Legislature(2009 - 2010)BELTZ 105 (TSBldg)
03/30/2010 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB377 | |
| Confirmation Hearings | |
| SB298 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 298 | TELECONFERENCED | |
| + | HB 377 | TELECONFERENCED | |
| + | 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
Surveyors
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
issue.
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
conditions.
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
date.
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
volunteering?
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
people:
Alcoholic Beverage Control Board
Belen M. Cook, Cordova
State Board of Registration for Architects, Engineers, and Land
Surveyors
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
profession.
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
work.
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
solution.
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
economy.
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
renter.
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
p.m.
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