04/13/2015 09:00 AM House FINANCE

HOUSE BILL NO. 176                                                                                                            
                                                                                                                                
     "An  Act eliminating  geographic pay  differentials for                                                                    
     employees of the  legislature; repealing state employee                                                                    
     salary  schedule   increases;  and  providing   for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
9:03:53 AM                                                                                                                    
                                                                                                                                
JANE   PIERSON,   STAFF,  REPRESENTATIVE   STEVE   THOMPSON,                                                                    
explained  that  HB  176   repealed  state  employee  salary                                                                    
schedule increase, the Cost of  Living Adjustment (COLA), of                                                                    
2.5 percent that was scheduled to  go into effect on July 1,                                                                    
2015.                                                                                                                           
                                                                                                                                
Representative Guttenberg  asked if  work draft,  version E,                                                                    
was the version that the committee should be looking at.                                                                        
                                                                                                                                
Ms. Pierson responded in the affirmative.                                                                                       
                                                                                                                                
9:05:07 AM                                                                                                                    
                                                                                                                                
Co-Chair Thompson OPENED public testimony.                                                                                      
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
Co-Chair Thompson  indicated Representative Gara  had joined                                                                    
the meeting.                                                                                                                    
                                                                                                                                
Representative  Guttenberg remarked  that although  the bill                                                                    
was  simple,  it represented  a  significant  step that  the                                                                    
legislature was  taking. He asked  about the history  of the                                                                    
state honoring its labor contracts.  He wanted to understand                                                                    
both  the  short-term  and long-term  consequences  for  the                                                                    
administration  and the  bargaining units.  He did  not feel                                                                    
there had been enough discussion on the matter.                                                                                 
                                                                                                                                
9:07:28 AM                                                                                                                    
                                                                                                                                
SKIFF   LOBAUGH,   HUMAN  RESOURCES   MANAGER,   LEGISLATIVE                                                                    
AFFAIRS,  reported that  the  proposed legislation  repealed                                                                    
the 2.5 percent COLA for  exempt employees. He worked on the                                                                    
fiscal note  for the bill  but deferred to Ms.  Sheehan, the                                                                    
director of  the Division of  Personnel from  the Department                                                                    
of Administration.  He explained  that the  executive branch                                                                    
had the  largest number of  exempt employees and  thought it                                                                    
would be better for her to speak to the bill.                                                                                   
                                                                                                                                
KATE SHEEHAN,  DIVISION DIRECTOR, DIVISION OF  PERSONNEL AND                                                                    
LABOR  RELATIONS,  DEPARTMENT  OF  ADMINISTRATION,  detailed                                                                    
that  the bill  applied  only to  partially exempt,  exempt,                                                                    
legislative, and  court employees.  She added that  the bill                                                                    
did  not  pertain  to employees  represented  by  collective                                                                    
bargaining agreements.  In the  executive branch  there were                                                                    
approximately   636   exempt   and  682   partially   exempt                                                                    
employees.                                                                                                                      
                                                                                                                                
Representative  Guttenberg  wondered  if  the  bill  was  an                                                                    
effort by  the legislature to organize  partially exempt and                                                                    
exempt employees.  He did  not feel  anyone was  speaking on                                                                    
behalf of the  combined group of employees. He  felt that it                                                                    
was  the legislature's  job to  consider  what pressure  was                                                                    
being placed on the economy  and who would be impacted most.                                                                    
He  expressed  his  concerns  regarding  the  long  list  of                                                                    
actions that were  being taken by the  legislature. He noted                                                                    
that   the  fiscal   note  represented   approximately  $5.8                                                                    
million.                                                                                                                        
                                                                                                                                
Representative  Gara wanted  to  confirm  that a  three-year                                                                    
statute  was  being  discussed.   Employees  were  given  an                                                                    
increase  of 1  percent two  years prior,  an increase  of 1                                                                    
percent the  previous year, and  an increase of  2.5 percent                                                                    
scheduled for the current year.  He asked if the legislation                                                                    
would revoke the 2.5 percent increase.                                                                                          
                                                                                                                                
Ms. Sheehan  responded affirmatively  that it was  the third                                                                    
year.                                                                                                                           
                                                                                                                                
Representative Gara asked if his numbers were accurate.                                                                         
                                                                                                                                
Ms. Sheehan answered, "Yes, they are correct."                                                                                  
                                                                                                                                
Representative Gara  stressed that  the problem he  had with                                                                    
the  legislation was  that the  state  offered a  three-year                                                                    
deal in  which the  first two  years the  employees received                                                                    
raises  that  fell below  the  inflation  rate leaving  them                                                                    
behind  cost of  living  increases. In  the  third year  the                                                                    
promise was  to provide employees  with a better  raise. The                                                                    
increases  in  salary  averaged over  three  years  remained                                                                    
behind  the rise  in the  cost of  living. If  circumstances                                                                    
were reversed he  would be more supportive of  the bill. The                                                                    
legislature  was   proposing  to  take  the   most  valuable                                                                    
increase  away  from  state employees  after  two  years  of                                                                    
austerity. He  had a problem  with the bill  without further                                                                    
discussion.                                                                                                                     
                                                                                                                                
Representative  Munoz  asked  if   the  bill  addressed  the                                                                    
geographical differentials.                                                                                                     
                                                                                                                                
                                                                                                                                
Co-Chair Thompson  responded that  the bill did  not address                                                                    
cost differentials.                                                                                                             
                                                                                                                                
Representative Munoz asked  if it just applied  to the third                                                                    
year of the contract.                                                                                                           
                                                                                                                                
Co-Chair Thompson responded that it  was just the third year                                                                    
of the COLA increase.                                                                                                           
                                                                                                                                
9:11:03 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Saddler suggested  that three  years prior  when                                                                    
the contracts  were negotiated the  state's oil  revenue was                                                                    
significantly higher than at present.  Before the meeting he                                                                    
read  in the  paper that  Alaska's current  oil revenue  was                                                                    
lower  than when  the pipeline  first  opened. He  contended                                                                    
that  either jobs  would be  cut or  salaries would  be held                                                                    
steady  after two  years of  increases. It  could be  argued                                                                    
that it was a cut because  it did not keep up with inflation                                                                    
but the legislation would hold  people's salaries steady and                                                                    
insure job security. It was not  a pleasant thing to have to                                                                    
impose, but  he believed  it was  respectful of  everyone to                                                                    
try to keep them employed.                                                                                                      
                                                                                                                                
Representative  Gara  remarked  that there  were  additional                                                                    
choices aside from cutting jobs.  He suggested that over the                                                                    
following two years the state  would be giving out over $500                                                                    
million to  the oil industry  in tax credits, more  than the                                                                    
state would  receive in production taxes.  Co-Chair Thompson                                                                    
interjected that  the current discussion  was not  about oil                                                                    
taxes.   Representative  Gara   asserted  that   there  were                                                                    
additional  options to  consider and  that he  could not  be                                                                    
supportive of  the bill. He  opined that there  were smarter                                                                    
options available.                                                                                                              
                                                                                                                                
Co-Chair  Neuman  MOVED  to  REPORT  CSHB  176(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative Guttenberg OBJECTED.                                                                                             
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gattis, Pruitt, Saddler, Wilson, Neuman, Thompson                                                                     
OPPOSED: Guttenberg, Munoz, Edgmon, Gara                                                                                        
                                                                                                                                
The MOTION PASSED (6/4).                                                                                                        
                                                                                                                                
There  being   NO  further  OBJECTION,  CSHB   176(FIN)  was                                                                    
REPORTED  out  of  committee   with  a  "no  recommendation"                                                                    
recommendation and  with three new fiscal  impact notes from                                                                    
the   Alaska  Judicial   System,  the   Governor,  and   the                                                                    
Legislature.                                                                                                                    
                                                                                                                                
9:14:03 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:18:11 AM                                                                                                                    
RECONVEYNED                                                                                                                     
                                                                                                                                
Co-Chair  Thompson  mentioned  that   he  had  forgotten  to                                                                    
recognize Representative Pruitt earlier in the meeting.