Legislature(2009 - 2010)BELTZ 105 (TSBldg)

03/30/2010 01:30 PM Senate LABOR & COMMERCE

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01:53:39 PM Start
01:55:03 PM HB377
02:32:44 PM Confirmation Hearings
02:48:37 PM SB298
03:22:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Governor's Nominations TELECONFERENCED
Heard & Held
Moved HB 377 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 30, 2010                                                                                         
                           1:53 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Joe Paskvan, Chair                                                                                                      
Senator Joe Thomas, Vice Chair                                                                                                  
Senator Bettye Davis                                                                                                            
Senator Kevin Meyer                                                                                                             
Senator Con Bunde                                                                                                               
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 377                                                                                                              
"An Act exempting certain volunteer work by amateur sports                                                                      
officials from certain requirements of the Alaska Employment                                                                    
Security Act."                                                                                                                  
     - MOVED HB 377 OUT OF COMMITTEE                                                                                            
CONFIRMATION HEARINGS                                                                                                         
Alcoholic Beverage Control Board                                                                                                
 Belen M. Cook, Cordova                                                                                                         
State Board of Registration for Architects, Engineers, and Land                                                                 
 Brian R. Hanson, Anchorage                                                                                                     
 Burdett B. Lent, Wasilla                                                                                                       
 Donald W. Shiesl, Wasilla                                                                                                      
State Assessment Review Board                                                                                                   
 Roger W. Nash                                                                                                                  
Board of Barbers and Hairdressers                                                                                               
 Glenda Ledford, Wasilla                                                                                                        
 Jynal C. Radzuikinas, Sitka                                                                                                    
Board of Chiropractic Examiners                                                                                                 
 Verdie A. Bowen, Wasilla                                                                                                       
 Dr. Walter L. Campbell, Palmer                                                                                                 
Alaska Labor Relations Agency                                                                                                   
 Gary Bader, Anchorage                                                                                                          
 Daniel Repasky, Anchorage                                                                                                      
Board of Marine Pilots                                                                                                          
 Richard Erickson, Ketchikan                                                                                                    
Personnel Board                                                                                                                 
 Dr. Keith J. Hamilton, Soldotna                                                                                                
Board of Certified Real Estate Appraisers                                                                                       
 Clint H.A. Lentfer, Anchorage                                                                                                  
 Donna H. Rulien, Anchorage                                                                                                     
Real Estate Commission                                                                                                          
 Marianne K. Burke, Anchorage                                                                                                   
Regulatory Commission of Alaska                                                                                                 
 T.W. Patch, Anchorage                                                                                                          
Board of Veterinary Examiners                                                                                                   
 Dr. Teresa L. Beck, Palmer                                                                                                     
 Dr. John E. Tuomi, Palmer                                                                                                      
Alaska Workers' Compensation Board                                                                                              
 Jeffrey R. Bizzarro, Two Rivers                                                                                                
 James P. Fassler, Soldotna                                                                                                     
 John D. Garrett, Anchorage                                                                                                     
 Don E. Gray, Anchorage                                                                                                         
 Sarah L. Lefebvre, Fairbanks                                                                                                   
 Michael J. Notar, Juneau                                                                                                       
 Thomas J. Tibor, Anchorage                                                                                                     
 Janet L. Waldron, Anchorage                                                                                                    
Workers' Compensation Appeals Commission                                                                                        
 Laurence Keyes, Anchorage                                                                                                      
     - HEARD                                                                                                                    
SENATE BILL NO. 298                                                                                                             
"An  Act adjusting  the established  geographic differentials  in                                                               
pay that apply to certain employees  in state service who are not                                                               
covered  by  collective   bargaining  agreements;  requiring  the                                                               
director  of the  division of  personnel to  establish geographic                                                               
pay differentials  for positions  located outside the  state; and                                                               
providing for an effective date."                                                                                               
     - HEARD AND HELD                                                                                                           
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 377                                                                                                                  
SHORT TITLE: VOLUNTEER AMATEUR SPORTS OFFICIALS                                                                                 
SPONSOR(s): REPRESENTATIVE(s) STOLTZE                                                                                           
02/23/10       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/10       (H)       L&C                                                                                                    
03/22/10       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/22/10       (H)       Moved Out of Committee                                                                                 
03/22/10       (H)       MINUTE(L&C)                                                                                            
03/23/10       (H)       L&C RPT 5DP                                                                                            
03/23/10       (H)       DP: BUCH, LYNN, HOLMES, T.WILSON, OLSON                                                                
03/24/10       (H)       TRANSMITTED TO (S)                                                                                     
03/24/10       (H)       VERSION: HB 377                                                                                        
03/25/10       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/25/10       (S)       L&C                                                                                                    
03/30/10       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
BILL: SB 298                                                                                                                  
SHORT TITLE: ST. EMPLOYEE GEOGRAPHIC PAY DIFFERENTIAL                                                                           
SPONSOR(s): SENATOR(s) EGAN BY REQUEST                                                                                          
02/24/10       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/24/10       (S)       L&C, FIN                                                                                               
03/30/10       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
WITNESS REGISTER                                                                                                              
REPRESENTATIVE BILL STOLTZE                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Sponsor of HB 377.                                                                                        
MORGAN HOBSON                                                                                                                   
Staff to Representative Stoltze                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Explained HB 377.                                                                                         
PAULA SCAVERA, legislative liaison                                                                                              
Alaska Department of Labor and Workforce Development (DOLWD)                                                                    
Juneau, AK                                                                                                                      
POSITION STATEMENT: Answered questions on HB 377.                                                                             
BILL CRAEMER, Chief                                                                                                             
Unemployment Insurance                                                                                                          
Department of Labor and Workforce Development (DOLWD)                                                                           
Juneau, AK                                                                                                                      
POSITION STATEMENT: Answered questions on HB 377.                                                                             
RICHARD WISENEN                                                                                                                 
USA Hockey                                                                                                                      
Kenai, AK                                                                                                                       
POSITION STATEMENT: Opposed HB 377.                                                                                           
T.W. PATCH                                                                                                                      
Regulatory Commission of Alaska (RCA) appointee                                                                                 
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Commented on his nomination for the RCA.                                                                  
SENATOR DENNIS EGAN                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Sponsor of SB 298.                                                                                        
DANA OWEN                                                                                                                       
Staff to Senator Egan                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Explained SB 298 for the sponsor.                                                                         
CHRIS CHRISTENSEN, Deputy Administrative Director                                                                               
Alaska Court System                                                                                                             
Juneau, AK                                                                                                                      
POSITION STATEMENT: Commented on SB 298.                                                                                      
JIM CALVIN, principal                                                                                                           
McDowell Group                                                                                                                  
Juneau, AK                                                                                                                      
POSITION STATEMENT: Explained survey methodology used in SB 298.                                                              
ACTION NARRATIVE                                                                                                              
1:53:39 PM                                                                                                                    
CHAIR JOE PASKVAN  called the Senate Labor  and Commerce Standing                                                             
Committee meeting  to order at 1:53  p.m. Present at the  call to                                                               
order were Senators Thomas, Davis, and Paskvan.                                                                                 
           HB 377-VOLUNTEER AMATEUR SPORTS OFFICIALS                                                                        
1:55:03 PM                                                                                                                    
CHAIR PASKVAN announced HB 377 to be up for consideration.                                                                      
1:55:08 PM                                                                                                                    
REPRESENTATIVE  BILL  STOLTZE,  sponsor  of  HB  377,  introduced                                                               
himself. He  said this issue was  brought to him by  folks active                                                               
in both Southcentral and Interior  youth sports activities facing                                                               
the  prospect of  finding  themselves in  a  unique situation  of                                                               
becoming something  they didn't  realize - direct  employers. The                                                               
problem arises  out of  enforcement by  the Alaska  Department of                                                               
Labor and  Workforce Development (DOLWD) to  protect workers from                                                               
manipulation  and  by strictures  of  the  federal government  on                                                               
employee exemptions for volunteer work as sports officials.                                                                     
1:56:27 PM                                                                                                                    
SENATOR BUNDE joined the committee.                                                                                             
REPRESENTATIVE  STOLTZE  said his  intent  is  to bring  forth  a                                                               
vehicle that  provides for as  much latitude for  these volunteer                                                               
organizations, which are basically scraping  by to just keep kids                                                               
on  the ice  or  on the  soccer fields  and  providing the  basic                                                               
scoring and  officiating that is  needed, without the  having the                                                               
responsibilities  of  unemployment  tax. The  federal  government                                                               
provides  a $1500  exemption for  volunteer activities  that have                                                               
some compensation.  It is not a  wage, but rather a  stipend or a                                                               
per diem type  of compensation. He preferred  a broader approach,                                                               
but his  hands are  tied by  the federal law.  He said  that many                                                               
Alaskans are  involved in youth  sports; so this is  an important                                                               
He said  the Alaska School  Activities Association (ASAA)  is the                                                               
main entity that brought this  forward and it has avalanched into                                                               
other folks presenting their interests.                                                                                         
1:59:46 PM                                                                                                                    
MORGAN HOBSON,  staff to Representative Stoltze,  said the intent                                                               
of the bill is not to help folks  who referee as a full time job,                                                               
but to  help people  who volunteer their  time at  local sporting                                                               
events and  receive money to  cover incidentals such as  food and                                                               
travel.  These  volunteers  cover  many  of  their  own  expenses                                                               
including  training, certification,  costs associated  with their                                                               
officials  organizations, uniforms,  and  this  job is  performed                                                               
purely as  an avocation  for the sake  of community  sports. This                                                               
measure  would only  apply to  volunteers who  receive less  than                                                               
$1500 cumulatively  per year  over all  sports they  are involved                                                               
with as well  as supporting organizations. This  amount cannot be                                                               
raised,  although many  people have  testified that  it would  be                                                               
beneficial  to have  a higher  amount. But  the state  would lose                                                               
funding for unemployment insurance if that amount was raised.                                                                   
Sports officials, whether they are  volunteers or amateurs cannot                                                               
be entirely exempted from unemployment  insurance, but this gives                                                               
leeway to help folks who do  this for several games in the summer                                                               
or who help out with a son or daughter's sport event.                                                                           
2:01:40 PM                                                                                                                    
SENATOR  BUNDE  said  he  received  several  communications  from                                                               
people supporting  this issue, but  nothing from  people opposing                                                               
it and he wanted to know if there is any opposition.                                                                            
MS. HOBSON  replied that  the only concerns  they have  heard are                                                               
from folks who  want a higher limit, but after  looking into that                                                               
they found it is not a possibility.                                                                                             
REPRESENTATIVE  STOLTZE added  that  the opposition  has been  in                                                               
legal form from the federal government.                                                                                         
SENATOR  BUNDE  asked  if these  various  groups  have  liability                                                               
insurance that would cover injuries.                                                                                            
MS. HOBSON  answered that workers' compensation  would be totally                                                               
outside of this.                                                                                                                
REPRESENTATIVE   STOLTZE  added   that   ASAA  carries   workers'                                                               
compensation  insurance,  but he  would  leave  that to  them  to                                                               
testify about.                                                                                                                  
2:03:40 PM                                                                                                                    
CHAIR PASKVAN asked if it is  possible for one of these officials                                                               
to  receive  unemployment  insurance,   and  if  so,  under  what                                                               
SENATOR  JOE  THOMAS   asked  relative  to  the   $1500  cap  for                                                               
compensation,  would it  be a  good idea  to consider  the soccer                                                               
association  or whatever  as the  employer so  they can  fill out                                                               
some kind  of contract acknowledging  that they are  a volunteer,                                                               
and  setting out  standards  to eliminate  confusion  at a  later                                                               
REPRESENTATIVE  STOLTZE   replied  that  these  people   are  not                                                               
employees  of  the school  districts  or  associations. They  are                                                               
usually dispatched through an official's  association. They do it                                                               
for love of the sport and to stay involved.                                                                                     
2:06:23 PM                                                                                                                    
SENATOR KEVIN MEYER joined the committee.                                                                                       
2:06:31 PM                                                                                                                    
SENATOR BUNDE said he is all  in favor of the bill, but sometimes                                                               
the  push back  from people  who do  activities like  this for  a                                                               
living  is that  their  opportunity  to make  a  living is  being                                                               
undercut.  His  comment  earlier   was  if  they  were  full-time                                                               
employees there  would be some workers'  compensation involved if                                                               
there was  an injury.  What kind of  liability coverage  do these                                                               
part time workers have?                                                                                                         
PAULA SCAVERA,  legislative liaison,  Alaska Department  of Labor                                                               
and  Workforce  Development (DOLWD),  said  that  she asked  this                                                               
question of the  workers' compensation division and  she was told                                                               
that volunteers are volunteers and  they are exempt from workers'                                                               
compensation laws.                                                                                                              
SENATOR BUNDE said  that is a little part of  his problem. It's a                                                               
contradiction   in  terms.   How   can  someone   get  paid   for                                                               
MS. SCAVERA  replied that these  are not considered wages  - they                                                               
get their uniform  cleaned or they get reimbursed for  a new rule                                                               
book.  Language on  page 7  of HB  377 says  that volunteer  work                                                               
means "work  for which compensation  does not exceed and  is paid                                                               
only  to defray  or reimburse  the reasonable  food, travel,  and                                                               
incidental expenses  the person  occurs in  order to  perform the                                                               
work." The word "wages" isn't there.                                                                                            
SENATOR BUNDE said  he is more familiar with it  being labeled as                                                               
an honorarium.                                                                                                                  
MS. SCAVARA stated  that she wasn't a drafting  attorney and that                                                               
is the way it was drafted.                                                                                                      
2:09:17 PM                                                                                                                    
CHAIR PASKVAN  asked if  they are exempted,  could they  still be                                                               
covered under Unemployment Insurance.                                                                                           
BILL CRAEMER, Chief, Unemployment  Insurance, Department of Labor                                                               
and  Workforce  Development  (DOLWD),  answered  if  someone  has                                                               
covered wages  in the system  and then they file  an unemployment                                                               
claim  they  could  draw unemployment  benefits  based  on  those                                                               
wages.  Reimbursement for  expenses  - uniforms  and travel,  for                                                               
instance - are not considered wages.  They are not taxed and they                                                               
wouldn't help someone qualify for a claim.                                                                                      
2:10:46 PM                                                                                                                    
RICHARD WISENEN,  certified USA  Hockey official,  Kenai, Alaska,                                                               
said  he is  also  a certified  National  Federation high  school                                                               
hockey official, a  volunteer local supervisor and  a trainer for                                                               
USA  Hockey that  trains hockey  officials. He  also sits  on the                                                               
board of  directors for their  local hockey  referee association.                                                               
He  said  they  need  to avoid  any  unintended  consequences  of                                                               
passing any bill, and if this  bill passes it won't alleviate the                                                               
current problem  that is forcing  sport programs to cut  back due                                                               
to the  increased cost of  obtaining officials for the  games. In                                                               
the case of the Hockey  Referee Association, they supply official                                                               
for everything  from youth  hockey to  varsity junior  varsity at                                                               
the high school  level and adult leagues. If they  have to charge                                                               
each  group the  extra fees  to cover  unemployment and  workers'                                                               
compensation for these  games it will be even  more expensive for                                                               
the programs.                                                                                                                   
He said the $1500 cap only  adds confusion. Any time a referee is                                                               
assigned a  game he has to  charge the league for  those fees and                                                               
might have no idea which person that  is going to bid for the job                                                               
will  be  able  to  pass  that threshold  in  their  year.  Their                                                               
officials' contracts,  which were  drawn up with  the help  of an                                                               
attorney, include  the statement  that they  are working  for the                                                               
association as  independent contractors  and as such  no workers'                                                               
compensation   or  unemployment   needs  to   be  withheld.   His                                                               
association pays  $35,000 -  $40,000 a  year to  approximately 50                                                               
different officials.  With these  regulations, they  are thinking                                                               
about hiring  an accountant  that would add  an extra  $10,000 to                                                               
the  fees  they  have  to charge  the  association.  Currently  a                                                               
volunteer treasurer handles this as an independent contractor.                                                                  
He said  a number  of young  people officiate  at boys  and girls                                                               
soccer as  well as the  hockey program,  and many are  beyond the                                                               
$1500 threshold. Most states he  has worked in treat officials as                                                               
independent contractors  and thus avoid this  dilemma completely.                                                               
They  would be  better  served providing  an  exemption under  AS                                                               
23.10.055 where  17 other exemptions for  the Employment Security                                                               
Act  reside  rather  than  forward HB  377.  He  suggested  using                                                               
language  saying that  "anyone officiating  amateur sports  where                                                               
they  are  compensated  on  a  per game  basis"  and  that  would                                                               
eliminate  the  problem  they are  facing.  Sports  programs  are                                                               
already very  costly, but they  are important to the  welfare and                                                               
health of our communities. They are trying to help the kids out.                                                                
2:15:01 PM                                                                                                                    
REPRESENTATIVE STOLTZE commented that  he prefers an exemption as                                                               
well, but  this is  what the  Department of  Labor says  the feds                                                               
will allow. It's  not as simple as what the  gentleman from Kenai                                                               
stated. The path in SB 377 will meet the legal test.                                                                            
SENATOR BUNDE  said previous testimony indicated  that volunteers                                                               
were part  of an organization.  His conception  is that a  lot of                                                               
these teams  are not hiring out  of a main hall;  they're getting                                                               
their volunteer workers from an informal group locally.                                                                         
REPRESENTATIVE STOLTZE responded that  some of the more organized                                                               
sports generally  have an a bigger  more sophisticated official's                                                               
association like USA Hockey that  that has expenses. It makes the                                                               
operation of  a local  summer soccer  league pale  in comparison.                                                               
This  issue  is  difficult,  he  said,  and  HB  377  won't  help                                                               
everybody, but  it will  provide relief for  many. He  would have                                                               
preferred an  exemption, but he  didn't want to open  other doors                                                               
and   provide  abuse   of  contract   employees.  He   said  it's                                                               
frustrating because  their hands are  tied at a level  far beyond                                                               
the borders of our state.                                                                                                       
2:19:32 PM                                                                                                                    
MS.  SCAVERA  added  that  she  helped  Representative  Stoltze's                                                               
office send four different bill  versions to the US Department of                                                               
Labor (USDOL)  to see what would  pass. Then they looked  at what                                                               
other states tried  to do and found this. USS  Code 26.33.09 says                                                               
non  profits  and  government entities  cannot  exempt  employees                                                               
totally from  the Unemployment Insurance  Act. One of  the drafts                                                               
tried the exclusion and USDOL said no.                                                                                          
2:21:30 PM                                                                                                                    
SENATOR THOMAS said he was a  little confused about what they are                                                               
actually considering.  They talked about volunteers  in the bill,                                                               
yet  some   of  the  attached  information   doesn't  talk  about                                                               
volunteers   at  all,   but  rather   people  in   two  different                                                               
classifications  that are  independent contractors  or employees.                                                               
Is   that  what   is  confusing   the   situation?  Is   workers'                                                               
compensation the issue they are looking at?                                                                                     
MS. SCAVERA  said she  hadn't read the  article he  was referring                                                               
to,  but she  knew  there was  a  difference between  independent                                                               
contractors and  volunteers. This bill is  just about volunteers;                                                               
it has  nothing to  do with the  relationship of  contractors and                                                               
independent contractors.  Since December she had  been talking to                                                               
people from  other states that are  trying to do the  same thing,                                                               
and  some  of  them  have   gone  to  an  independent  contractor                                                               
situation and later had those struck down by the USDOL.                                                                         
SENATOR THOMAS  asked if there  is a  way to solve  the situation                                                               
that was brought to them by  Mr. Wisenen short of where they are.                                                               
His  concern seemed  to  be paying  the  individuals and  somehow                                                               
keeping track  of the pay and  when a person hits  the $1500 cap.                                                               
Is that your understanding of the problem?                                                                                      
2:24:34 PM                                                                                                                    
MR.  CRAEMER answered  that the  federal law  is very  clear that                                                               
wages of  sports officials  working for  non-profit organizations                                                               
may not  be exempted  from being  covered under  the Unemployment                                                               
Insurance  Program.   The  federal  statute  tries   to  be  very                                                               
inclusive  to provide  coverage  for workers;  so  they want  the                                                               
wages included.  They specifically say  they may not  be exempted                                                               
because  of  being for  a  nonprofit  organization. The  question                                                               
about employees  versus independent contractors  gets complicated                                                               
fairly quickly. Alaska  statute is very clear on it.  To meet the                                                               
level of independent contractor is a pretty difficult test.                                                                     
He said he  understands that HB 377  clarifies that reimbursement                                                               
for incurred expenses should not be reported as covered wages.                                                                  
SENATOR THOMAS said he didn't  see this reimbursement up to $1500                                                               
as wages,  and he thought  this bill  was the best  solution they                                                               
could find.                                                                                                                     
MS.  SCAVERA  said  this  bill  was for  those  people  who  have                                                               
actually tried to  referee a soccer game once,  to reimburse them                                                               
for gas  or meals, a uniform  or studying the rules.  They aren't                                                               
wages  whatsoever.  It's to  help  reimburse  the "mom  and  pop"                                                               
organizations.  She said  she has  a  friend who  goes through  a                                                               
couple of  uniforms a year  officiating kids' basketball  games -                                                               
kids bleed on  his shirt and things  like that. So he  can put in                                                               
to be reimbursed for his uniform.                                                                                               
CHAIR PASKVAN stated he  thought Representative Stoltze indicated                                                               
it very  well when he said  this is not a  solution for everyone.                                                               
Federal law does  not allow a broader solution. This  is the best                                                               
that can be done.                                                                                                               
2:29:33 PM                                                                                                                    
SENATOR BETTYE DAVIS  said she thought the Department  of Law was                                                               
on line and wanted  to know if they had something  to add. No one                                                               
from the department was on line, so they moved on.                                                                              
2:30:02 PM                                                                                                                    
SENATOR  THOMAS  moved  to  report HB  377  from  committee  with                                                               
individual  recommendations  and  attached zero  fiscal  note(s).                                                               
There were no objections and it was so ordered.                                                                                 
2:30:31 PM                                                                                                                    
CHAIR PASKVAN announced an at ease from 2:30 to 2:32 p.m.                                                                       
^Confirmation hearings                                                                                                          
                     Confirmation hearings                                                                                  
2:32:44 PM                                                                                                                    
CHAIR PASKVAN announced confirmation hearings for the following                                                                 
Alcoholic Beverage Control Board                                                                                                
 Belen M. Cook, Cordova                                                                                                         
State Board of Registration for Architects, Engineers, and Land                                                                 
 Brian R. Hanson, Anchorage                                                                                                     
 Burdett B. Lent, Wasilla                                                                                                       
 Donald W. Shiesl, Wasilla                                                                                                      
State Assessment Review Board                                                                                                   
 Roger W. Nash                                                                                                                  
Board of Barbers and Hairdressers                                                                                               
 Glenda Ledford, Wasilla                                                                                                        
 Jynal C. Radzuikinas, Sitka                                                                                                    
Board of Chiropractic Examiners                                                                                                 
 Verdie A. Bowen, Wasilla                                                                                                       
 Dr. Walter L. Campbell, Palmer                                                                                                 
Alaska Labor Relations Agency                                                                                                   
 Gary Bader, Anchorage                                                                                                          
 Daniel Repasky, Anchorage                                                                                                      
Board of Marine Pilots                                                                                                          
 Richard Erickson, Ketchikan                                                                                                    
Personnel Board                                                                                                                 
 Dr. Keith J. Hamilton, Soldotna                                                                                                
Board of Certified Real Estate Appraisers                                                                                       
 Clint H.A. Lentfer, Anchorage                                                                                                  
 Donna H. Rulien, Anchorage                                                                                                     
Real Estate Commission                                                                                                          
 Marianne K. Burke, Anchorage                                                                                                   
Regulatory Commission of Alaska                                                                                                 
 T.W. Patch, Anchorage                                                                                                          
Board of Veterinary Examiners                                                                                                   
 Dr. Teresa L. Beck, Palmer                                                                                                     
 Dr. John E. Tuomi, Palmer                                                                                                      
Alaska Workers' Compensation Board                                                                                              
 Jeffrey R. Bizzarro, Two Rivers                                                                                                
 James P. Fassler, Soldotna                                                                                                     
 John D. Garrett, Anchorage                                                                                                     
 Don E. Gray, Anchorage                                                                                                         
 Sarah L. Lefebvre, Fairbanks                                                                                                   
 Michael J. Notar, Juneau                                                                                                       
 Thomas J. Tibor, Anchorage                                                                                                     
 Janet L. Waldron, Anchorage                                                                                                    
Workers' Compensation Appeals Commission                                                                                        
 Laurence Keyes, Anchorage                                                                                                      
2:33:23 PM                                                                                                                    
T.W.  PATCH, Regulatory  Commission  of  Alaska (RCA)  appointee,                                                               
Anchorage, said he  is honored to serve on the  commission and is                                                               
humbled as  he reflects  on the importance  and magnitude  of the                                                               
task the  RCA shoulders each  day and as  he examines how  he can                                                               
make positive contributions  as a commissioner. He  said he would                                                               
work at  making the rationale  behind every  decision transparent                                                               
and  relevant. He  pledged to  Governor Parnell  his focused  and                                                               
determined efforts  to carefully  analyze matters  brought before                                                               
the commission.  He intended to  side proceedings on  a developed                                                               
record and he hoped to  be repeatedly accused of logical analysis                                                               
and of carefully weighing important facts as cases are decided.                                                                 
MR.  PATCH said  he would  always apply  the enacted,  decided or                                                               
otherwise relevant law to every  proceeding. He hoped it would be                                                               
apparent that  hard work and  honest effort  was part of  all RCA                                                               
decisions, and  that people would  be able to  understand clearly                                                               
why they  were made so  they could  be accepted. He  committed to                                                               
making  the  rationale  behind every  decision  evident  and  the                                                               
process the RCA uses to arrive  at its decisions transparent.  He                                                               
said he  was also committed  to consistent application  of policy                                                               
decisions   saying  that   carefully  crafted   policy  decisions                                                               
uniformly applied  is the best  way to provide  predictability of                                                               
result  and to  avoid the  legal snares  along the  pathway where                                                               
hard cases make bad law.                                                                                                        
MR.  PATCH said  he is  eager to  start his  service and  eagerly                                                               
looks forward to  expanding his knowledge across  the spectrum of                                                               
utility  regulation.  He  related  his  personal  history  before                                                               
during  and   after  coming  to   Alaska.  He  listed   his  many                                                               
contributions  to communities  throughout  Alaska,  saying he  is                                                               
appreciative of  the state's  beauty and  character by  virtue of                                                               
his exposure to its people.                                                                                                     
In terms of  his profession as an attorney, he  began practice in                                                               
Alaska in 1975  both in government service  and private practice.                                                               
His practice has  involved criminal and civil  litigation as well                                                               
as  transactional  work.  For  a   long  while  he  practiced  in                                                               
professional  dispute  resolution;  he  has  served  as  both  an                                                               
arbitrator  and  a  mediator. He  earned  membership  on  several                                                               
national hearing panels  as well as being an  arbitrator in other                                                               
states and on labor and interest arbitration panels in Alaska.                                                                  
2:41:40 PM                                                                                                                    
His  training  and service  experience  necessary  to advance  to                                                               
chairmanship  responsibilities  and  senior  status  on  national                                                               
panels has assisted in his  development as a patient yet critical                                                               
listener.  It  has  helped  in  continuously  honing  the  skills                                                               
necessary to analyze facts and  apply law and that experience has                                                               
emboldened him in deciding issues  of the magnitude so often seen                                                               
in proceedings before  the RCA. He said his service  with the RCA                                                               
and  exposure  to  the  agency's  enabling  legislation  and  its                                                               
regulations has  further qualified him  for a meaningful  role in                                                               
RCA matters. Serving  as an administrative law  judge exposed him                                                               
to a broad  array of RCA dockets, some  involving routine matters                                                               
and some of significantly greater importance.                                                                                   
He said  the RCA has processed  on average just under  600 tariff                                                               
filings per year  over the past five years. It  has dealt with an                                                               
average of  425 consumer  protection matters  per year  over that                                                               
some period.  The RCA published  about 1300 orders last  year and                                                               
today there  are more than  170 open  dockets of all  types being                                                               
considered.  It is  a  very busy  work  environment dependent  on                                                               
sound management  and a cooperative team  of dedicated employees.                                                               
He embraces  the RCA's mission  is to protect  consumer interests                                                               
and promote economic development and  he looks forward to working                                                               
with the RCA  in a new role and contributing  his life experience                                                               
and qualifications to the analysis of complex matters.                                                                          
SENATOR THOMAS said he appreciated his statement and enthusiasm.                                                                
CHAIR  PASKVAN noted  he  was  in his  38th  year  in the  lawyer                                                               
2:46:23 PM                                                                                                                    
CHAIR PASKVAN  moved to forward  all the appointees names  to the                                                               
full body for consideration. There  were no objections and it was                                                               
so ordered.                                                                                                                     
2:46:50 PM                                                                                                                    
CHAIR PASKVAN announced an at ease at 2:46-2:48 p.m.                                                                            
        SB 298-ST. EMPLOYEE GEOGRAPHIC PAY DIFFERENTIAL                                                                     
2:48:37 PM                                                                                                                  
CHAIR PASKVAN announced SB 298 to be up for consideration.                                                                      
2:48:51 PM                                                                                                                    
SENATOR DENNIS EGAN,  sponsor of SB 298, said  he introduced this                                                               
bill   by   request   of  constituents.   He   said   the   Palin                                                               
administration  commissioned  the   geographic  pay  differential                                                               
study  in 2008,  but  declined  to introduce  the  bill. He  said                                                               
regional  differences in  the cost  of living  change drastically                                                               
over  time and  the  statute  update on  this  issue  was over  a                                                               
quarter   century  ago.   SB  298   will  bring   the  geographic                                                               
differential statute up  to date and many citizens  believe it is                                                               
a matter of fairness.                                                                                                           
2:50:29 PM                                                                                                                    
DANA OWEN, staff  to Senator Egan, elaborated that  25 years have                                                               
passed  since  this issue  was  updated.  Serious pay  inequities                                                               
developed  over  that  time and  this  inhibits  recruitment  and                                                               
retention in certain areas of the  state. It is time to begin the                                                               
discussion on fixing this problem.                                                                                              
When the  Palin administration requested  the study  McDowell was                                                               
charged with looking at differences  in cost of living in various                                                               
communities  across  the state  and  in  various regions  of  the                                                               
state. SB  298 incorporates the  findings of the  McDowell study.                                                               
It follows the  structure of the current statute in  that is uses                                                               
the  same  original  19 election  districts  that  are  currently                                                               
embedded  in the  statute, but  it would  change the  approach by                                                               
substituting the  McDowell study's  percentage variation  for the                                                               
current  step  variation.  The way  the  statute  recognizes  the                                                               
geographic differential  is by applying one  or two and up  to as                                                               
many as eight pay steps within that geographic area.                                                                            
2:52:23 PM                                                                                                                    
MR. OWEN said it's important  to note that McDowell recommended a                                                               
different  approach to  grouping communities  not in  relation to                                                               
their  geography but  in relation  to their  cost of  living. The                                                               
regions  they  recommended  would  have  a  maximum  differential                                                               
across the region of 10  percent. Using the approach suggested by                                                               
the McDowell  Group raises a new  policy question of how  to pick                                                               
the  number within  the pool.  Within  a pool,  for instance,  if                                                               
there is a 10 percent difference,  do you split the difference or                                                               
pick a  number that is half  between the lowest and  the highest?                                                               
Do you  take a weighted average  or use some other  rationale for                                                               
picking a number within that variation?                                                                                         
SB 298's  approach is  the simplest,  Mr. Owen  said, and  is one                                                               
that people  are familiar with.  However, it is only  intended to                                                               
be a  point of departure  for the  discussion and the  sponsor is                                                               
open to considering other methods.                                                                                              
2:54:13 PM                                                                                                                    
CHRIS CHRISTENSEN,  Deputy Administrative Director,  Alaska Court                                                               
System,  said  this is  the  third  time  he had  addressed  this                                                               
subject with the legislature; the first  time being in 1996 on SB
152 which failed to  pass; the second time in 2002  was on SB 180                                                               
which  passed but  was  vetoed by  Governor  Knowles. Both  bills                                                               
attempted to  fix the geographic  system for non  union employees                                                               
and both failed  over the details. He said  the legislative focus                                                               
in 1996 and 2002 was finding  a way to lower the state's personal                                                               
services  budget,  not  fixing the  inherent  unfairness  in  the                                                               
current system.                                                                                                                 
The current differential  was adopted in 1976 while  the TAPS was                                                               
still  under  construction. Obviously  a  lot  has changed  since                                                               
then.  The   executive  branch's   union  contracts,   which  are                                                               
renegotiated every  three years, have not  reflected this out-of-                                                               
date differential  since around 1985, although  the differentials                                                               
in the  current contracts are  apparently also  substantially out                                                               
of date.                                                                                                                        
He said  while the judiciary is  a tiny branch using  less than 2                                                               
percent  of  the  state's  general  fund  operating  budget  they                                                               
actually employ about  two-thirds of all the  non union employees                                                               
who are  currently getting a  geographic differential.  They have                                                               
266  eligible  employees as  of  late  last year;  the  executive                                                               
branch has  190 and the legislative  branch has 10. He  said this                                                               
situation  is especially  problematic for  his employees  because                                                               
most of  them are clerical workers  at ranges 10 and  12, whereas                                                               
many  of the  executive  branch employees  are  attorneys in  the                                                               
Department of Law  and the Public Defender Agency who  get a much                                                               
higher base salary to live on.                                                                                                  
Assuming that  the differential rates  reflected in  the McDowell                                                               
study  are accurate,  he  has clerical  employees  who, in  rural                                                               
Alaska  for example  Dillingham, are  being  paid as  much as  25                                                               
percent less than  the actual cost of living. To  put it a little                                                               
differently, those employees are  effectively being paid about 25                                                               
percent  less than  employees in  Anchorage for  doing the  exact                                                               
same work. Conversely,  he has employees in  certain urban areas,                                                               
such as Fairbanks  and Palmer, who are effectively  being paid 5-                                                               
10  percent more  than  Anchorage employees  for  the exact  same                                                               
MR.  CHRISTENSEN  said every  year  they  go without  fixing  the                                                               
unfairness inherent in the current  system it gets more expensive                                                               
because  the  differential  between   Anchorage  and  most  rural                                                               
communities has increased compared to  what it was the last times                                                               
they tried  to fix it.  It's complicated because  those employees                                                               
who  are  benefiting  from  a  too  high  differential  in  their                                                               
communities like Fairbanks have  based their economic decisions -                                                               
like  mortgage payments,  car payments,  and rate  at which  they                                                               
save for  retirement and their  children's education -   on their                                                               
current  salaries,  projected  longevity increases  and  cost  of                                                               
living  adjustments  granted by  the  legislature.   Under  those                                                               
circumstances  they  think  it  would be  unfair  to  reduce  the                                                               
differential of  those employees as  was proposed in the  past or                                                               
even  to freeze  those employees  in  place as  the current  bill                                                               
proposes. Some employees would not  get a merit increase for 5-10                                                               
years if  this would pass  because their  geographic differential                                                               
has been  changed so much.  In conclusion, Mr.  Christensen urged                                                               
them to do  something that would address  the inherent unfairness                                                               
in the current system.                                                                                                          
2:58:24 PM                                                                                                                    
SENATOR  JOE  THOMAS   asked  what  he  used   to  determine  the                                                               
differential in places like Bethel versus Anchorage.                                                                            
MR. CHRISTENSEN  answered that those  figures were based  on what                                                               
the law  currently gives  employees and  what the  McDowell study                                                               
would give those employees in those communities.                                                                                
SENATOR  THOMAS  asked  if  the real  problem  wasn't  finding  a                                                               
meaningful  formula that  everyone  can agree  on.  He said  they                                                               
should have  compared a  comprehensive list  of things  that were                                                               
done the  same way every  time. He  said he received  a complaint                                                               
that  a lot  of  the Fairbanks  housing data  was  used when  the                                                               
military troops were  gone and that applied  downward pressure to                                                               
the housing market  as far as what rents were  or sale of houses.                                                               
He didn't know what the right answer  was, but he did know that a                                                               
lot of people were excited about it.                                                                                            
MR. CHRISTENSEN said  he didn't know if the  committee received a                                                               
letter  from  the  Association   of  Alaska  Magistrates  stating                                                               
concern  about the  McDowell study  because  they disagreed  with                                                               
some  of  the  methodology  and   the  way  it  affected  certain                                                               
communities. He  agreed that  deciding what is  fair is  the most                                                               
difficult thing.                                                                                                                
SENATOR  CON  BUNDE  asked  what  he  thought  would  be  a  good                                                               
MR. CHRISTENSEN replied  their preferred method would  be to give                                                               
people who are  getting paid substantially less than  the cost of                                                               
living relative  to Anchorage a  raise and freeze people  who are                                                               
getting paid too much. He said  the court system has a great deal                                                               
of turnover, about  10 percent per year, and that  would make the                                                               
fiscal note  for the  first year  the same  either way;  the cost                                                               
would go  down more slowly if  they were allowed to  retain their                                                               
current salaries and continue to get merit increases.                                                                           
He explained that a merit  system gives annual merit increases to                                                               
employees,  if they  deserve it,  but  often it  isn't used  like                                                               
that. In the Court System  merit increases are withheld if people                                                               
aren't performing  adequately. When  you tell people  they aren't                                                               
going to be  eligible for merit increases for  4-10 years because                                                               
of this change  in the law, you  have to wonder what  is going to                                                               
happen in your organization. So, there are practical problems.                                                                  
SENATOR BUNDE remarked  that very few state  employees think they                                                               
get paid too much.                                                                                                              
3:04:15 PM                                                                                                                    
JIM  CALVIN,   principal,  McDowell  Group,  Juneau,   said  they                                                               
provided the geographic differential  survey. He said two primary                                                               
methodological tasks  were involved  in this  project. One  was a                                                               
household  survey of  2500 Alaskan  households in  74 communities                                                               
scattered throughout  the state;  the purpose was  to essentially                                                               
understand the  size and  shape of  the Alaskan  household budget                                                               
relative  to  housing,  food, transportation,  medical  care,  et                                                               
cetera. The  second was a  retail price survey conducted  in over                                                               
600  retail  outlets  throughout   the  state  and  58  different                                                               
communities to  understand the difference  in prices of  a market                                                               
basket  of about  200 typical  household items  over the  state -                                                               
like the price of  a loaf of bread in Angoon versus  a price of a                                                               
loaf of bread in Anchorage.                                                                                                     
He  stated clearly  that the  study never  addressed nor  implied                                                               
that anyone was being overpaid  in state government. In fact they                                                               
didn't measure the cost of  living; they measured the differences                                                               
in cost of living between Anchorage  as the base community, and a                                                               
differential of 1  and a range of other districts.  So the equity                                                               
of pay  overall is not  part of what they  were trying to  do and                                                               
they don't want that suggested.                                                                                                 
MR. CALVIN said one last  methodological background point is that                                                               
they initially  departed from the election  district structure of                                                               
the  previous  differential  and   focused  instead  on  defining                                                               
geographic differential pools,  which are essentially collections                                                               
of  communities that  exhibit like  characteristics  in terms  of                                                               
size,    geographic    location,   climactic    conditions    and                                                               
transportation   infrastructure.    One   of    the   overarching                                                               
conclusions the  study found is that  if you're on a  road system                                                               
you're in  a very  different situation  than if  you are  off the                                                               
road system,  although small Southeast communities  are different                                                               
because  they have  ferry service.  Road access  is probably  the                                                               
most critical aspect in the cost of living.                                                                                     
3:08:01 PM                                                                                                                    
In regards  to Senator  Thomas's issues about  the impact  of the                                                               
deployment of  troops on the  Fairbanks economy,  there certainly                                                               
was an  impact. But typically  about 60 percent of  the residents                                                               
in  a community  own their  own home;  so that  deployment didn't                                                               
affect  anyone's   mortgage  payment.  It  would   affect  rental                                                               
payments if a typical renter  were moving into a different rental                                                               
situation  during the  period  and new  people  coming into  town                                                               
might have  experienced slightly  lower rents if  property values                                                               
were slightly  lower. But overall, if  you think of the  slice of                                                               
the population  that might have  been affected because  they were                                                               
moving in or out of the community it was pretty small.                                                                          
MR. CALVIN said  turnover in Fairbanks housing  is relatively low                                                               
and  it is  typically about  one-third of  the household  budget.                                                               
Some minor  variation in that  aspect of the household  budget is                                                               
possible,  but they  didn't  see that  as  having any  meaningful                                                               
impact   on   the   differential.    What   really   matters   is                                                               
transportation   infrastructure    and   Fairbanks    has   great                                                               
transportation  infrastructure. Essentially  they  have the  same                                                               
overall cost  of living as  Anchorage and many  other communities                                                               
on a highway system.                                                                                                            
SENATOR  THOMAS  said  he appreciated  that  and  would  probably                                                               
agree, but  he wanted to know  how values were assigned  to these                                                               
things. Rents and housing costs,  for instance, vary dramatically                                                               
from one  part of town to  another whether the town  is Anchorage                                                               
or  Fairbanks.  The  cost  of   fuel  is  extremely  volatile  in                                                               
Fairbanks  but  not in  Anchorage,  and  the  cost of  fuel  also                                                               
affects the  price of  electricity because  Fairbanks has  a fuel                                                               
surcharge that  doubled the  electric costs  last year.  It still                                                               
exists now  as it  is getting  paid off.  That made  his electric                                                               
bill go  from $100/mo. to $200/mo.  and doubled the cost  of fuel                                                               
for   his  car.   He  had   difficulty  with   understanding  the                                                               
methodology in the survey. He  thought there should be relatively                                                               
fair way of  establishing it and then some  adjustment would have                                                               
to  be made  for up  and down.  People probably  looked at  their                                                               
survey and  compared it to  what took place  in 2009 and  said it                                                               
didn't make  sense because  the cost  of fuel went  way up  and a                                                               
variety of  other things. He  wasn't so much concerned  about the                                                               
cost of tooth paste and Campbell's soup.                                                                                        
MR. CALVIN  responded that  the basic  methodology in  the survey                                                               
was to  measure the cost  of housing  as people experience  it in                                                               
each community.  Their challenge was  to compare how  people live                                                               
in Anchorage versus  how they live in Fort Yukon  and look at how                                                               
important the  cost of housing is  to a household budget  in Fort                                                               
Yukon  versus Anchorage.  Housing  is the  single most  important                                                               
factor;  urban areas  typically  have higher  mortgage rates  and                                                               
housing costs.  Anchorage's are among  the highest in  the state.                                                               
So,  using Anchorage  as the  base doesn't  mean it's  the lowest                                                               
cost by  any stretch of  the imagination  for all aspects  of the                                                               
household budget.                                                                                                               
3:15:23 PM                                                                                                                    
SENATOR  THOMAS said  it's important  for  him to  know how  they                                                               
settle on particular items that  they think are indicative of the                                                               
economy in that  specific area and how they  are adjusted because                                                               
a lot of things are based  on that - like salaries, for instance.                                                               
They are  talking about percents;  so even  if there was  a minor                                                               
impact  to  housing,  it  is  such a  big  item  in  the  overall                                                               
household budget  that 1 or  2 percent  would have a  big impact.                                                               
Also, he  wanted to  know what McDowell  used when  they compared                                                               
the heating  cost - a  dollar value or  a barrel of  equivalent -                                                               
for the  heating value that one  gets out of a  certain increment                                                               
of a particular fuel.                                                                                                           
MR. CALVIN  replied that they collected  a great deal of  data on                                                               
what  people paid  in  each community  regardless  of the  energy                                                               
efficiency of their home or the  price of fuel in their community                                                               
and  calculated how  important it  was to  the average  household                                                               
budget there.                                                                                                                   
He said  they conducted their  household survey and all  of their                                                               
secondary research  where they collected  price data in  the fall                                                               
of 2008. The  peak of fuel prices  was in the summer  of 2008; so                                                               
fuel  prices  were  changing   dramatically  right  during  their                                                               
research effort,  but they weren't  at a peak. They  asked people                                                               
to tell  them about  their average  monthly expenditures  for the                                                               
year of 2008.  It interested them to understand if  they had done                                                               
the study in  2009 or 2007 what differences they  might have seen                                                               
in  the   differentials.  There   is  some  sensitivity   in  the                                                               
differentials  if  prices had  been  30  percent lower  for  fuel                                                               
primarily  in the  small remote  rural communities,  not so  much                                                               
Fairbanks  that   might  be  1.05   instead  of  1.04   or  1.06.                                                               
Sensitivity to  prices is  much more evident  in the  rural areas                                                               
where they are  not only paying higher prices for  their fuel but                                                               
the effect of a spike in  fuel prices is multiplied because first                                                               
you have to  get the fuel out  to the community and  then you pay                                                               
the additional  price on that.  It's really a  geometric increase                                                               
in prices when you look at a fuel change in Bethel. for example.                                                                
3:18:00 PM                                                                                                                    
CHAIR PASKVAN asked  if the McDowell Group knew  that the Striker                                                               
Brigade had deployed.                                                                                                           
MR. CALVIN answered yes, certainly;  they keep close track of the                                                               
CHAIR  PASKVAN  asked what  numbers  left  Interior Alaska  as  a                                                               
result of that deployment.                                                                                                      
MR. CALVIN answered if 2000 people  were deployed that might be a                                                               
population change of 3 percent or so.                                                                                           
CHAIR PASKVAN  asked if triple  those numbers would that  have an                                                               
immediate effect on selling prices of homes and rents.                                                                          
MR. CALVIN answered certainly in  the rental market. The turnover                                                               
in the  population is what  is meaningful. People leaving  is not                                                               
going to change  anyone's mortgage nor will it change  rent for a                                                               
CHAIR PASKVAN asked if he didn't  believe that rents dropped as a                                                               
result of the deployment.                                                                                                       
MR.  CALVIN said  they probably  did,  but it  didn't change  the                                                               
rental  rates for  people  already living  in  the community  pre                                                               
Striker Brigade  deployment. He said  a guy wasn't going  to drop                                                               
his rental  rates; although someone  who lost renters  because of                                                               
the deployment might need to  offer lower rental rates to someone                                                               
new coming in.                                                                                                                  
3:22:18 PM                                                                                                                    
CHAIR  PASKVAN said  this discussion  has shown  SB 298  to be  a                                                               
complex issue; he  thanked everyone for their  testimony and said                                                               
it would be held for more  work. He adjourned the meeting at 3:22                                                               

Document Name Date/Time Subjects