Legislature(1999 - 2000)
04/20/1999 08:01 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 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.
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