Legislature(1995 - 1996)
04/24/1996 01:50 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 545
"An Act relating to the cost-of-living differential for
certain public employees residing in the state and the
criteria for determining eligibility for the
differential; and providing for an effective date."
PAT GULLUFSEN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
noted that HB 545 was introduced by the Administration in
order to clarify the definition of residency for Cost of
Living Differentials (COLD) for Alaska Marine Highway
employees. He observed that HB 545 adopts the permanent
fund dividend definition of resident for purposes of the
COLD. The definition was altered by the insertion of
"temporarily" as requested by the Administration. The House
State Affairs Committee also deleted from the temporarily
allowable allowances exemptions for serving in Congress or
the Peace Corps. He noted that HB 545 clarifies that the
criteria is not subject to bargaining under the Public
Employees Retirement Act (PERA). The legislation also gives
the Commissioner of Administration the authority to clarify
and implement the criteria by regulation. He noted that
this is similar to the authority of the Commissioner of the
Department of Revenue in relation to the permanent fund
dividend.
Mr. Gullufsen noted that the Department of Administration
has proposed an amendment, Amendment 1 (copy on file). The
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amendment would set the differential rate by statute. The
rate is currently subject to negotiation. The rate would
be set based on a recent study of COLD by the Division of
Personnel. The Director of Personnel would have the
authority to adjust the rate according to studies
demonstrating the cost of living in Alaskan communities and
Bellingham, Washington. Adjustments would be subject to
annual legislative review.
Co-Chair Hanley stressed that the intent is to clarify in
statute that the criteria for residency will not be
negotiable.
MARK BOYER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION
referred to a two page chronological listing of COLD events
(copy on file). He noted that COLD was implemented in 1980
and became active in 1982. He observed that PERA directed
that the State have a cost of living differential. It does
not specify the amount or criteria of the differential. He
emphasized that the dispute over COLD payments began in
1989. Historically the amount of the COLD and the criteria
for qualification have been settled through negotiation. He
maintained that COLD is part of the negotiation package. He
observed that it was initiated to entice out-of-state
employees to come to Alaska for residency. The original
amount was 22.5 percent which was the same as the federal
cost of living allowance at the time. He maintained that
the real cost of living differential between Seattle and
Southeastern communities are negligible and should be
reviewed.
Commissioner Boyer observed that the Administration has
asked that COLD criteria be placed in statute. He
emphasized that contracts that do not contain the criteria
could be reopened if the legislation is enacted to deal with
COLD criteria. If this fails the criteria will be in place
the next time the contracts are negotiated.
Co-Chair Hanley summarized that the two contracts currently
before the Legislature for ratification would not be
affected. Commissioner Boyer noted that the Marine
Engineer's Beneficial Association (MEBA) will be under
negotiation in the fall.
In response to comments by Representative Martin,
Commissioner Boyer emphasized that the problem was not
created by the current Administration. He stressed that
there are a number of programs that require residency.
Mr. Gullufsen stated that the court has not recognized a
definite set of criteria under the COLD statute. He
observed that COLD statutes, AS 23.42.10, states "for
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employees residing in the state of Alaska. He noted that
there are statutes for establishing residency for voting
purposes.
Mr. Gullufsen noted that an arbitrator determined that time
spent working on a vessel in Alaskan waters can be counted
toward residency. He stressed that the legislation proposes
language that would clarify that the criteria will be the
same as the State has always thought was the criteria. He
stated that if the legislation is enacted the State will
argue that the criteria applies now to everybody except MEBA
which has other agreed to criteria. He clarified that the
MEBA agreement would apply permanent fund dividend
regulations.
Commissioner Boyer noted that the problem began when COLD
was initiated. Administrations since 1989 have recognized
the need to set criteria through regulation. He reviewed
events outlined on Attachment 1. He summarized that there
was not adequate criteria.
Co-Chair Hanley noted that the current Administration could
have adopted regulations. He added that discussions were
held on this issue during the 3/20/96, House Finance
Committee meeting. Commissioner Boyer recounted
negotiations during the previous year.
Co-Chair Hanley asked for copies of arbitrator's decisions.
Discussion occurred regarding the responsibility of the
Administration and Legislature in regards to the failure to
implement criteria.
Representative Mulder asked if the legislation would result
in a uniform, consistent COLD format. Commissioner Boyer
clarified that the legislation only applies to the marine
units.
Commissioner Boyer reiterated that Amendment 1 would take
COLD criteria outside of the bargaining process.
Representative Mulder expressed support for Amendment 1.
Co-Chair Hanley asked if Amendment 1 would be consistent
with other legislation. Commissioner Boyer stated that it
would be consistent with other legislation.
Co-Chair Hanley summarized that the legislation would
provide that new contracts would not be negotiated. The
criteria and rates set by the legislation would be enacted
and become statute. Commissioner Boyer added that the rates
would be reviewed every five years after a study is
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completed.
In response to a question by Co-Chair Hanley, Commissioner
Boyer explained that IBU members tie ships off. Employees
at ferry terminals are GGU and SSU members. The person who
ties up the ships receives a COLD of 18 to 22 percent. On
shore personnel receive a fraction of this amount.
Mr. Gullufsen observed that the State was told that COLD
criteria needed to be bargained in order to be applied.
Under PERA disputes must go to an arbitrator. The State has
challenged the arbitrator's ruling in court. He emphasized
that accept where the State has set down to permissively
negotiate criteria the State has the authority as a public
employer to propagate criteria without negotiation.
Co-Chair Hanley asked if there is a penalty section in the
legislation. Mr. Gullufsen explained that there are no
specific penalty provisions in the statute. He emphasized
that employees can be dismissed and required to return COLD
payments that they should not have received. He stated that
criminal prosecution is possible if false physical evidence
is given. Co-Chair Hanley stated that there should be some
penalty specifically associated with false resident claims.
Mr. Gullufsen stated that there is a criminal penalty
provision stated on the form.
(Tape Change, HFC 96-135, Side 2)
Representative Martin asked if the same penalties for
falsifying permanent fund dividend applications could apply.
Mr. Gullufsen did not think the same penalties could apply
unless they were included in the legislation. He stated
that it would not complicate or harm things to have specific
criminal provision with regards to false claims of residency
for COLD purposes.
In response to a question by Representative Martin, Mr.
Gullufsen stated that it would be difficult to impose on the
union the responsibility to report the true residence of
their members.
Commissioner Boyer pointed out that employees sign a form to
certify their Alaskan residency. He noted that the new form
will embrace the criteria. All members of MEBA will have to
recertify under the new criteria. The Alaska Marine Highway
system will submit the forms to the Permanent Fund Dividend
Division.
Representative Mulder MOVED to adopt Amendment 1. There
being NO OBJECTION, it was so ordered. Commissioner Boyer
noted that the rates included in Amendment 1 reflect the
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1994, Runzheimer study. The study recommended a 14 percent
differential for Ketchikan and a 7 percent differential for
Kodiak. These were adjusted in Amendment 1.
Co-Chair Hanley summarized that the rates if enacted would
be adopted for any new contracts until a new study is
completed. The Director of Personnel would implement new
rates by regulations after the next study is completed.
The regulations would be subject to legislative review.
Commissioner Boyer clarified that the bench mark should be
Bellingham since operations were moved there from Seattle.
He emphasized that rates will be subject to legislative
input.
Representative Brown observed that the amendment would state
that there is no difference in the cost of living in Juneau
or Anchorage and Bellingham, Washington. Commissioner Boyer
noted that the Runzheimer study contained an error range of
-3.5 - +3.5.
Commissioner Boyer reiterated that the Legislature can
change or modify rates placed by regulations.
There being NO OBJECTION, Amendment 1 was adopted.
Co-Chair Foster MOVED to report CSHB 545 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 545 (FIN) was reported out of Committee with a "do
pass" recommendation and with three zero fiscal notes by the
Department of Administration, the Department of Revenue, and
the Department of Transportation and Public Facilities, all
dated 3/22/96.
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