Legislature(2005 - 2006)SENATE FINANCE 532

04/25/2005 09:00 AM Senate FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 133 Out of Committee
Moved CSSB 150(HES) Out of Committee
Bills Previously Heard/Scheduled
Moved SB 151 Out of Committee
Heard & Held
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 25, 2005                                                                                      
                             9:10 a.m.                                                                                        
CALL TO ORDER                                                                                                               
Co-Chair Green convened the meeting at approximately 9:10:51 AM.                                                              
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Also  Attending: NONA  WILSON,  Legislative Liaison,  Department  of                                                          
Transportation   and   Public  Facilities;   KIP   KNUDSON,   Deputy                                                            
Commissioner  of Aviation, Department  of Transportation  and Public                                                            
Facilities;  JASON  HOOLEY,   Staff  to  Senator  Fred  Dyson;  JOEL                                                            
GILBERTSON, Commissioner,  Department of Health and Social Services;                                                            
CHUCK HARLAMERT,  Juneau Section Chief, Tax Division,  Department of                                                            
Revenue;   MIKE  TIBBLES,   Deputy   Commissioner,   Department   of                                                            
Administration;  CHRIS CHRISTENSEN, Deputy Administrative  Director,                                                            
Alaska  Court System;  PAM VARNI,  Executive  Director, Legislative                                                             
Affairs Agency                                                                                                                  
Attending via  Teleconference: From Anchorage: MARGO  MCCABE, Chair,                                                          
Board of Trustees, Alaska Children's Trust                                                                                      
SUMMARY INFORMATION                                                                                                         
SB 133-AVIATION ADVISORY BOARD                                                                                                  
The  Committee  heard from  the  Department  of  Transportation  and                                                            
Public  Facilities. One  amendment  was offered  but withdrawn  from                                                            
consideration. The bill reported from Committee.                                                                                
SB 150-ALASKA CHILDREN'S TRUST FUND GRANTS                                                                                      
The Committee  heard from the bill's sponsor, the  Alaska Children's                                                            
Trust, and  the Department of Health  and Social Services.  The bill                                                            
reported from Committee.                                                                                                        
SB 151-DECOUPLING FROM FED TAX DEDUCTION                                                                                        
The Committee  heard  from the Department  of Revenue  and the  bill                                                            
reported from Committee.                                                                                                        
SB 71-NONUNION PUBLIC EMPLOYEE SALARY & BENEFIT                                                                                 
The  Committee heard  from  the Department  of  Administration,  the                                                            
Court System, and the Legislative  Affairs Agency. The bill was held                                                            
in Committee.                                                                                                                   
     SENATE BILL NO. 133                                                                                                        
     "An Act establishing the Aviation Advisory Board; and                                                                      
     providing for an effective date."                                                                                          
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
NONA WILSON, Legislative  Liaison, Department of Transportation  and                                                            
Public Facilities,  informed the Committee  that the Department  has                                                            
identified  this  legislation  as  being "critical  to  the  State's                                                            
aviation  infrastructure  as  well as  the  aviation industry  as  a                                                            
whole". It would allow  for the continuance of the Aviation Advisory                                                            
Board,  which was  created in  2003 and  renewed in  2004, to  occur                                                            
"without the need  for annual administrative renewals".  A permanent                                                            
Board would  be "practical  and necessary  to the continued  success                                                            
and prudent operation"  of the State's international airport hubs in                                                            
Anchorage and in Fairbanks and its 258 Rural airports.                                                                          
Ms.  Wilson  stated  that  the Board  also  serves  in  an  advisory                                                            
capacity  to the Commissioner  of the Department  of Transportation                                                             
and Public Facilities  (DOT) and facilitates on-going  "coordination                                                            
between the State and aviation  industry" on such things as aviation                                                            
policy, safety, airport management and operations.                                                                              
Ms. Wilson noted  that the composition of the Board,  as detailed in                                                            
Section 1, Sec.  44.42.230(a) on page two, lines six  through 30, is                                                            
"a broad  cross-section"  of the  State's aviation  industry and  as                                                            
such would provide well-balanced dialogue and expertise.                                                                        
Senator Olson  asked whether the responsibilities  of the  new Board                                                            
would differ from its predecessor.                                                                                              
KIP  KNUDSON,  Deputy   Commissioner  of  Aviation,   Department  of                                                            
Transportation  and Public Facilities,  informed the Committee  that                                                            
the Board  was originally  formed to improve  communication  between                                                            
aviation  interest  groups and  DOT  personnel responsible  for  the                                                            
airport  system. The Board  has done  a good job  in providing  that                                                            
Senator Olson  pointed out that a large portion of  the Board member                                                            
positions  "are not necessarily  aviation  related", as exampled  by                                                            
Section 1,  Sec. 44.42.230.  Composition of  the Board (a)(5),  (6),                                                            
and (7).                                                                                                                        
     (5) a member who is a community leader residing in the                                                                     
     unorganized borough of the state;                                                                                          
     (6) a member who represents the mayor of the Municipality of                                                               
     (7) a member who jointly represents the mayors of the City of                                                              
     Fairbanks and the Fairbanks North Star Borough;                                                                            
Mr.   Knudson  explained   that   when  Governor   Frank   Murkowski                                                            
established  the  original Board  by  Administrative  Order, it  was                                                            
thought best  not to "predetermine"  that Board members should  have                                                            
an aviation connection.  However, "effectively they are all aviation                                                            
people"  in that  in some  form, they  each  have "some  leg in  the                                                            
aviation industry  or some aviation interest group".  The people who                                                            
have been appointed  by the mayors of the City of  Anchorage and the                                                            
City of  Fairbanks  have had  aviation backgrounds.  Therefore,  "it                                                            
happens that they're all aviation interested".                                                                                  
Co-Chair Green  concluded therefore  that it must be "assumed"  that                                                            
the appointees would have aviation industry backgrounds.                                                                        
Co-Chair Green  asked whether the Board composition  in this bill is                                                            
similar   to  the   makeup   of  the   Board  established   by   the                                                            
Administrative Order.                                                                                                           
Mr. Knudson  replied that  this Board is  identical to the  original                                                            
Board with  the exception  being that an  at-large member was  added                                                            
"for tie breaks". Therefore  this Board would have 11 members rather                                                            
than ten.                                                                                                                       
Co-Chair Green  asked whether the Board has met consistently  during                                                            
the two years it has existed.                                                                                                   
Mr. Knudson communicated  that the Board has had a busy schedule and                                                            
has met nine times in the last two years.                                                                                       
Co-Chair  Green understood  that the responsibilities  of the  Board                                                            
would continue as before.  Absent this legislation it could continue                                                            
via the issuance of an  Administrative Order. This legislation would                                                            
serve to  include the  Board in  State Statute  and thereby  make it                                                            
subject to  review by the  Division of Legislative  Budget  & Audit.                                                            
This would align the Board with other boards in the State.                                                                      
Senator Hoffman  asked for examples  of the types of "major  issues"                                                            
the Board has addressed and resolved.                                                                                           
Mr. Knudson commented  for general background that  DOT oversees the                                                            
operations of  the Anchorage and Fairbanks airports.  Other airports                                                            
such as the ones ins Juneau  and Ketchikan are locally governed. The                                                            
Board has  addressed the  issue of airport  governance by  gathering                                                            
information from around  the country in order to determine the best,                                                            
most cost  effective method  to manage airports.  Other issues  that                                                            
have been addressed include  the operation of airport towers such as                                                            
the tower  at King Salmon  and a feasibility  issue relating  to how                                                            
small of  a community could  support a ten  million dollar  airport.                                                            
The Board has  provided good advice  to the Commissioner  in regards                                                            
to such things as the allocation of resources.                                                                                  
Co-Chair  Wilken  voiced  concern  about  the  size  of  the  Board;                                                            
specifically  that the  budget  and the  Board's size  and scope  of                                                            
responsibility  do  not appear  to be  "in alignment".  Language  in                                                            
Section  1, Sec. 44.42.220.  Meetings; hearings;  records.  does not                                                            
appear  to   allow  the  Board  to   meet  and  make  decisions   by                                                            
teleconference;  therefore,  he questioned  how the 11-member  Board                                                            
could meet  two or three  times a year within  the constraints  of a                                                            
$20,000  budget. To  that point, he  asked whether  the Board  could                                                            
meet and make decisions via teleconference.                                                                                     
Mr. Knudson communicated  that, while the Board has held meetings by                                                            
teleconference,  they  would  prefer to  meet as  a  group prior  to                                                            
issuing  a  resolution.  Meetings   have  been  held  in  Ketchikan,                                                            
Anchorage, Fairbanks, and Juneau.                                                                                               
Co-Chair Wilken asked whether  the $20,000 annual Board budget would                                                            
be sufficient.                                                                                                                  
Mr.  Knudson  stated   that  while  the  budget  might   cause  some                                                            
"scrimping", it would be workable.                                                                                              
Co-Chair  Wilken   questioned  the  language  in  Section   1,  Sec.                                                            
44.42.230.(c), page three,  lines two and three, that specifies that                                                            
the Governor would name  the Board chairman. He considered proposing                                                            
an amendment to delete  that language, as an 11-member Board, making                                                            
such important  decisions,  would be qualified  to choose their  own                                                            
chairman. It would also  "keep peace in the family". The Chair being                                                            
appointed by  the Governor is an anomaly,  as it is atypical  of how                                                            
other boards select their chairs.                                                                                               
Mr.  Knudson understood  that  this  must "be  a construct  of  some                                                            
Boards".  The chair  being  appointed by  the Governor  was,  "oddly                                                            
enough",   recommended   by  the   Board   for  inclusion   in   the                                                            
Administrative  Order. One Board member,  Richard Williams,  thought                                                            
that "it would de-politicize  the chair to a certain extent" in that                                                            
the chair selection "would not be a popularity contest".                                                                        
Conceptual  Amendment #1: This amendment  deletes the language  "The                                                            
governor shall designate  a member of the board to serve as chair of                                                            
the board, or, at the governor's  request," in Section 1, subsection                                                            
(c), on  page 3,  lines two and  three. The  revised language  would                                                            
read as follows.                                                                                                                
     (c) The board shall elect a chair from among its members who                                                               
     are not state officers or employees.                                                                                       
Co-Chair Wilken moved to adopt Amendment #1.                                                                                    
Co-Chair  Green  objected and  stated  that one  of  the upsides  in                                                            
having a chair appointed  by a Governor is that there is no delay in                                                            
the deliberations  of the Board. In her experience  with Boards, she                                                            
has  concluded  that,  oftentimes,  this  process  would  have  been                                                            
preferred  as it would result  in a more efficient  use of  time and                                                            
the board would be ready to conduct business.                                                                                   
Senator  Olson  asked  the  reason  Co-Chair  Wilken  chose  not  to                                                            
eliminate the  language excluding  State officers or employees  from                                                            
being able  to chair the  Board. He contended  that numerous  "State                                                            
officers and  employees are quite  knowledgeable about the  aviation                                                            
industry" and would make excellent Board chairs.                                                                                
Co-Chair Wilken opined  that State officers and employees should not                                                            
be considered  for the chair position as he viewed  this board as "a                                                            
citizens' commission".                                                                                                          
Co-Chair Wilken moved to withdraw Conceptual Amendment #1.                                                                      
There being no objection, the Amendment was WITHDRAWN.                                                                          
Senator  Olson  opined  that,  as  the  operator  of  two  air  taxi                                                            
companies,  this  Advisory  Board  is  an  "asset  to  the  aviation                                                            
industry". He strongly supported the bill.                                                                                      
The Bill was HELD in Committee.                                                                                                 
[NOTE: This bill was re-addressed later in the meeting.]                                                                        
     SENATE BILL NO. 150                                                                                                        
     "An Act repealing the limits on grants awarded from the Alaska                                                             
     children's trust fund."                                                                                                    
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
JASON  HOOLEY, Staff  to Senator  Fred  Dyson, Chair  of the  Senate                                                            
Health, Education and Social  Services (HESS) Committee, stated that                                                            
the HESS  Committee  sponsors  this bill  by request  of the  Alaska                                                            
Children's  Trust Board of  Trustees. The  Trust was established  in                                                            
the late 1980s  as a means through  which to fund programs  designed                                                            
to  "combat  child  abuse".  The  Board   of Trustees   is  "seeking                                                            
additional  flexibility"  in the administration  of  the program  in                                                            
regards to  the awarding of Trust  grants. To that point,  Section 1                                                            
of this  bill  would require  grant applicants  to  include a  self-                                                            
sustainability  plan in their proposal. Section 2  of the bill would                                                            
eliminate  the current annual  $50,000 grant  limitation; would  re-                                                            
define the  current grant  funding formula;  and would specify  that                                                            
the grant award  be limited to four-years in an effort  to guarantee                                                            
that the grant  would be recognized  as seed money for the  program.                                                            
Section 3  would reinforce  the conditions  specified in Sections  1                                                            
and 2 by allowing the Board  to reduce or eliminate an awarded grant                                                            
based on the performance of the grantee.                                                                                        
Co-Chair Green,  noting that this  grant process was revised  within                                                            
the last four  or five years, asked  the reason for the need  to re-                                                            
address the process.                                                                                                            
Mr. Hooley deferred to  Margo McCabe of the Alaska Children's Trust.                                                            
MARGO MCCABE,  Chair, Board  of Trustees,  Alaska Children's  Trust,                                                            
testified  via teleconference  from  Anchorage  and commented  that,                                                            
while the  assets of  the Trust  Fund currently  exceed ten  million                                                            
dollars, the  Trust could only expend  its annual net income  of the                                                            
Trust Fund to  fund the entirety of child abuse programs  statewide.                                                            
In the last few years,  the amount of available funds was a limiting                                                            
factor as the  income was only sufficient  enough to fund  recurring                                                            
grants.  Therefore, "the  intent of  this legislation  is to  limit"                                                            
funding for  those grants so that  money would be available  to fund                                                            
"new innovative" programs.                                                                                                      
Co-Chair Green asked which  current formula language must be changed                                                            
in order  to accomplish  this goal;  specifically  why the  proposed                                                            
formula is to  establish a sliding scale award of  75-percent of the                                                            
program's first year's  expenses the initial year, 50-percent of the                                                            
program's  first-year expenses  the second  year, and 25-percent  of                                                            
the program's first-year expenses the third and fourth years.                                                                   
Ms. McCabe stated that  the proposed formula changes would establish                                                            
parameters that  would allow the grantees to become  self-sufficient                                                            
at the termination  of the four-year  period. This would  also allow                                                            
Trust funds to become available to fund other programs.                                                                         
Co-Chair Green asked how many $50,000 grants have been awarded.                                                                 
Ms.  McCabe responded  that,  due to  budget constraints,  the  most                                                            
recent  Request for  Proposals (RFP)  grant awards  were limited  to                                                            
$30,000.  Approximately half  of the applicants  applying  requested                                                            
the maximum $30,000  amount, and four such grants  were awarded. The                                                            
Trust would be issuing its next RFP shortly.                                                                                    
Co-Chair Green noted that  current State Statutes limit the award to                                                            
$50,000.  She was curious  to the  number of grants  that have  been                                                            
awarded at that level.                                                                                                          
Ms. McCabe  did not have  that data available  as the $50,000  grant                                                            
level  was last  awarded prior  to her  being on  the Board.  Recent                                                            
annual award levels have been limited to $30,000.                                                                               
Co-Chair Green  asked the Commissioner  of the Department  of Health                                                            
and  Social  Services  to explain,  for  the  record,  the  specific                                                            
formula change included in the Senate HES version of the bill.                                                                  
JOEL  GILBERTSON,  Commissioner,  Department  of Health  and  Social                                                            
Services, pointed  out that the most  substantial formula  change in                                                            
that version  of the bill  is the four-year  grant award  limitation                                                            
specified in Section  2. Current State Statute does  not specify any                                                            
limitation  on the length of a grant  award. While current  language                                                            
does include  a sliding  scale award  level, once  the lowest  award                                                            
percentage  is  reached,  it  could  be  awarded  indefinitely.  One                                                            
program  recipient  is receiving  its eighth  year  of funding.  "No                                                            
grants are  transitioning  off", therefore  no new grants are  being                                                            
awarded,  as there is  a finite  amount of money  available.  No new                                                            
programs have received  grants in the last two years. The net income                                                            
for the program  is projected to continue at the current  level and,                                                            
unless programs are cycled  out, funds to support new programs would                                                            
be unavailable.  Therefore,  the four-year  provision would  provide                                                            
the Trust the  ability to transition from "continuation  funding" to                                                            
being able to fund new programs.                                                                                                
9:30:19 AM                                                                                                                    
Co-Chair Green  stated that she had participated in  the development                                                            
of  the  previously  adopted  language.   While  the  sliding  scale                                                            
language  in the bill was  intended to halt  continual funding,  the                                                            
changes  being  proposed  in this  legislation  would  "correct  and                                                            
clarify" that a program  would receive a sliding scale percentage of                                                            
funding that  would terminate  at the end  of the fourth year.  This                                                            
would provide  the opportunity  for new programs  to be funded.  The                                                            
intent of the Trust funds  is to provide "a boost but not a lifeline                                                            
support system".                                                                                                                
Commissioner  Gilbertson  affirmed   that that  the  intent  of  the                                                            
original  Trust  language  was  "to  have  the  grants  move  toward                                                            
sustainability  plans  and  to  transition  off after  a  four  year                                                            
cycle".  However,  the four-year  cycle  language was  omitted  from                                                            
State Statute.                                                                                                                  
9:31:09 AM                                                                                                                    
Co-Chair  Green asked  whether  this  legislation would  affect  the                                                            
maximum award amount.                                                                                                           
Commissioner   Gilbertson   stated  that   this  legislation   would                                                            
eliminate  the maximum limitation  amount on  the grants awarded  by                                                            
the  Trust.  The annual  net  income  available  would serve  as  "a                                                            
natural cap".                                                                                                                   
Co-Chair  Green concurred,  but  stated that  the  Trust should  not                                                            
award the entirety of its funds to a single program.                                                                            
Commissioner Gilbertson  stated that other factors would prevent one                                                            
entity  from receiving  the entire  amount of  available funds.  One                                                            
deterrent  to that would  be the fact that  existing grants  must be                                                            
honored until they transition out of their four-year cycle.                                                                     
Co-Chair Green asked whether  the number of program applicants might                                                            
diminish  once  the  current  recipients  conclude  their  four-year                                                            
Commissioner  Gilbertson  responded that  one of  the circumstances                                                             
constantly encountered  in grant programs is "that areas most in the                                                            
need of the  programs and programs  that are most in need  of coming                                                            
into their communities  are often those that are the  least prepared                                                            
to  submit a  good  grant application".   Typically the  areas  that                                                            
submit good applications  "are areas that are resourced enough". The                                                            
challenge, therefore,  is how to make those communities  that do not                                                            
have  grant writers  or the  resources  with which  to compete  with                                                            
larger organizations more  competitive. The proposed structure would                                                            
require  the  formation   of  a  sustainability  plan,  performance                                                             
measures, and would include  the Trust's involvement in the process.                                                            
This,  combined  with  the  phased  four-year  maximum  grant  award                                                            
limitation,  would allow  a natural  transition  process that  would                                                            
provide the  opportunity for  programs that  are on "the  peripheral                                                            
now" to get into  the system and receive some start-up  funding. The                                                            
existing programs  are good; however, as was the original  intent of                                                            
the Trust  grant program,  they need to  become self-sustaining  and                                                            
allow other programs to benefit from the grant program.                                                                         
Co-Chair Green  asked whether the language authorizing  the Board to                                                            
reduce or discontinue  an awarded  grant, as included in  Section 3,                                                            
is a revision of current language.                                                                                              
Commissioner  Gilbertson clarified  that Section 3 is new  language.                                                            
9:33:54 AM                                                                                                                    
Commissioner Gilbertson  stated that Section 3 would allow the Trust                                                            
to  discontinue  or  reduce   funds  were  a  program  to  not  meet                                                            
performance standards.  When he initially participated in the Trust,                                                            
the quality of  the data being collected on the grants  disappointed                                                            
him. The  Board is  addressing  performance standards  in a  serious                                                            
manner as reflected in  the forthcoming RFP specifications. "Outcome                                                            
data" would become more of the focus in the future.                                                                             
Co-Chair  Green supported  this direction,  as it would provide  the                                                            
Board the oversight  authority required to ensure  that the programs                                                            
being conducted support  the mission of the Alaska Children's Trust.                                                            
Commissioner  Gilbertson affirmed  that the Board and the  Trust are                                                            
"in agreement"  that "a better tool  and a better reason  for why we                                                            
approve a grant  or why we discontinue it" is required.  The outcome                                                            
data, similar  to the State's  Missions and  Measures policy,  would                                                            
allow the program's performance  to be measured to insure that Trust                                                            
funds  are used  in the  most efficient  and effective  manner.  The                                                            
bill's  language would  also  allow for  program  expansion for,  as                                                            
recipients  cycle out, funding  would become  available to  fund new                                                            
Ms. McCabe  voiced appreciation for  the discussion. It covered  the                                                            
important aspects of what the bill would do.                                                                                    
Co-Chair  Wilken  moved  to  report the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
There  being  no  objection,  CS  SB  150(HES)   was  REPORTED  from                                                            
Committee  with previous zero  Fiscal Note  #1, dated April  5, 2005                                                            
from the Department of Health and Social Services.                                                                              
AT EASE 9:36:24 AM / 9:37 AM                                                                                                  
     SENATE BILL NO. 133                                                                                                        
     "An Act establishing the Aviation Advisory Board; and                                                                      
     providing for an effective date."                                                                                          
Co-Chair Green  noted that the bill was again before  the Committee.                                                            
Co-Chair  Wilken  moved  to  report the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal notes.                                                                       
There being no objection,  SB 133 was REPORTED from Committee with a                                                            
new  $20,000 Department  of  Transportation  and  Public  Facilities                                                            
fiscal  note,  dated April  25,  2005, and  previous  Department  of                                                            
Transportation  and Public  Facilities  zero Fiscal  Note #1,  dated                                                            
February 28, 2005.                                                                                                              
     SENATE BILL NO. 151                                                                                                        
     "An  Act excepting  from  the  Alaska Net  Income  Tax Act  the                                                            
     federal  deduction  regarding  income attributable  to  certain                                                            
     domestic production  activities; and providing for an effective                                                            
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Green asked whether  the Department  of Revenue wished  to                                                            
present further testimony.                                                                                                      
CHUCK HARLAMERT,  Juneau Section Chief, Tax Division,  Department of                                                            
Revenue,  stated   that  he  was   available  to  answer   Committee                                                            
9:38:12 AM/ 9:38:40 AM                                                                                                      
Co-Chair Green  stated that a revised  Department of Revenue  fiscal                                                            
note, dated April 19, 2005, has been provided.                                                                                  
Mr. Harlamert  noted  that the  only revision  included  in the  new                                                            
fiscal  note is  that  the revenue  column  reflects  an  $8,230,000                                                            
revenue increase  in FY 2006.  An upward  trend would continue  with                                                            
$14,995,000 being the projected revenue increase in FY 2011.                                                                    
Co-Chair  Green characterized  this  legislation are  being "a  good                                                            
thing for the State budget".                                                                                                    
Mr. Harlamert  affirmed that  this legislation  would reinstate  the                                                            
Co-Chair  Green voiced  that  the legislation  would  "restore"  the                                                            
Mr. Harlament affirmed.                                                                                                         
Co-Chair  Green noted  that other  details of  this legislation  had                                                            
been discussed during its previous hearings.                                                                                    
Co-Chair  Wilken  moved  to  report the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
There being no objection,  SB 151 was REPORTED from Committee with a                                                            
new indeterminate  Department  of Revenue  Fiscal Note, dated  April                                                            
19, 2005.                                                                                                                       
9:40:49 AM                                                                                                                    
     SENATE BILL NO. 71                                                                                                         
     "An  Act  relating  to  the  compensation   of  certain  public                                                            
     officials,  officers, and employees  not covered by  collective                                                            
     bargaining  agreements; and providing  for an effective  date."                                                            
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
MIKE TIBBLES,  Deputy Commissioner,  Department  of Administration,                                                             
testified in support  of the legislation. This bill  would align the                                                            
statutory pay schedule  for partially exempt and exempt employees in                                                            
the  executive,  legislative,  and  judicial  branches  with  recent                                                            
negotiated union  contract salary schedules. It is  anticipated that                                                            
"complicated issues" would arise were the bill denied.                                                                          
Mr.  Tibbles  stated  that  the area  of  interest  is  the  process                                                            
involved  in  making State  employees  wage  adjustments:  the  wage                                                            
adjustment process  for Union employees is addressed  via collective                                                            
bargaining  negotiations and, once  an agreement is reached  at that                                                            
level, the proposed monetary  terms are submitted to the Legislature                                                            
for   approval;  partially   exempt   or  exempt   employee   salary                                                            
adjustments  are  addressed by  the  submittal of  legislation  that                                                            
would update  State wage  Statutes.  SB 71 is  the vehicle for  that                                                            
wage adjustment this year.                                                                                                      
Mr. Tibbles  noted that due  to the fact  that partially exempt  and                                                            
exempt wage  bill proposals have not  always "moved forward",  there                                                            
is currently  an approximate  five-percent  disparity between  their                                                            
wage schedules and those  represented by collective bargaining. This                                                            
disparity would  increase further in FY 2006 and 2007  as contracted                                                            
wage implementations occur.                                                                                                     
Mr.  Tibbles stressed  that  were  the salary  scales  of  partially                                                            
exempt or exempt employees  not brought into alignment with those of                                                            
union employees,  three issues could  arise. The first is  an equity                                                            
issue in  that all State  employee positions  are assigned  a salary                                                            
range based on  the nature and complexity of work  and the amount of                                                            
supervisory  oversight. Since State  Statutes require "like  pay for                                                            
like work", the Department's  opinion is that were SB 71 to not move                                                            
forward, a  disparity between the  two salary schedules would  occur                                                            
which would violate  "the like pay for like work"  statutory mandate                                                            
at the point "when  we get to a nine-percent difference  between the                                                            
two salary schedules".                                                                                                          
Mr. Tibbles also shared  that difficulties have arisen in situations                                                            
where an effort was made  to "move a position laterally" in the same                                                            
range. For example,  were an exempt fiscal analyst  position to open                                                            
in the  Office of  Management and  Budget, a  collective  bargaining                                                            
fiscal  analyst employee  would  be  disinterested  in the  position                                                            
because "there  was such  a difference in  pay". This situation  has                                                            
become problematic.                                                                                                             
9:45:52 AM                                                                                                                    
Mr. Tibbles stated  that a second issue is that recruitment  efforts                                                            
become more  difficult as  the disparity  between the two  schedules                                                            
increases;  particularly in  the case of  recruiting professionals,                                                             
especially  as "managers and directors  are asked to do more".  Were                                                            
this "bill  to not pass, the message  being sent is that  we are not                                                            
respecting  the management that they  do perform ... in many  cases,                                                            
individuals" they supervise  would be making more money than them at                                                            
the point in time  that a nine-percent difference  in the two salary                                                            
schedules occurs.                                                                                                               
Mr. Tibbles communicated  that the third issue is  that when a large                                                            
disparity   between  the  two  salary   schedules  is  reached,   it                                                            
discourages people  "from moving up" into management  positions. The                                                            
State  is "required  to encourage  career progression"  and, in  his                                                            
opinion, that  requirement could not  be met when it would  not take                                                            
"that many years in merit  step" increases for an individual to earn                                                            
more than  his or  her own  new supervisor.  This is  exampled  by a                                                            
situation in  which an individual  in a Range 23 Step D supervisory                                                             
position  would be earning  more than  his or her  Range 26,  Step A                                                            
supervisor.  This  situation  is reflected  in  the  "Comparison  of                                                            
Statutory   and  Supervisory   Salary  Schedules   after   bargained                                                            
increases"  chart  depicted  on page  three  of the  "Comparison  of                                                            
Statutory, Judicial and  Supervisory Salary Schedules" handout [copy                                                            
on file].                                                                                                                       
Mr.  Tibbles  summarized  that  this bill  is  "very  important"  in                                                            
addressing  the  inequity,  recruitment,  and difficulty  in  upward                                                            
progression  issues. It would  provide a  better playing field.  The                                                            
"union  contracts have  been submitted  to the  Legislature and  are                                                            
moving  forward in  the budget  process". He  asked the Committee's                                                             
support in adjusting "the statutory schedules as well".                                                                         
Senator Hoffman asked when  the exempt and partially exempt salaries                                                            
were  last  adjusted; specifically   the salaries  of  Alaska  Court                                                            
System employees                                                                                                                
Mr. Tibbles  stated that the historical  wage increases for  exempt;                                                            
partially exempt;  and Court System  employees are depicted  on page                                                            
two of the aforementioned  handout. Court employees wage adjustments                                                            
are specified  in the column titled  "Wage Increases for  XJ". Their                                                            
most recent  wage  adjustments included  a two-percent  increase  in                                                            
2001 and a three-percent increase in 2002.                                                                                      
9:46:32 AM                                                                                                                    
Co-Chair  Green  understood  therefore,   that,  under  the  current                                                            
system, were  a Range 10, Step "E"  or Step "F" employee  encouraged                                                            
to advance  in their career and increased  to a Range 12,  Step A or                                                            
Step  B  position,  "they  would actually   lose money"  by  such  a                                                            
Mr. Tibbles responded  that is possible. He also noted  that were an                                                            
employee  to move  from a classified  position  to a non-classified                                                             
position, they would be  moving from a collective bargain negotiated                                                            
schedule that  is higher than the  non-classified schedule  existing                                                            
in Statute.                                                                                                                     
Co-Chair Green asked for  further information regarding how the Step                                                            
placement  for a person earning  the highest  step in one range  but                                                            
who is being advanced to the next range would be determined.                                                                    
Mr. Tibbles  responded  that there  are "certain  rules that  govern                                                            
advanced step  placement". Continuing,  he noted that the  operating                                                            
procedures  in place  in the Executive  Branch  of State  government                                                            
specify  that  an individual  "can't  be  moved into  longevity  and                                                            
certain  criteria must  be met" before  one could  be placed  within                                                            
advanced   steps.  Such   things   as  "exceptional   service"   are                                                            
considerations.  He was  unfamiliar  with the  Legislative  employee                                                            
rules in this regard.                                                                                                           
Co-Chair  Green concluded  therefore,  that this  legislation  would                                                            
serve to  make "the  smoothing much  easier" and  more aligned  with                                                            
employee  counterparts  in  non-exempt positions.  While  this  wage                                                            
issue might "have  been overlooked or intentional  in years past for                                                            
various  reasons",  this  legislation  would  serve to  correct  the                                                            
situation.  It  would  make  it "even,  equal"  and  provide  parity                                                            
amongst between the two groups of employees.                                                                                    
9:49:12 AM                                                                                                                    
Co-Chair Green  introduced her grandsons, Connor and  Noel Leaf, who                                                            
were visiting from Kenai.                                                                                                       
9:49:30 AM                                                                                                                    
CHRIS  CHRISTENSEN,  Deputy Administrative  Director,  Alaska  Court                                                            
System,  voiced  appreciation   for Court   System  employees  being                                                            
included in this Administration  sponsored legislation. Of the Court                                                            
System's  approximate   733  permanent  employees,   62  are  judges                                                            
appointed by the  Governor, 39 are magistrates, and  the majority of                                                            
the remaining  employees are  clerical in  nature. The Court  System                                                            
consumes less than two-percent  of the State's operating budget, and                                                            
even though it  is one of the smallest departments  in the Executive                                                            
branch, more  private citizens interact  with the System  on a daily                                                            
basis than any  other entity in State government with  the plausible                                                            
exception of  the University of Alaska  system. The majority  of the                                                            
private citizens with whom  the Court System's staff work with every                                                            
day are  unfamiliar  with the  workings  of the  Court System,  "are                                                            
angry  or  scared,  and  might  be  undergoing  the  most  traumatic                                                            
experience  of their  lives".  In addition,  more  than 150,000  new                                                            
cases were  filed with  the Court  System the  previous year.  While                                                            
Court employees  work hard under very stressful conditions  and most                                                            
of them work  "at a very low salary",  they are, nonetheless,  proud                                                            
of their work and believe that what they do matters.                                                                            
Mr. Christensen  informed the Committee  that because approximately                                                             
70-percent  of  the employees  are  Range  15  or below,  the  Court                                                            
experiences  large  turnover   rates.  This,  in  turn,  results  in                                                            
management  issues.   Currently  there  is  a  50-percent   employee                                                            
turnover rate  for employees who have been with the  System for less                                                            
than  five years.  The turnover  rate in  Rural  locations, such  as                                                            
Kotzebue,  is 100 percent  for five-year or  less employees,  and at                                                            
times the turnover  has been 100-percent in one year.  One factor in                                                            
the  high Rural  turnover  is  that  the local  boroughs  or  Native                                                            
Corporations offer  higher compensation to employees  than the State                                                            
does for similar work.                                                                                                          
Mr. Christensen  reminded  the Committee  that  the Legislature  has                                                            
historically provided non-judicial  Court employees a cost of living                                                            
adjustment  (COLA) equal to  the COLA provided  to union  employees.                                                            
When this failed  to occur in 1993, non-supervisory  Court employees                                                            
voted to  join the  IBEW union.  In 1996, the  Legislature  provided                                                            
both  union and  non-union  employees a  COLA amount  that  restored                                                            
parity. Subsequently, those  Court employees voted to de-certify the                                                            
IBEW when  the first collective  bargaining  agreement expired.  Pay                                                            
equity  rather than  working  conditions appears  to  have been  the                                                            
driving force behind the  initial vote. Currently, "the Court System                                                            
has the largest non-union shop in State government".                                                                            
Mr. Christensen  informed the Committee  that while the salaries  of                                                            
the Alaska  Court System's judges  "were ranked first in  the nation                                                            
in 1982", today, "according  to the National Center of State Courts,                                                            
the salary  of a  Superior Court  Judge in Alaska  ranks 49th,  once                                                            
adjusted for cost of living".  This decline has occurred in a little                                                            
more than twenty  years. "The average  annual increase for  Superior                                                            
Court Judges  in other states  during the  period from 1992  to 2004                                                            
was  three-point-one  percent.  In  Alaska  it  averaged  under  one                                                            
percent which  was well under  half the rate  of inflation  … unlike                                                            
other  State   employees,  Judges   do  not  get  annual   longevity                                                            
increases".  The salary  of a  new Judge  is exactly  the same  as a                                                            
Judge with 15 years of  experience. There are no longevity increases                                                            
to compensate  for missed cost of  living adjustments. In  addition,                                                            
the  geographic  differential  (GD)  provided  to  Rural  judges  is                                                            
substantially less than  that of other State employees. For example,                                                            
a union employee in Barrow  receives a 43-percent GD and a non-union                                                            
employee receives a 31.5  percent GD. The local Superior Court Judge                                                            
receives   a  17-percent   GD.  In  addition,   Judges'   geographic                                                            
differential is  calculated only on the first $40,000  of his or her                                                            
salary.  Other State  employees' GD  is calculated  on their  entire                                                            
salary.  Due  to  the  combination   of there   being  no  longevity                                                            
increases  and a limited  GD, there  are places  in Rural Alaska  in                                                            
which the local  prosecutor or the local public defender  makes more                                                            
than the local Superior Court Judge.                                                                                            
Mr. Christensen  stated that  this bill  would provide non-judicial                                                             
Court employees a salary  adjustment effective in FY 2006 that would                                                            
place the Court's  salary schedule  on par with the salary  schedule                                                            
approved last  year for Alaska Public  Employees Association  (APEA)                                                            
members. Nonetheless,  Court employees have lost substantial  ground                                                            
to inflation  over  the last  two decades.  Judges  would receive  a                                                            
salary  increase  equal  to  the  percentage  increase  that  SB  71                                                            
proposes  for a Range 28  Step E in the  Executive Branch,  as State                                                            
Statutes ties a Judge's salary to that Range.                                                                                   
Mr. Christensen  observed that this increase would  improve Alaska's                                                            
judges' ranking  of 49th in the nation  to 47th place. The  increase                                                            
would be appreciated,  and by approving this bill,  "the Legislature                                                            
would send  a message that it values  Court employees as  much as it                                                            
does union  employees in  the Executive Branch  and that it  doesn't                                                            
take their  hard work for  granted." Support  of this bill  would be                                                            
9:55:00 AM                                                                                                                    
Co-Chair  Green understood  therefore  that the  Court System  views                                                            
this legislation "as a good thing for its employees".                                                                           
Mr. Christensen affirmed.                                                                                                       
9:55:24 AM                                                                                                                    
PAM VARNI,  Executive Director,  Legislative  Affairs Agency,  noted                                                            
that  in  the  1980s  and  again  in  the 1990s,   Executive  Branch                                                            
employees   received  salary  increases   that  Legislative   Branch                                                            
employees did  not. "Currently, Legislative employees'  salaries are                                                            
roughly five-percent behind  their counterparts in the Executive and                                                            
Judicial Branches with  the exception of partially exempt employees.                                                            
This bill should be passed  as a matter of fairness and to eliminate                                                            
any  suggestion  that employees  doing  similar  work  are not  paid                                                            
equally.  It is long overdue.  You want to  retain the best  and the                                                            
brightest  employees".  Numerous "employees  have been  lost to  the                                                            
Executive Branch because  they can take a position at the same range                                                            
and step and  make more money or they  accept positions at  a higher                                                            
range, and receive an additional five percent increase in pay".                                                                 
Ms. Varni stated  that absent parity  in salary, it is difficult  to                                                            
retain   employees   such  as   attorneys,   programmers,   personal                                                            
assistants,   and   Legislative   staffers.   When   reviewing   the                                                            
Legislative  budget, "the drain" of  long-term Legislative  staff is                                                            
noticeable  as the number of Legislative  staff receiving  longevity                                                            
Step increases  is decreasing. In addition to this,  the Legislative                                                            
Affairs Agency is experiencing  difficulty in recruiting Legislative                                                            
Information  Office (LIO) teleconference  moderators in Rural  areas                                                            
as the "private sector  wages are higher". It is difficult for staff                                                            
at the lower  Range levels  "to keep up with  cost of living".  Wage                                                            
adjustments  are not keeping  pace with the  cost of living.  In the                                                            
15-year  period from  1988  to 2003,  the Anchorage  Consumer  Price                                                            
Index (CPI) increased 49.89-percent  while Legislative pay increased                                                            
14.72-percent:   a  difference   of   35.08-percent.   "This  is   a                                                            
significant  difference". When comparing  Alaska's Legislative  wage                                                            
increases for the past  five years to other state's it is found that                                                            
in contrast to Alaska's  five percent increase, New Mexico increased                                                            
14.5-percent,  Louisiana  increased  30-percent,  Indiana  increased                                                            
12.7-percent,  Virginia  increased  11.8-percent,  and Rhode  Island                                                            
increased 12.3-percent.                                                                                                         
Ms. Varni  thanked  the Committee  for  their attention,  and,  as a                                                            
manager and  personnel officer, she  urged for passage of  this bill                                                            
in order "to make  wages fair and equitable to all  employees in the                                                            
Legislative branch".                                                                                                            
Co-Chair  Wilken noted that,  regardless  of political affiliation,                                                             
over the years, Administrations  have "struggled" in their search to                                                            
find individuals  to fill commissioner positions.  Extended searches                                                            
have occurred  and oftentimes,  the people  filling those  positions                                                            
"have the financial  means" that allow them to fulfill  their public                                                            
service. This  is a re-occurring situation every election  cycle. To                                                            
that point, he  asked whether this bill would be the  avenue through                                                            
which commissioner salaries could be addressed.                                                                                 
9:59:12 AM                                                                                                                    
Mr. Tibbles replied  that the salaries of commissioners  "are unique                                                            
because  they are  tied  to a  range  and a  step". That  creates  a                                                            
situation  in which  the salaries  are  frozen. As  a result,  other                                                            
employees' salaries could  increase beyond that of the Commissioner.                                                            
He noted  however,  that people  serve the  state for  a variety  of                                                            
reasons: some of them "are  financially able" to accept the position                                                            
at  a lower  salary  than  they would  make  in  other professions.                                                             
Generally;  however,  this is  a concern.  There  were three  acting                                                            
commissioners  this year. He shared that a number  of the applicants                                                            
would  be taking  a pay  cut from  their current  job  were they  to                                                            
become commissioner.                                                                                                            
Co-Chair Green  asked whether the applicants who would  have taken a                                                            
pay reduction were existing State employees.                                                                                    
Mr. Tibbles  affirmed  that a number  of the  applicants were  State                                                            
employees who  would have received less compensation  had they taken                                                            
a commissioner position.                                                                                                        
10:00:32 AM                                                                                                                   
Co-Chair  Wilken suggested  that the  commissioner  salary issue  be                                                            
addressed in this  legislation. Doing so could assist  in making the                                                            
process of hiring a commissioner  easier for the next governor. Such                                                            
conditions  as  implementing  a salary  upgrade  effective  date  to                                                            
coincide with the seating  of the next governor could be considered.                                                            
Co-Chair  Green  noted  that  action  eliminating   the statutorily                                                             
specified salary  range and allowing  the position to be  subject to                                                            
the range and step process could also be considered.                                                                            
Mr. Tibbles opined that  a simple solution would be to eliminate the                                                            
Step "E" designation and  simply include the Range 28 designation in                                                            
Statute.  This would allow  the commissioner  salary to move  up the                                                            
steps in the same manner that other State employees do.                                                                         
Co-Chair Green  asked whether the  Range 28 Step "E" designation  is                                                            
frozen at its  original level or would  increase in line  with other                                                            
State salary increases.                                                                                                         
Mr. Tibbles  verified that it increases  with the State's  statutory                                                            
Co-Chair  Green asked  for confirmation  that  the salary  currently                                                            
increases in that manner.                                                                                                       
Mr. Tibbles affirmed.                                                                                                           
Co-Chair Green  stated that further  work on this legislation  would                                                            
be conducted.                                                                                                                   
The bill was HELD in Committee.                                                                                                 
10:02:36 AM                                                                                                                   
Co-Chair Green announced that Senator Bunde is excused.                                                                         
Senator Dyson introduced  his wife and the wife of his staff person,                                                            
Lucky Schultz.                                                                                                                  
Co-Chair Green adjourned the meeting at 10:03 AM.                                                                               

Document Name Date/Time Subjects