                
MR. DEWITT quoted the "KPMG" study that was conducted last fall:                                                                
Total compensation for State of Alaska employees was calculated to                                                              
be 120 percent of the market median and 125 percent of the market                                                               
weighted average private survey data.  This indicates that State                                                                
employees are compensated more than employees performing similar                                                                
work in other organizations within the State's defined labor                                                                    
market.  He said it seems that we can pick and choose individual                                                                
parts of compensation and what we need to look at is the size of                                                                
the compensation package, is it within the range that we ought to                                                               
be in.  Mr. DeWitt further stated that the Finance Committee                                                                    
believes these reductions help bring us back into a relatively                                                                  
competitive area with other employers.                                                                                          
                                                                                                                                
CHAIR JAMES asked, "What about the 37.5 hours which factors in, and                                                             
other benefits (not counting retirement) and so forth factor in.                                                                
And that certainly does up the amount that we're paying for State                                                               
employees.  Can we fix that?  Another 2.5 hours a week would make                                                               
a big difference in the amount of compensation compared to other                                                                
folks who are working 40 hours a week."                                                                                         
                                                                                                                                
MR. DEWITT replied that those are all options.  He said his point                                                               
was that we have different sets of benefits.  He further stated, "I                                                             
didn't hear anybody come to the table and object to the fact that                                                               
we have a shorter work-week than most other employees.  And that is                                                             
one of the comparable benefits that in fact we do have on the                                                                   
employees of the State."                                                                                                        
                                                                                                                                
Number 544                                                                                                                      
                                                                                                                                
CHAIR JAMES stated that, "It's your annual that makes up the                                                                    
difference and I don't know that that KPMG report did it on an                                                                  
annual salary basis for the hours worked and I think a standard                                                                 
work-week is 40 hours.  I think that an awful lot of the factors                                                                
that plugged in there were the other benefits, the 37.5 hour                                                                    
work-week and some of the other benefits of vacation time and time                                                              
not working."  She indicated that State employees don't work as                                                                 
many days and hours as the rest of the folks do; that's where the                                                               
difference is but that doesn't affect the bottom-line annual salary                                                             
that they're making.  She said, "It seems to me like if you wanted                                                              
to do some real conservative planning for the State to make the                                                                 
State employees be more effective, we'd have them work more for the                                                             
same pay."                                                                                                                      
                                                                                                                                
REPRESENTATIVE HUDSON said he researched collective bargaining and                                                              
found that there were years and years when there were no increases                                                              
whatsoever in pay.  He mentioned the Egan Administration negotiated                                                             
with the State employees and gave them a 7 percent reduction in                                                                 
their work-week in lieu of a 7 percent pay raise.                                                                               
                                                                                                                                
CHAIR JAMES said she believes "we" ought to be back to the table on                                                             
that issue in lieu of taking away benefits and reducing salaries                                                                
and increases.                                                                                                                  
                                                                                                                                
Number 584                                                                                                                      
                                                                                                                                
REPRESENTATIVE KERTTULA emphasized that State employees are not                                                                 
just working a 37.5 hour work-week because they take work home,                                                                 
some employees are putting in the hours whether they're getting                                                                 
paid for it or not.  She said she takes umbrage at the fact that                                                                
they don't work as hard, or they don't work as much because she                                                                 
doesn't think that is accurate.                                                                                                 
                                                                                                                                
REPRESENTATIVE KERTTULA indicated she has a difficult time with HB
199 because it is really regressive.  She said she would like to                                                                
know quite a bit more about what Mr. Bell had to say in terms of                                                                
whether or not it would actually save the State money with the                                                                  
increased cost that we would have to put into it to go to social                                                                
security.                                                                                                                       
                                                                                                                                
CHAIR JAMES stated that she knows employees who don't work beyond                                                               
37.5 hours a week, however, if they do work long hours they should                                                              
be paid for it.  She said she was only making a statement that                                                                  
changes could be made and that they should be made by collective                                                                
bargaining as opposed to this piece of legislation [HB 199].  Chair                                                             
James further stated, "I think that the most productive employees                                                               
are the ones who are happy with where they are and feeling good                                                                 
about what they're doing.  I don't think this bill is going to do                                                               
that.  In fact I think it is going to have a negative effect so I'm                                                             
not comfortable with it in that respect.  I think that before you                                                               
reduce someone's salary, you need to know how dependent they are on                                                             
their salary because it's very likely that if you reduce their                                                                  
salary, they're going to have to look for another job ... and where                                                             
are they going to find one ... that makes the amount of money they                                                              
need to make."                                                                                                                  
                                                                                                                                
632                                                                                                                             
                                                                                                                                
CHAIR JAMES asked Mr. DeWitt to provide the language that rehires                                                               
would be eligible for the SBS.                                                                                                  
                                                                                                                                
CHAIR JAMES stated that, since the committee only had the bill                                                                  
itself just recently, and the CS this morning, she would like to                                                                
hold HB 199 over until Thursday because this is a serious issue.                                                                
                                                                                                                                
REPRESENTATIVE WHITAKER asked that a fiscal note also be provided.                                                              
                                                                                                                                
MR. DEWITT stated the Administration has not yet provided it.                                                                   
                                                                                                                                
Number 682                                                                                                                      
                                                                                                                                
CHAIR JAMES indicated that HB 199 will be moved out of committee on                                                             
Thursday.  [HB 199 was held over in committee].                                                                                 
                                                                                                                                
SB 33-TASK FORCE ON PRIVATIZATION                                                                                               
                                                                                                                                
Number 687                                                                                                                      
                                                                                                                                
CHAIR JAMES announced the next order of business is CSSB 33(FIN)                                                                
"An Act relating to contracts for the performance of certain state                                                              
functions previously performed by state employees and to the                                                                    
Commission on Privatization and Delivery of Government Services;                                                                
and providing for an effective date."                                                                                           
                                                                                                                                
Number 695                                                                                                                      
                                                                                                                                
MARK HODGINS, Legislative Assistant to Senator Ward, presented SB
33 on behalf of the Senator.  He pointed out that SB 33, version                                                                
LS0317\S, sets up a commission which looks into the aspects of                                                                  
contracting out, privatizing, or redistributing State services to                                                               
the municipalities and to the federal government and reports back                                                               
in one year [to the legislature and the governor].  He said this                                                                
commission would not make any horrendous changes in the delivery of                                                             
services.  Mr. Hodgins said, "We have to look at how we deliver                                                                 
government.  And if there are better ways of delivering services,                                                               
we need to look at what needs to be done - and some of the                                                                      
alternatives."  He further stated that there are portions of State                                                              
government which should never be privatized, there are porions of                                                               
state government that should be run more efficiently, and there are                                                             
possibly portions of state government that we need to add more                                                                  
revenues and more staff.                                                                                                        
                                                                                                                                
Number 728                                                                                                                      
                                                                                                                                
MR. HODGINS indicated that Governor Knowles vetoed similar                                                                      
legislation for three reasons, one was that the Governor felt that                                                              
it was a separation of powers issue.  A legal opinion from Legal                                                                
Services said they feel that separation of powers was not a valid                                                               
reason.  Mr. Hodgins said it was the fact that the Governor was                                                                 
going to be mandated to appoint a certain individual as one of his                                                              
representatives, representing a certain faction of the society.                                                                 
Mr. Hodgins further stated, "We feel in that the opinion that came                                                              
out, to guess that as long as there's no legislation coming out of                                                              
this committee, that there is not the question of separation of                                                                 
powers."  The second reason is the Governor felt that it should be                                                              
presented as a resolution and not as a bill.  Mr. Hodgins said, "We                                                             
feel that the bill does demand a certain time and does put a little                                                             
bit of teeth into the information that will be gathered and the                                                                 
recommendations that will come forward.  Again, those will simply                                                               
be recommendations that the legislature can decide on, decide the                                                               
policy and move forward with."  The last point Governor Knowles                                                                 
made was that it had a power to administer an oath.  Mr. Hodgins                                                                
said SB 33 does not have that power because it's simply a                                                                       
commission.  He pointed out that SB 33 was originally a task force                                                              
and was changed to a commission by the Senate Finance Committee.                                                                
He said, "There is no difference between a commission and a task                                                                
force because their duties are laid out specifically in the body of                                                             
the bill and that's what gives a task force or a commission the                                                                 
appropriate powers to do its findings."                                                                                         
                                                                                                                                
Number 762                                                                                                                      
                                                                                                                                
CHAIR JAMES asked, what is the net result of the work of this                                                                   
commission, if they find areas that would be beneficial to either                                                               
privatize or contract out, that they make that report to the                                                                    
legislature and that the legislature makes those decisions.  What                                                               
happens as a result of their decision making process?                                                                           
                                                                                                                                
MR. HODGINS replied the commission's report is given to the                                                                     
Governor and to the legislature and there is nothing binding on                                                                 
that.                                                                                                                           
                                                                                                                                
REPRESENTATIVE OGAN said he supports SB 33, however, he would like                                                              
to offer a conceptual amendment which would expand the task force                                                               
[commission] to include, "looking at functions of state government                                                              
that need to go away."  He suggested that the panel also be a                                                                   
"reprioritization commission" which makes recommendations of things                                                             
that the State has provided in the past, but that we possibly can't                                                             
afford to do it any longer, "so we can do the things that we're                                                                 
supposed to do well."                                                                                                           
                                                                                                                                
MR. HODGINS responded that, "The sponsor [Senator Ward] agrees that                                                             
there are probably some areas of state government that we should                                                                
not be in, there's some services that we deliver that maybe we                                                                  
shouldn't be delivering."  He said the first section of SB 33 kind                                                              
of lays out the territory and states that if government shouldn't                                                               
be doing this, maybe private enterprise should be, that maybe other                                                             
organizations should be doing some of the services.  He indicated                                                               
that (before the oil money started coming in) it seemed like the                                                                
churches and other organizations did most of the social services                                                                
type work by helping individuals and their neighbors.  Mr. Hodgins                                                              
stated, "And then when we got a lot of money it seemed like there                                                               
was a faceless, nameless person that sent checks ... to help rather                                                             
than personal assistance. ... Because people expect those services,                                                             
it's quite traumatic to make a change."  He added that he                                                                       
wholeheartedly agrees with Representative Ogan that there are areas                                                             
that the state should not be involved with, whether they should go                                                              
away and that maybe this commission can give us some insight on                                                                 
that.                                                                                                                           
                                                                                                                                
Number 821                                                                                                                      
                                                                                                                                
CHAIR JAMES said she totally disagrees with the term                                                                            
"privatization" because true privatization means that the State                                                                 
goes out of business and that the private sector has the option of                                                              
picking it up or not.  We just say, "This is not a proper thing for                                                             
the government to be doing anymore and someone else should pick it                                                              
up, it's not something we should be spending public funds on."  She                                                             
said it may be better managed and done more efficiently if someone                                                              
else were to do it because we have our rules and (indisc.) that                                                                 
keep us from doing it the way it ought to be done.                                                                              
                                                                                                                                
CHAIR JAMES stated that she doesn't call it contracting out or                                                                  
outsourcing privatization because we're still doing it, we're just                                                              
not having state employees do it and so that's really not                                                                       
privatization at all.  Chair James further stated, "I'm not                                                                     
convinced that the decision to determine whether we should contract                                                             
out or not should be based on just the cost of it.  If it's                                                                     
something that we've determined that we as a State should be doing,                                                             
we should be doing it well, and we should be doing it as                                                                        
inexpensively as possible. ... And the most important times that we                                                             
should do outsourcing is when we have a blip in the need and we                                                                 
don't have a steady workforce to provide that need."                                                                            
                                                                                                                                
Number 856                                                                                                                      
                                                                                                                                
CHAIR JAMES added, "I think that the agencies should have an                                                                    
opportunity to put their own costs together and they might find                                                                 
that they're wasting their funds in getting the job done because I                                                              
think there is an ability to cut the costs if we go out, but it                                                                 
needs to be costs over the long-term.  There's no point in putting                                                              
something out for a bid to the private sector, and somebody comes                                                               
in with a low-bid, and you give it to him, and a year later you                                                                 
know you have to pick it back up again, now you..."                                                                             
                                                                                                                                
TAPE 99-27, SIDE A                                                                                                              
                                                                                                                                
CHAIR JAMES continued.  "...Privatization, and I think this task                                                                
force should find those kinds of things even though it doesn't say                                                              
that in this piece of legislation.  And I think that would kind of                                                              
respond to Representative Ogan's concerns."                                                                                     
                                                                                                                                
Number 010                                                                                                                      
                                                                                                                                
REPRESENTATIVE COGHILL said he resists task forces because quite                                                                
often the foregone conclusion is just to be substantiated.  He said                                                             
the title is more simplified than the actual title (Section 8, page                                                             
4), "The Commission on Privatization and Delivery of Government                                                                 
Services."  He said that if he understands it correctly that would                                                              
be the whole intent of it and that efficiency is going to be just                                                               
as important as whether we contract out or actually do go out of                                                                
business on it and let the private sector take care of it.  He said                                                             
he is in favor of doing that.  Representative Coghill further                                                                   
stated that, "I know that there's some discussion ... on how should                                                             
we deliver services (and with the people that we have already hired                                                             
to do that) I think other states also have had to wrestle with this                                                             
and this bill says that that commission would look at other state                                                               
policies.  So it would be, to me a tremendous resource to see the                                                               
comparison and what a commission might do in gathering information                                                              
from around Alaska.  Then I think the legislature can ask them real                                                             
serious questions on, 'Should we do this anymore,' and I think the                                                              
argument would be framed, not only by pinpointing whether it is                                                                 
actually happening, but how it's done.  So I am going to favor the                                                              
bill."                                                                                                                          
                                                                                                                                
CHAIR JAMES expressed a concern with the language in Section 2,                                                                 
page 2, is amended to read:                                                                                                     
                                                                                                                                
     Sec. 23.40.075. Items not subject to bargaining.  The parties                                                              
     may not negotiate terms contrary to the                                                                                    
                                                                                                                                
Number 079                                                                                                                      
                                                                                                                                
CHAIR JAMES emphasized that she is not happy with that language                                                                 
because she believes bargaining should not exclude any type of                                                                  
contracting out, or privatization of their job.  She stated, "I                                                                 
think they are entitled to job security, in some language so that                                                               
it is not done flippantly or without good cause."  Chair James said                                                             
she is not sure how she would like to amend this, but that it can                                                               
be discussed later.                                                                                                             
                                                                                                                                
Number 103                                                                                                                      
                                                                                                                                
JUANITA HENSLEY, Administrator, Division of Motor Vehicles,                                                                     
Department of Administration, came forward noting that the                                                                      
Administration feels that (any time that a function is out for a                                                                
study) that it should be done to make sure that it can be done                                                                  
wiser, cheaper, better, and more efficiently.  She said the State                                                               
currently has that in the collective bargaining process, in                                                                     
contracts that have been negotiated in good faith.  She explained                                                               
that, "We have language in there that allows the State to contract                                                              
out services providing that feasibility studies are completed, and                                                              
that we can show just cause as to why those functions should be                                                                 
outsourced."  For example the Division of Motor Vehicles closed                                                                 
offices when they made a determination that it would be cheaper to                                                              
outsource it to a private entity.                                                                                               
                                                                                                                                
MS. HENSLEY also noted that the Administration has real concerns                                                                
with Sections 2, 3, and 4, and requested that this committee delete                                                             
that language.  She mentioned that this language was added by                                                                   
Senate Finance Committee, which adds to the list of items that "we"                                                             
cannot bargain for the collective bargaining process, that                                                                      
contracting out language cannot be put in the collective bargaining                                                             
process.  They believe that changing those sections in PERA (Public                                                             
Employees' Relation Act), that this magnitude is going to affect                                                                
the collective bargaining process, and that they currently have 11                                                              
more contracts to negotiate and their first priority in the                                                                     
negotiating process (has been what the legislature has asked for)                                                               
is coming in with zero cost contracts and cost containment.  Ms.                                                                
Hensley said the Administration believes that they've done that                                                                 
with the agreements that they have currently negotiated for.  For                                                               
example PSEA (Public Safety Employee Association), came in with a                                                               
zero contract cost containment for the State which she believes is                                                              
good.  She emphasized that they believe changing PERA at this time                                                              
could jeopardize their negotiation process and they would hate to                                                               
see that happen because they too believe that cost effective                                                                    
government is a good way to go.                                                                                                 
                                                                                                                                
REPRESENTATIVE OGAN indicated that privatizing some of the                                                                      
functions in the Division of Motor Vehicles (DMV) were done by                                                                  
statute.                                                                                                                        
                                                                                                                                
Number 180                                                                                                                      
                                                                                                                                
MS. HENSLEY replied no, there have been no statute changes                                                                      
mandating privatization.  She said a bill was previously introduced                                                             
that mandated the privatization of the DMV, however that                                                                        
legislation did not move and that was several years ago.                                                                        
                                                                                                                                
REPRESENTATIVE OGAN remarked that he wasn't sure if it passed or                                                                
not.                                                                                                                            
                                                                                                                                
CHAIR JAMES said she doesn't believe there is anything on the                                                                   
books, short of collective bargaining, that would keep this                                                                     
Administration from outsourcing and that the Administration can't                                                               
go to true privatization, go out of doing business without                                                                      
statutory change.  She said, as far as outsourcing is concerned,                                                                
except for collective bargaining agreements, she doesn't think                                                                  
there is anything that would stop this Administration from being                                                                
able to do that.                                                                                                                
                                                                                                                                
MS. HENSLEY replied that is correct, even in the current contracts                                                              
and collective bargaining contracts that the Administration has, it                                                             
allows them to outsource, or to go out and look at oursourcing, and                                                             
do the feasibility studies.  She noted that the feasibility studies                                                             
cost in the range between $20,000 and $50,000 to do full intensive                                                              
study depending on what function you want to outsource.  However,                                                               
the current contracts have the contracting-out language in them and                                                             
that providing (indisc.) come back and show that there is                                                                       
definitely a cost-savings, it can be done.                                                                                      
                                                                                                                                
Number 220                                                                                                                      
                                                                                                                                
CHAIR JAMES remarked, let's talk about the feasibility studies                                                                  
because there are a lot of things that don't require a feasibility                                                              
study.  For example, if you have a blip and have a large amount of                                                              
work that needs to be done and it's something that's quite simple,                                                              
you could contract that out rather than hiring new employees.  She                                                              
said she believes that's available under existing law and you won't                                                             
need to do a feasibility study to determine that.                                                                               
                                                                                                                                
MS. HENSLEY replied, you are correct.  However, if you are going to                                                             
displace any current employee that's when the feasibility study                                                                 
needs to be done and the whole process needs to be looked at.                                                                   
                                                                                                                                
CHAIR JAMES said she also agrees with that because, if you're                                                                   
contracting out, and if that doesn't work, then you would have to                                                               
hire new employees so that needs to be checked thoroughly before                                                                
you do that.                                                                                                                    
                                                                                                                                
REPRESENTATIVE OGAN said he agreed that a feasibility study should                                                              
probably be done in every case.  He remarked, "I guess ... this                                                                 
bill is a policy call, whether or not a feasibility study will be                                                               
done, totally within the Administration or within more of a broad                                                               
spectrum of people that might not be quite as biased and protective                                                             
of the bureaucratic function."                                                                                                  
                                                                                                                                
Number 273                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY noted that there are no numbers on the                                                                   
fiscal note.  He asked if a fiscal note will be attached for                                                                    
meetings at various times during the year and perhaps various                                                                   
locations.                                                                                                                      
                                                                                                                                
MS. HENSLEY explained that it is an "asterisk fiscal note" which                                                                
means that they have no way of determining what those costs are at                                                              
this time.                                                                                                                      
                                                                                                                                
CHAIR JAMES asked Ms. Hensley if she could estimate how often the                                                               
commission is going to meet in order to figure out the per diem and                                                             
travel expenses.                                                                                                                
                                                                                                                                
MS. HENSLEY said she doesn't know how the sponsor envisioned the                                                                
commission meeting and how often they expected these meetings.                                                                  
                                                                                                                                
Number 292                                                                                                                      
                                                                                                                                
MR. HODGINS responded, "We took a fiscal note off of SB 68                                                                      
[COOPERATION WITH FEDERAL AGENCIES] which was the one that Governor                                                             
had vetoed, and we came up with a $26,000 fiscal note, and then                                                                 
here at the continuation of the fiscal note, as to how it would be                                                              
spent as far as meetings and travel, and what not."                                                                             
                                                                                                                                
CHAIR JAMES stated that fiscal note should be filed with this bill.                                                             
                                                                                                                                
MS. HENSLEY remarked, "This is done by the Legislative, Executive                                                               
Director's Office."                                                                                                             
                                                                                                                                
REPRESENTATIVE SMALLEY said he thinks that there is merit into                                                                  
looking at long-term cost savings and privatization may in fact                                                                 
assist in that.  He referred to a recent comment made in the House                                                              
about a "long-term-strategic-plan for the State."  Representative                                                               
Smalley said he believes this is something that would probably help                                                             
tie into that because in a long-range strategic plan you could look                                                             
at other situations such as other future potential consolidations                                                               
rather than ... piecemeal them together in 120 days, or whatever                                                                
the legislature tries to do it in.  He said he would support that                                                               
effort in its self.                                                                                                             
                                                                                                                                
Number 321                                                                                                                      
                                                                                                                                
REPRESENTATIVE SMALLEY further stated, "In looking at this                                                                      
particular document, it doesn't necessarily give you what's on page                                                             
2.  And, in reference to the Oregon report assessed successful                                                                  
privatization in some areas it was successful, and I know in some                                                               
areas it was a disaster because it was short-term-cost-savings, but                                                             
on the third year the hammer came down and it ended up the                                                                      
privatized custodial work actually went back to the school district                                                             
and they ended up purchasing brand new equipment and, et cetera, et                                                             
cetera, et cetera, because nobody else would pick up the contract                                                               
when it was advertised.  So long-term potential is what I would                                                                 
definitely be interested in, and I think the committee in a                                                                     
strategic plan could in fact give us that information."                                                                         
                                                                                                                                
CHAIR JAMES cited how the folks from British Columbia explained how                                                             
they privatized their road maintenance, and the net result of that                                                              
wasn't that they saved money, the costs were smaller but there was                                                              
more division of that money.  More people in the smaller                                                                        
communities had jobs and they had more control in making decisions                                                              
at a local level.                                                                                                               
                                                                                                                                
Number 363                                                                                                                      
                                                                                                                                
CHUCK O'CONNELL, Member, General Government Bargaining Unit,                                                                    
testified in opposition to SB 33 via teleconference from Anchorage.                                                             
He stated that:                                                                                                                 
                                                                                                                                
     I am here in firm opposition to SB 33.  You have heard                                                                     
     testimony already from Ms. Hensley about the fact that we do                                                               
     currently have language in our collective bargaining                                                                       
     agreements involving contracting out what is currently                                                                     
     recognized as State work.  That language works well.  We in                                                                
     the classified service work for the executive branch and this                                                              
     commission is composed in majority from people being appointed                                                             
     from the legislative branch and we have some significant                                                                   
     problems with that.                                                                                                        
                                                                                                                                
     In the disputes that we have had with our employer, over the                                                               
     issue of contracting out, the major area of disagreement that                                                              
     we have had is that the contracting out, that we have                                                                      
     questioned the propriety of in all cases cost the State a                                                                  
     considerable sum of money.  Let me give you a couple of brief                                                              
     examples, the Division of Public Health contracted out                                                                     
     audiology services and laid off the State audiologist, his                                                                 
     salary at the time was about $55,000 a year.  In the first                                                                 
     year of that contract the division paid to private sector                                                                  
     audiologist $350,000 to do Mr. (Indisc.) work; that does not                                                               
     represent good management or any kind of a cost-savings to the                                                             
     State.  I agree with the Chair that sometimes cost savings may                                                             
     not be paramount, but in most instances that we are talking                                                                
     here, it is important that economies enter into whatever                                                                   
     decisions are made.  Another example of contracting out where                                                              
     we can't accomplish cost savings is at API (Alaska Psychiatric                                                             
     Institute) for example the State has been attempting to hire                                                               
     a psychiatrists for a number of years and nobody will apply,                                                               
     therefore, they must contract out to the private sector at                                                                 
     great costs to the State of Alaska.                                                                                        
                                                                                                                                
     Another example, at DOT (Department of Transportation and                                                                  
     Public Facilities) right now with the airport project, you've                                                              
     heard a lot about the cost overruns there.  Currently we have                                                              
     six of our members working at the airport expansion project                                                                
     and they're earning a wage of about $22.00 an hour.  Along                                                                 
     side of our six members are 22 private project engineers doing                                                             
     exactly the same work and they are earning a wage 40-hours a                                                               
     week of $110.00 to $125.00 an hour.  That is not good                                                                      
     government that is not efficient operation and expenditure of                                                              
     funds.                                                                                                                     
                                                                                                                                
Number 436                                                                                                                      
                                                                                                                                
CHAIR JAMES asked what is the time frame for the airport expansion.                                                             
                                                                                                                                
MR. O'CONNELL said he believes there are different phases, it may                                                               
be 2002.                                                                                                                        
                                                                                                                                
CHAIR JAMES said if they were to hire State employees, for example,                                                             
to take the place of the highly paid engineers, the State employees                                                             
would have to be hired on a temporary-basis.                                                                                    
                                                                                                                                
MR. O'CONNELL responded that that depends on what legal counsel                                                                 
finds out as to the IRS definition.  He said he believes Chair                                                                  
James is correct.  Mr. O'Connell added that they would also be                                                                  
saving $2,200 an hour [22 private engineers].                                                                                   
                                                                                                                                
CHAIR JAMES remarked, if you can find somebody to work that, doing                                                              
that.                                                                                                                           
                                                                                                                                
MR. O'CONNELL agreed with Chair James comment.                                                                                  
                                                                                                                                
CHAIR JAMES indicated that he might be precluded from hiring                                                                    
somebody because they [State engineers] wouldn't work for $22.00 an                                                             
hour and you don't have a provision in law to give them any more                                                                
than that.                                                                                                                      
                                                                                                                                
MR. O'CONNELL added that they would also have a retirement program                                                              
and social security.                                                                                                            
                                                                                                                                
Number 470                                                                                                                      
                                                                                                                                
DON ETHERIDGE, District Council Laborers, Testified on behalf of                                                                
Local 71, noting that they are opposed to SB 33 in its current                                                                  
form.  He said Local 71 came out in support of the bill which was                                                               
vetoed by the Governor.  Mr. Etheridge emphasized that they don't                                                               
have a problem with being compared to the private sector on a fair-                                                             
basis.  He said, "Our main concern is that it's on a fair-basis                                                                 
that they are compared with.  And we do believe that we can prove                                                               
... that we are very competitive."                                                                                              
                                                                                                                                
MR. ETHERIDGE cited examples of Local 71 work being handed over to                                                              
private sectors or to the local governments to do street and                                                                    
airport maintenance (three different instances).  He stated that in                                                             
the first year the State gave away the equipment and facilities to                                                              
take care of these projects, and when it came back to the State (in                                                             
the third-year) they'd already destroyed all the equipment.   He                                                                
said, "And now they were realizing how much it really is going to                                                               
cost them to do this, so now they wanted to triple the price (in                                                                
the third year) and now DOT[/PF] now has those areas back."  He                                                                 
explained that while those projects were under the operation of                                                                 
local governments, DOT personnel had to go in and do the                                                                        
maintenance because nobody at those locations had the experience to                                                             
take care of the airports properly.  He further stated that they                                                                
were made unsafe for landings and DOT had to come back and fix                                                                  
them.                                                                                                                           
                                                                                                                                
MR. ETHERIDGE noted that Local 71 is strongly opposed to removing                                                               
the language on their subcontracting and that they believe that                                                                 
legislature should also be opposed to this language because their                                                               
main interest in the contracts is that the State can prove that                                                                 
they can do it cheaper and better, and if they can't then it                                                                    
shouldn't be outsourced.                                                                                                        
                                                                                                                                
Number 510                                                                                                                      
                                                                                                                                
CRAIG PERSSON, Representative, Public Safety Employees Association                                                              
(PSEA), said he agrees with Mr. Etheridge.  He noted that PSEA                                                                  
opposes SB 33 in its current form and that they do not oppose                                                                   
looking at long-term costs.  However SB 33 takes that out of                                                                    
collective bargaining.  He added that, "We believe that it should                                                               
stay in collective bargaining.  We do have feasibility studies in                                                               
our contracts right now that are basically the same as some of the                                                              
other unions have that says that if the state can save money and do                                                             
a better job, then they can go ahead and contract out."                                                                         
                                                                                                                                
MR. PERSSON further stated that, "There is a real danger in                                                                     
contracting out.  I believe public safety systems in Alaska is an                                                               
example; I know there is a big push right now in Delta for the                                                                  
Delta Prison to go through with private guards and everything down                                                              
there.  I think there's a real danger when you're going to pay                                                                  
people $7.00 or $8.00 an hour to take those jobs.  Right now we                                                                 
have a hard time recruiting folks to work in the correctional                                                                   
facilities and there's a high turn-over-rate of correctional                                                                    
officers based on the fact.  Once they get the job and they are in                                                              
the facility, a lot of times they just don't last, they get burned                                                              
out; they work seven days a week at a time, in 12-hour shifts.  And                                                             
I'm glad I have the job I have.  I work in Fairbanks as a Public                                                                
Safety Officer there.  Every time I take somebody to jail, I just                                                               
shake my head and thank God I don't work here because I wouldn't                                                                
want to."                                                                                                                       
                                                                                                                                
Mr. PERSSON pointed out the other concern they have is that this                                                                
commission is only made up of one person from labor.  He said he                                                                
believes there ought a few more people on the commission from labor                                                             
and some of the best people you can have on the committee, or even                                                              
testify in front of the commission, would be folks that are                                                                     
directly involved with these jobs and know the system.  Mr. Persson                                                             
stated that, "I don't know if I trust somebody from the Alaska                                                                  
Chamber of Commerce making decisions that are going to have                                                                     
long-term impacts on public safety of the state.  That is not to                                                                
say that they can't bring other specialists in to testify, and I                                                                
hope they plan on doing that."                                                                                                  
                                                                                                                                
Number 554                                                                                                                      
                                                                                                                                
PAM LaBOLLE, President, Alaska Chamber of Commerce, asked if SB 33                                                              
was going to be held over because she didn't want to rush through                                                               
her testimony.                                                                                                                  
                                                                                                                                
CHAIR JAMES announced SB 33 will be held over until Thursday.                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
There being no further business before the committee, the House                                                                 
State Affairs Standing Committee adjourned at 10:07 a.m.                                                                        
                                                                                                                                

Document Name Date/Time Subjects