Legislature(1995 - 1996)
04/09/1996 08:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 545 - PUB. EMPLOYEE COST OF LIVING DIFFERENTIAL CHAIR JEANNETTE JAMES called on Patrick Gullufsen, Department of Law, to explain the bill further. CHAIR JAMES explained the concerns regarding HB 545 at the last meeting were how it would be implemented. The criteria for enacting the cost of living differential (COLA) would be the same criteria used for the permanent fund dividend (PFD) in statute but not in regulation. The record reflected the arrival of Representative Caren Robinson at 8:08 a.m. CHAIR JAMES asked Mr. Gullufsen if the employee had to qualify for the permanent fund dividend, or just meet the criteria in statute? They were two different things. Number 0222 PATRICK GULLUFSEN, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law, explained he was asked to draft the bill and propose the bill to the House State Affairs Committee. He explained a person would not have to qualify or obtain the permanent fund dividend. However, the bill allowed the state to use the criteria of the definition of resident in statute for the dividend and the regulations that had been adopted by the Department of Revenue. Those criteria would determine who received the COLA differential until the Department of Administration adopted different regulations or clarified the PFD regulations as they would apply to the differential. The exception was that the criteria used for the PFD might contain nuances as they were applied to the COLA differential for employees living in Alaska. Therefore, by giving the Commissioner of Administration the authority to modify the PFD regulations legislative action would not be necessary every time there was a new nuance. Number 0355 CHAIR JAMES replied that was her biggest concern. She wondered why legislation was necessary at all. Number 0380 MR. GULLUFSEN responded if the legislature did not set the criteria or allow the executive branch to set the criteria, arbitrators would then set the criteria under collective bargaining agreements. Therefore, when there was a dispute, it would go to arbitration, and would be subject to inconsistencies based on decisions made by the arbitrators. The basic need was for the executive or legislative branch to specify the criteria to prevent those inconsistent decisions. Number 0499 CHAIR JAMES asked Mr. Gullufsen if the incentive was established to encourage people to move to Alaska to work on the Marine Highway System? Number 0517 MR. GULLUFSEN replied the legal argument was that it was an incentive for Alaskan residents to work for the Marine Highway System. The argument that Chair James presented was avoided by the system because it presented problems. Number 0555 CHAIR JAMES wondered where was the incentive because the differential was established to equalize residents and nonresidents. Number 0584 MR. GULLUFSEN said that was a good question. He explained in 1977 when the legislation was passed, the House Finance Committee report discussed that it might not be an incentive because the dollar would be spent for the greater cost of living in Alaska. It was removing a disincentive, however. Number 0622 CHAIR JAMES explained there was legislation pending that addressed geographic pay differentials. In that legislation it was determined that the cost of living in Anchorage and Seattle was the same. She was not sure if she agreed with that conclusion, however. She asked Mr. Gullufsen if the COLA differential was necessary? Number 0650 MR. GULLUFSEN replied, "I don't know." He had asked that question himself before. CHAIR JAMES stated if it was not necessary the bill was not needed. Furthermore, if there was an active state income tax, it would be easier to determine who was a resident and who was a nonresident. She was not sure if the PFD requirements were the right ones to follow. She cited an individual who moved to Alaska from Idaho and got a job with the Marine Highway System. She wondered if he would qualify for the COLA differential. Number 0716 MR. GULLUFSEN replied under the PFD requirements, he would qualify for the differential. However, under the current scenario, an arbitrator could rule that a part-time Alaskan resident, a resident living in the South for part of the year, would qualify for the COLA differential. Whereas, under the PFD criteria a part-time resident would not qualify. CHAIR JAMES asked Mr. Gullufsen, why not give a part-time resident the differential when he was in Alaska and not while he was outside of Alaska. MR. GULLUFSEN replied that was one option. He envisioned an administrative nightmare, however. Number 0812 CHAIR JAMES stated other states used that type of system to determine state taxes, for example. She said there was a better way to do this than alluding to the PFD requirements. She suggested including in the bill the exact statutes that the system wanted to follow instead of tying it into the PFD program. That would prevent future regulation changes on the part of the Administration in the event the PFD program changed their regulations. Otherwise, it was a proliferation of regulations. Number 0910 MR. GULLUFSEN replied the criteria could be put into statute. The system would hope it was detailed enough, however, to resolve the disputes. He reiterated the basic desire was to resolve the disputes that went to arbitration. Number 0968 REPRESENTATIVE SCOTT OGAN said the PFD regulations were the most "bullet proof" residency requirements in the state. They had withstood several court tests, and were generally accepted as undisputable. Number 0995 MR. GULLUFSEN replied, "you hit the nail on the head." That was one of the reasons why the PFD regulations were identified. They had been tested by application and in court. Number 1005 REPRESENTATIVE OGAN asked Mr. Gullufsen, if HB 545 was to pass, would the regulations be adopted verbatim or with exceptions? Number 1018 MR. GULLUFSEN replied the regulations that applied to state residency would be adopted verbatim. Number 1043 REPRESENTATIVE OGAN stated, therefore, it would be fair to assume that the wheel would not be reinvented and a lot of bureaucratic time would not be wasted writing regulations. MR. GULLUFSEN replied, "that's correct." However, the bill did give the Commissioner of Administration the authority to change the PFD regulations through the Department of Law hearing process. The system hoped, however, that the PFD regulations would work well. Number 1084 REPRESENTATIVE JOE GREEN said he agreed with Chair James that if the regulations were going to be tweaked they needed to be addressed in the bill. If they were not going to be tweaked they did not need to be included in the bill. He did not agree with the concept that they would be adopted until changes were needed. Number 1153 MR. GULLUFSEN said he understood the concerns of Representative Green. He explained the application process of the PFD would also determine who was eligible and who was not eligible for a COLA differential. Number 1197 REPRESENTATIVE GREEN replied, if that was the case, new regulations would not be needed. He said, "if your going to have your own regs, have your own regs. If you going to rely on the permanent fund dividend requirements, then you should say that." Number 1221 MR. GULLUFSEN replied, "maybe we are." The system believed the PFD requirements were a solid set of regulations. However, the system was a different program with special nuances that might need to be fixed by regulation over time. Therefore, a strict application of the PFD program would probably not solve all of the problems of the COLA differential. Number 1278 REPRESENTATIVE GREEN asked what was the benefit of referencing "criteria similar" to the PFD program then (page 1, line 7)? Number 1306 MR. GULLUFSEN replied the bill said it was going to be the regulations of the PFD program. An arbitrator might use a strict view of the regulations, and cited he might rule that both parents had to be out of the state for a medical leave for six months rather than just one, for example. The system would then be stuck with that decision regarding that particular regulation. That was the nuance he was referring to earlier. The system did not know over time how the arbitrators would rule, however. Therefore, it wanted the ability to fix the regulations if they were diverting from a reasonable interpretation. Number 1376 REPRESENTATIVE CAREN ROBINSON said basically room was being made for tweaking the regulations if needed. MR. GULLUFSEN replied, "that would be correct. That's the intent." REPRESENTATIVE ROBINSON further said, even though the regulations were written, it could be discovered that they were not completely designed exactly as the system needed. MR. GULLUFSEN replied, "that's correct." Number 1406 REPRESENTATIVE OGAN said, for clarification, the system did not have the statutory authority to deny an employee differential because he did not qualify for the PFD. MR. GULLUFSEN replied, "that's correct." REPRESENTATIVE OGAN further said the system was looking for statutory authority for contract negotiations with the unions and arbitrators. MR. GULLUFSEN replied, "that's correct." The system did not want to argue over the criteria. Furthermore, the system did not want an arbitrator to pick and chose criteria. It wanted a criteria system so that all parties knew what were the rules. Number 1462 REPRESENTATIVE OGAN said, if the regulatory authority was not given, something would need to be written in statute referring to PFD eligibility, for example. MR. GULLUFSEN said that would be one approach, or the system would continue to live with the current approach. Number 1504 CHAIR JAMES said she was concerned about using the PFD regulations because it might prevent an individual from spending time outside of Alaska, especially if he was gone for more than 180 days. She asked, "do we really want to hold the resident as-tight-as the permanent fund?" Number 1545 MR. GULLUFSEN replied that was a difference in philosophy. The system would like to hold that resident. It was open to legitimate argument, however. Number 1565 CHAIR JAMES asked if there were any further questions or comments. She announced she was not willing to move the bill forward today. She wanted to look at it further. Number 1572 REPRESENTATIVE IVAN IVAN announced he would ask questions of the Administration at the next scheduled hearing.
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