Legislature(2001 - 2002)
03/26/2002 08:07 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 361-PILOT PAY PROGRAM FOR STATE EMPLOYEES CHAIR COGHILL announced that the first order of business would be HOUSE BILL NO. 361, "An Act relating to pilot pay programs to attract and retain exceptional state employees; and providing for an effective date." LINDA SYLVESTER, Staff to Representative Pete Kott, Alaska State Legislature, explained that HB 361 seeks to allow the state to establish pilot pay programs to assist in the recruitment and retention of employees. She reminded the committee that it heard HB 361 in early February when the committee expressed concerns with regard to the excellence bonus. Members felt that the excellence bonus was susceptible to cronyism; the Department of Administration agreed. Therefore, the committee substitute (CS) [Version 22-LS1317\F, Cook, 3/20/02] eliminates the excellence bonus. The majority of labor's concerns are satisfied [with the CS]. However, one representative continues to oppose the bill because these programs are excluded from collective bargaining. Ms. Sylvester explained that these programs are excluded from collective bargaining because they are pilot programs. Furthermore, maintaining these programs under the purview of the Personnel Board provides tighter control in terms of targeting and record keeping. She directed attention to page 5, lines 25-27, which discuss the commissioner of administration's report on each pilot pay program. At that time, it will be determined whether or not the programs worked and whether or not the programs should be maintained. If the programs are maintained, the programs will be included in the Personnel regulations in statute and will be included in the collective bargaining. MS. SYLVESTER remarked that [HB 361] targets the problem of flexibility in recruitment and retainment. She directed the committee to a chart entitled, "Indicators of Recruitment and Retention Problems." This chart illustrates, by job title, the average annual vacancy rate and turn over rate. These pilot programs attempt to offer [another option to address recruitment and retention]. She discussed her husband's experience with these problems in the Division of Finance. In closing, Ms. Sylvester commented that all in the legislature are suspect of how well the state government manages its funds and personnel and thus tend to forget that these are people serving in positions such as troopers and investigators of child abuse. She hoped the members could support the bill. REPRESENTATIVE JAMES related her understanding that this will be done "for nothing." She asked if that would be the case because [the legislature] has authorized more people to work than are currently working. MS. SYLVESTER deferred to the Department of Administration. Number 0821 DAVE STEWART, Personnel Manager, Division of Personnel, Department of Administration, answered that normal turnover, between 2.5-4.5 percent, is built into the budgeting system. Financing for bonuses under the pilot pay proposal in HB 361 would come from the vacant positions. Recruitment bonuses, for example, to entice people to apply would be paid for with the salaries saved from having those positions vacant. Some positions have been vacant for a year while agencies have been recruiting. REPRESENTATIVE JAMES remarked that she wasn't sure how the legislature, when doing the budget, knows how much money these agencies have in the bank from the prior year. Therefore, she inquired as to whether there is a large amount of money available for these vacant positions. MR. STEWART explained that the vacancy rate is built into the system. If an agency needs a specified amount, 96 percent of what the legislature appropriates is to operate the agency at a fully staffed level. If an additional two or three positions remained vacant because of turnover or a rather lengthy recruitment, there would be an accumulation of funds such that it could pay for the advertising and recruitment bonus. It won't provide a nest egg, he said. REPRESENTATIVE JAMES expressed her discomfort with this situation because the legislature can't change the budget once it's done. She said she was sure that the application for the budget is sufficient to cover [recruitment advertising and bonuses]. She questioned how the agencies are dealing with these vacancies. Is the work not being done or are people working over time, she asked. MR. STEWART answered that primarily the work is done by employees working extra hours through overtime or extra work by those employees who aren't eligible for overtime. Nonpermanent employees are utilized as well. The use of nonpermanent employees and overtime is probably the most common manner in which work for vacant positions is accomplished. Mr. Stewart informed the committee that an analyst programmer position in the Division of Personnel has been vacant for about a year. This position has been advertised in state and out of state a number of times. The specific set of skills required aren't available for the current salary rates, which are already stretched. Such situations were the impetus for speaking with Representative Kott regarding this legislation, he pointed out. REPRESENTATIVE JAMES noted that she liked this idea. Number 1139 CHAIR COGHILL related his understanding that the Personnel Board would create a priority system with regard to the greatest need. He inquired as to how Mr. Stewart envisioned such a system. MR. STEWART explained that he envisioned the Division of Personnel inviting comments [with regard to the needs]. He specified that department commissioners and division directors would nominate a job class that has experienced an outstanding vacancy for a lengthy period. If there was statistical analysis that there would be large turnover of an occupational group, that job class would be nominated as well. The Division of Personnel would review the effectiveness of past recruitment efforts and thus a list of job classes or job class series could be created for those eligible for a recruitment bonus. For example, the two largest competitors for employees in the state are the federal government and the hospital system in Anchorage. Both of those employers offer recruitment bonuses and other retention bonuses to their employees. It's difficult to compete in a limited employee market with those two alone, he said. Mr. Stewart specified that the personnel board would prioritize on the basis of need. He envisioned nurses being near the top. Number 1300 CHAIR COGHILL pointed out that there may be underfunded positions in one area while not in other areas. Chair Coghill inquired as to how the board would view that. MR. STEWART said that would probably be one of the factors in prioritization. REPRESENTATIVE JAMES asked if there is an incentive to encourage employees to consider new methods of doing things or even eliminate tasks. MR. STEWART agreed that reviewing business processes is always a way of determining whether a position needs to be filled. However, on a weekly basis the state spends thousands of dollars on newspaper advertisements for positions that receive little or no response. Therefore, money and time could be saved by placing an enticing ad rather than a simple notice of vacancy. He mentioned that looking at the process is something that is incumbent on the managers [of the] positions. REPRESENTATIVE JAMES clarified that she was asking if those doing the job were reviewing ways in which to make changes to the job. MR. STEWART said he supposed that would have to be built into the review system. REPRESENTATIVE JAMES opined that those actually doing the work would have the best ideas what to change. However, [employees], particularly those in union organizations, are usually resistant to put forth any effort that would eliminate a position. Therefore, she expressed the need for everyone to see the benefit for finding cost and work savings. She agreed with Mr. Stewart's comment that [employees] be polled. CHAIR COGHILL remarked that such would be useful in regard to recruitment. Number 1575 REPRESENTATIVE STEVENS commented that he thought this was a wonderful opportunity to solve the recruitment and retention problems the state is facing. However, he understands that now the legislation merely addresses recruitment. He asked if there are other ways to assist in the retention of personnel. MR. STEWART clarified that the retention and recruitment portions of the legislation remain, but the individual excellence award was removed. Therefore, class-based retention awards remain. He reiterated that there had been concern surrounding the potential abuse with individual [excellence] awards and thus it was eliminated in the CS. CHAIR COGHILL specified for the record that it's not promotion for time in the job. Therefore, there would be some criteria used for awarding a retention bonus. He surmised that there would be some avenue to discuss the value of an individual in that retention bonus process. MR. STEWART said that retention bonuses would be based on class specifics, defined skill sets, rather than individual skills. Number 1673 REPRESENTATIVE FATE referred to the "Indicators of Recruitment and Retention Problems" chart, which illustrates that some of the [percentage of] recruitment attempts [that didn't result in a hire] are extremely high. He inquired as to the reason for these high percentages. MR. STEWART replied that in some cases there is no knowledge as to why recruitments don't result in a hire. He explained that the Division of Personnel reviews the minimum qualifications for its job specifications when percentages such as these are reviewed. This review is done in order to ensure that capable individuals aren't being unfairly excluded with the stringent minimum qualifications (MQ). REPRESENTATIVE FATE continued to refer to the aforementioned chart and pointed out that some positions that aren't entry level have high turnover rates. For example, the Accounting Technician II position has a turnover rate of 65 percent. He inquired as to the reason for that. MR. STEWART pointed out that large groups of those people promote to higher level positions when the highest level incumbents in the job class series retire. There is a progression based on skill and time. Many of the administrative support positions have had a high level of turnover because people have moved on to other job classes. He noted that the state hasn't done much research to determine why some of these turnover rates are so high. In fact, only the recent acquisition of data from the payroll system provided these numbers, which have been found to be so high. He noted that [the division has] recognized that some of the job classes, such as with the public health nurse and nurse series and the social worker series, have positions that remain vacant for a lengthy period of time. Such vacancy endangers the provision of services and thus this legislation has been introduced. REPRESENTATIVE FATE asked if the bonus would increase the retention rate or create a vicious cycle in which a bonus is paid every two years because no one can be retained. Representative Fate offered that there could be a systemic reason for nonretention rather than the pay itself. Therefore, the money spent to retain individuals would be accelerated by the bonuses. MR. STEWART said that the reason to try this proposal is to determine whether it'll work or not. Furthermore, that's the reason to keep the proposal on a limited scale as a pilot project. Therefore, the project could be turned off when it's obvious that it's not working. Although the division doesn't know whether these problems are the result of a systemic problem or a competitive pressure, there are a great deal of state employees who become federal employees. He noted that the federal government is paying a 25 percent tax free cost of living allowance (COLA) with which the state government can't compete. Furthermore, [there are states] such as Missouri where $40,000 bonuses were being paid for analyst programmers who would work anywhere in the state. Mr. Stewart said that [the division] would like to determine whether these problems are systemic or competitive. Number 2030 REPRESENTATIVE STEVENS moved to adopt Version 22-LS1317\F, Cook, 3/20/02, as the working document. There being no objection, Version F was before the committee. MR. STEWART, in response to Representative Stevens, pointed out that on page 4, line 19, the definition of excellence bonus was deleted. Language referring to excellence bonus on page 4, line 1, was also deleted. The language, "The pilot pay program must be based on criteria derived from and based on qualifications for a job class rather than on the qualifications of a particular employee." was inserted on page 4, lines 4-6, of Version F. All these changes are included in Version F. Number 2174 CHAIR COGHILL surmised that this bill will provide an additional tool in the realm of recruitment. However, Chair Coghill inquired as to the retention tools currently utilized. He asked whether HB 361 would enhance the current retention program or change it entirely. MR. STEWART said that under the law there is no opportunity to do anything financial for retention purposes. The retention awards built into the system involve one's career path, one's opportunity to promote or be considered for promotion, and movement in and around the state system. "There's no provision currently in state pay plan or in the definition or application of the merit system that allows for, other than (indisc.- coughing) of effort either at ceremony or not at ceremony," he specified. CHAIR COGHILL related his understanding that [the state] looks in-house first for [open] positions. He identified that as a retention gain. MR. STEWART said that the idea of promotion from within is probably the only method of recognition other than sectional/divisional certificates of achievement. In further response to Chair Coghill, Mr. Stewart remarked that he would love to be able to return to the legislature in a couple of years and report that turnover rates are [the result of] retirements and planned progressions and that the retention rates have dropped. Therefore, the skill sets could work through the workforce, he said. Number 2341 REPRESENTATIVE JAMES referred to page 13 of a document entitled, "Recruitment, Retention, and Promotion of Employees in the Biological Sciences 2001" by the Division of Administration, Alaska Department of Fish and Game (ADF&G). Page 13 discusses the effect of inflation on state employee pay since 1985. Representative James said that off the top of her head she would suggest that [the state] hasn't kept pace with inflation. However, she wondered how the 1985 rates compared to the private sector then and now. Still, she said she feels that the state pay is under the private sector. Although Representative James noted her agreement that the state is underpaying its employees, she said she didn't believe it's to the extent specified. MR. STEWART pointed out that the last major salary study was done in December 2000, which he offered to provide Representative James. REPRESENTATIVE JAMES related her belief that when private sector rates were high, the state was parallel to those or slightly higher. Then, when the private sector rates went down, the state's didn't. The [change in rate] hasn't occurred on an annual basis, and she wasn't sure it could be done annually because the state can't [merely follow the private sector]. Number 2431 CHAIR COGHILL mentioned the need to realize [the possibility] of creating a situation in which certain job classes would have continual recruitment bonuses and other job classes would experience stacking. MR. STEWART explained that there was the suggestion that programs adopted under this language be exempt from collective bargaining in order to avoid the stratification. Therefore, it would avoid having one plan for supervisors and one plan for worker bees [while both] being in the same job class. However, he noted that there may be supervisory/managerial job classes that require their own recruitment and retention program. CHAIR COGHILL interjected, "We're going to bump up against the edge of that, though. And that's something that probably should be looked out whenever the report is brought out." Number 2542 REPRESENTATIVE FATE inquired as to the state of the current vacancy and turnover rate as compared to those presented in the aforementioned document. MR. STEWART said that the division is in the process of reducing the data for 2001. Although there hasn't been a comparison yet, he expected the numbers to be fairly similar. REPRESENTATIVE FATE asked what has been done to mitigate, improve, the turnover rate. MR. STEWART explained that the Division of Personnel has met with agency staff and has developed a number of recruitment flexibilities. For example, agencies have been allowed to recruit for a job class rather than a specific position. The division has also allowed for continuous recruitment for job classes that are of a higher turnover rate or their advertisement response rates are low. He offered to provide Representative Fate with a list of things that are being done to address this problem. CHAIR COGHILL announced that he would be recommending discussion and insertion of language [requiring] an intermediary report in 2004. Number 2680 BRUCE LUDWIG, Business Manager, Alaska Public Employees Association (APEA) and the Alaska Federation of Teachers (AFT); Secretary/Treasurer, Alaska AFL-CIO (American Federation of Labor and Congress of Industrial Organizations), provided the following testimony: While the bill isn't as offensive as it was - we appreciate taking out the personal bonuses - we're still opposed to it. We believe that we do have a serious recruitment problem. We don't believe that we're competitive. We believe we pay lower than standard wages. Our retirement system is no longer a magnet. And we pay more in health insurance than most of the competition. You know, we've known this for a long time. And we've ... cut back - ways to save money for the state - and we've thrown it on the backs of the employees. And when people are looking at jobs, they look at those things. We have a state of the art recruitment system right now with Workplace Alaska Hiring System. And how that got in place was through a pilot project negotiated with our union .... And I .. would suggest here is a similar pilot project, but do it through collective bargaining, do it through labor management committees. If you get the worker bees involved, you're going to find what works and what doesn't work. ... So, I would like to recommend that ... you change it to go through a labor management process. I'd also like to suggest that you make this bonus compensation for retirement purposes. ... REPRESENTATIVE JAMES noted her agreement with Mr. Ludwig's comments. She inquired as to Mr. Ludwig's opinion with regard to how much of this opportunity [to make changes in job positions] comes from the people at the lower level versus those in management. She related her notion that it seems people would be reluctant to recommend changes that would eliminate a fellow employee's job. MR. LUDWIG informed the committee that although there was once an incentive program that gave part of the money saved in some process to the employee involved in creating the savings, it was never fully implemented. Mr. Ludwig pointed out that none of the options discussed with regard to recruitment and retention have involved talking with the workers to determine what would entice an employee to a job and make that employee want to stay. The labor management process provides that employee input. CHAIR COGHILL remarked that although the bill may not demand [the input from the employee], there is certainly the intention [for the employees] to be included in the discussion. MR. LUDWIG specified that his opportunity, as a bargaining agent, is through his ability to testify on the regulations before the Personnel Board. Any member of the public has the right to do so. CHAIR COGHILL related his understanding that the Personnel Board will designate these bonuses, which they will discuss with [people] such as Mr. Ludwig. MR. LUDWIG said that he didn't see [such language]. There is no requirement to have any interface with the bargaining units. "In here, we're giving the administration the right to unilaterally set wages and do it out of their budget, the way they want to do it. ... I don't see where this, politically, is a win-win situation for anybody," he remarked. Number 2963 REPRESENTATIVE JAMES acknowledged Mr. Ludwig's frustration. She noted her own frustration with the APEA union because this union negotiates with an administration that has no ability to pay. The legislature is involved ... TAPE 02-31, SIDE B MR. LUDWIG, in response to Representative James, related his belief that the more that is taken from bargaining and the less interaction there is with the employees, the more top down the management structure. CHAIR COGHILL characterized that as part of the public policy call. "If we want the state to do the recruiting, then we need to give them the authority. If we wanted information as to how the employees viewed that, I think we would go then to the collective bargaining," he said. He highlighted that the legislature is giving the administration not the collective bargaining unit the responsibility for employment, retention, and recruitment. Still, he agreed that those most impacted should be heard. Number 2883 REPRESENTATIVE JAMES opined the importance of having this bottom-up suggestion process. "I could probably go where you want to go today on this issue, except I think I'm probably willing to go ahead with this if we had that part of the agreement that there would be this interaction to figure out how not only to do the job better but to do it for less ..., and the how the responsibility of that is part of this whole issue of retention," she said. She pointed out that the issue of retention can be found everywhere, [especially] with the heavy reduction in 18-44 year olds [in the state]. This situation will continue until the state builds some economic activity, she predicted. She said she didn't think putting "that" in this bill would be that helpful. CHAIR COGHILL requested that Mr. Stewart respond to [Mr. Ludwig's suggestion]. Chair Coghill reiterated his view that this legislation provides the administration with a responsibility. However, he related his belief that those in the collective bargaining units should have an engaged voice as an interested party. He invited Mr. Stewart to comment. MR. STEWART agreed to involve the management and the employees of the collective bargaining unit in regard to the formation of and consideration of the priority lists presented to the Personnel Board. In fact, in a meeting with the representatives of the collective bargaining [unit], [the division] mentioned [that it would be happy to have them involved] at that point. "We believe that once the regulatory process takes place and ... the Personnel Board adopts the program, the narrowest possible control will provide us with the opportunity to come back and say whether it's worked or not," he explained. CHAIR COGHILL expressed agreement in that if the legislature is going to require the [division] to provide the final answer, then it should have the final say. However, in the regulation and board process he expected those in the collective bargaining management positions to help with the prioritization and the discussion of the regulatory scheme. Number 2717 CHAIR COGHILL suggested that there be a report on this in 2004. Therefore, he offered the following conceptual [Amendment 1] on [page 5], line 26, that there be a report [on the progress of this pilot project] to the legislature during the 2004 legislative session. REPRESENTATIVE HAYES said that it seems like this is a no-win situation. On the one hand, there is the knowledge that there is a problem with recruiting and retaining state employees. On the other hand, legislation freezing the hiring of state employees is moving through the Senate. He questioned the message being sent to employers and potential employees. REPRESENTATIVE JAMES agreed that Representative Hayes' scenario is concerning. However, she pointed out that the Senate Bill isn't before the committee. CHAIR COGHILL asked if there is any objection to conceptual Amendment 1. There being none, conceptual Amendment 1 was adopted. Number 2550 REPRESENTATIVE FATE remarked that he has seen recruitment bonuses do well. The retention bonuses that he has seen work are based on efficiency and productivity. He related his skepticism with regard to giving bonuses merely to retain people. Although Representative Fate viewed the recruitment [portion of the bill] as being on the right track, he had concerns [with regard to the other provisions of the bill]. Number 2495 REPRESENTATIVE CRAWFORD recalled Representative James' comment regarding the public-private sector in Alaska. He informed the committee that over the years, the building trade has graduated a number of apprentices. However, Alaska isn't able to retain them due to losses to the West Coast states. Moreover, Alaska's private sector wages haven't kept pace with other states either. Last year, there was a shortage of ironworkers, pipefitters, and other trades people in the state. Representative Crawford related his belief that throughout Alaska there is a systemic problem because Alaska's wages haven't kept pace over the last several years. Therefore, he expressed the need to make stronger structural changes than merely receiving bonuses from within the department's budget. CHAIR COGHILL commented that the systemic issue on the societal level is that Alaska has drifted into a service-based industry rather than a production-based industry. REPRESENTATIVE JAMES acknowledged that many people are leaving the state because there aren't opportunities in the state [for them]. However, there are many people who would stay regardless of the wages. Therefore, she felt that there will be a fight with regard to who gets the employees and thus [this legislation] might help with retention and [recruitment]. Although the retirement and insurance situations in the state have changed, it's much better than what's in the private sector. Therefore, addressing the wages, even at a lower level, could result in people staying. Number 2302 REPRESENTATIVE JAMES moved to report CSHB 361, Version 22- LS1317\F, Cook, 3/20/02, as amended out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 361(STA) was reported from the House State Affairs Standing Committee. The committee took a brief at-ease.
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