Legislature(2005 - 2006)CAPITOL 106
02/28/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
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| Start | |
| Conference of Young Alaskans Presentation | |
| HB485 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 485 | TELECONFERENCED | |
| += | HB 475 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 485-STATE PHARMACISTS/DOCTORS/AUDITOR EXEMPT 9:23:27 AM CHAIR SEATON announced the last order of business was HOUSE BILL NO. 485, "An Act amending the State Personnel Act to place in the exempt service pharmacists and physicians employed in the Department of Health and Social Services or in the Department of Corrections and corporate income tax forensic auditors employed by the division of the Department of Revenue principally responsible for the collection and enforcement of state taxes who specialize in apportionment analysis and tax shelters of multistate corporate taxpayers; and providing for an effective date." The committee took an at-ease from 9:23:44 AM to 9:27:05 AM. 9:27:18 AM JANET SEITZ, Staff to Representative Norm Rokeberg, Alaska State Legislature, presented HB 485 on behalf of the House Rules Standing Committee, sponsor by request, which is chaired by Representative Rokeberg. She said the House Rules Standing Committee introduced the bill at the request of the Departments of Health & Social Services and Revenue. The bill proposes to move two job [categories] from their current position to exempt status. Those two categories are: pharmacists and corporate income tax forensic auditors. She noted that the committee packet includes the sponsor's statement, which describes some of the recruitment and retention problems that the departments are experiencing with those two job categories and an explanation of why it would relieve those problems if the jobs were made exempt. She noted that the representatives of the departments were present to answer technical questions, and she urged the committee to support the bill. 9:28:47 AM CHAIR SEATON, in regard to moving forensic auditors to an exempt category, said he believes one of the people working in that position is currently representing the unions on the Alaska Retirement Management (ARM) Board. He asked if changing that job category to exempt status would prevent that person from being able to serve on the board. MS. SEITZ said she doesn't have the answer at hand, but will find out. 9:29:15 AM VIRGINIA SMILEY, Director, Division of Alaska Pioneer Homes, Department of Health and Social Services (DHSS), put the issue of the pharmacists' salaries in context, by giving the committee an overview of the pharmacy in the Alaska Pioneer Homes and the pharmacists' duties. She said the six homes are located in Ketchikan, Sitka, Juneau, Anchorage, Palmer, and Fairbanks, and they all rely on receiving the medications for their residents from the division's central pharmacy located in the Anchorage Pioneer Home. As mandated by state and federal law, the pharmacy must be under the oversight of a licensed pharmacist. She said the division does use School of Pharmacy interns and pharmacy assistants; however, three pharmacists are necessary to supervise staff, determine appropriateness and dosage of each medication, and - for the specialized geriatric population - track and respond to the possibility of drug interactions. She stated that the pharmacists perform highly specialized consultant duties by spending much of their time giving consult to physicians, family, and staff. MS. SMILEY continued: With the introduction of Medicare Part D, the Pioneer Home pharmacists have designed and are about to implement a resident chart assessment that requires a complete review of each resident's medication regimen every 30 days. Based on our current occupancy, that's going to be approximately 450 resident chart reviews a month. That's a substantial amount of work. In the quarter ending December 1, 2005, the pharmacy packaged and dispensed ... 353,821 individual doses of medications out of our pharmacy in Anchorage. Dispensing that volume of medications requires a full staff that are present and working. MS. SMILEY stated that for almost a full year, the division has been losing its pharmacists to higher paying jobs and has not been able to attract new pharmacists to fill those vacancies. She said both the federal government and private sector pay wages that are competitive with that of the division and offer "signing bonuses" and forgiveness of student loans. She continued: For eight months of last year, we had a single pharmacist on our payroll. It was necessary for us to sign contracts with two temp agencies, and we were able to fill many but not all of the vacant shifts. We paid the contract agencies $70/hour for their pharmacists. At this critical point, we finally placed the pharmacists' PCN [position control number] into a temporary higher paying category in order to recruit and hire more competitively; however, the Division of Personnel told us that we would have to seek a permanent solution for this issue, and that's why we're here today. The problem is that under the present wage scale for pharmacist positions in the state system, we're not competitive with other employers - either the federal government or the private sector. We're asking to have pharmacists moved into the exempt service with other professional classifications, as it will provide the needed flexibility to be competitive in our current market place. 9:33:28 AM JANET CLARKE, Assistant Commissioner, Central Office, Finance and Management Services, Department of Health and Social Services (DHSS), said she thinks Ms. Smiley's testimony highlights the personal difficulties that have been experienced with "some of our most vulnerable populations" in dealing with this issue. She urged the committee's strong support of HB 485. She stated that DHSS has eight pharmacists positions: three of the positions are in the Division of Pioneer Homes, two are in the Alaska Psychiatric Institute [within the Division of Behavioral Health], and one is in [the Epidemiology Section within the Division of Public Health]. She stated that while there are not many positions, each is critical in the state services being performed. For example, she said, they are either providing direct dispensing services to clients who are in great need of that expertise, or they are providing highly specialized consulting services that would be cost prohibitive to obtain through a contracting service. She indicated that another problem with contracting services is in regard to issues of employee/employer relationships and guidance. MS. CLARKE warned that the risks are great to the state if the core group of expert pharmacists cannot be maintained. She said, "I'm not sure what we would do if we did not have the required pharmacy support for our vulnerable pioneers; it's just critical in this day and age related to their own medical needs." Therefore, she said, it is necessary to be able to compete in the market place for these critical positions. Ms. Clarke said under the current classified salary, the department can pay $32/hour, whereas contracted pharmacists are paid double that amount. She concluded: It's clear to us that these highly professional, licensed pharmacists no longer really fit in the classified service. Physicians [and] psychiatrists are exempt, as you know, in the statute, and ... this group of ... workers clearly more readily meets that test of being these kind of specialized medical professionals that we need to have in the exempt service." 9:37:38 AM REPRESENTATIVE GATTO mentioned other occupations that are in short supply in the state. He questioned what is going on that Alaska is experiencing so many shortages across the board. 9:38:04 AM MS. CLARKE responded that she thinks that is a complex question and recommended that a representative of the Division of Personnel may be able to offer that division's view. Notwithstanding that, she proffered that in the '90s the state- negotiated salary increases were half of the Consumer Price Index (CPI), so state wages did not keep up at that point. In regard to pharmacists, she emphasized, the market is so far out of realm with what the state pays that she said she doesn't think there is any study or market-based pay system that could accommodate "what we're seeing with pharmacists." She mentioned national shortages and said, "There's a whole lot going on for these other job classes that you talked about." She offered further examples. 9:39:44 AM REPRESENTATIVE GARDNER said there was a lot of testimony last year about people taking state jobs because of the benefit package, even though salaries were not equivalent [to those in the private sector]. She said, "Now that the benefit package is no longer the strength that it used to be, salaries are maybe more important across the board." She suggested that it may be necessary to restructure the entire structure of state employment, rather than addressing individual job categories in a piecemeal fashion. 9:41:02 AM MS. CLARKE deferred to Ms. Cosgrove. 9:41:26 AM CHAIR SEATON mentioned a study and pay ranges between 22 and 27. He asked how much a range 27 is paid. 9:41:55 AM MS. CLARKE said she doesn't know the exact amount; however, she said when the pharmacist classification study came out, the results were dismaying. She explained that when a classification study is done, there is no comparison to external market; only internal comparisons are made. She explained that means there was no comparison to what pharmacists were being paid in the private sector. 9:43:11 AM CHAIR SEATON stated his understanding that both internal and external markets can be used in a study. He suggested there may be a difference in the interpretation of the regulations, and he called on Ms. Cosgrove to answer that question so that everyone would be on the same track. 9:45:36 AM MILA COSGROVE, Director, Division of Personnel, Department of Administration, explained that the current State of Alaska classification plan is based on nine occupational families. She explained that in a telescoping level of duties there are groups, within which are families, and within which are series "and so on." She continued: The state Personnel Act contemplates the concept of like pay for like work, which has for the past 15-20 years been interpreted to mean that job classifications are aligned internally for salary purposes. In other words, when you do a classification study, you contemplate the eight classification factors - it's a whole job classification system based on a federal model. We look at [those] duties and we say, "Does this work equate to a range 14 or a range 16?" And we try to make sure that professional level positions and one job class family are compensated equitably as other professionals in other job class families. So, in other words, they're internally aligned; there's a sense that range 16 in the State of Alaska has a certain kind of responsibility and duty, and has a certain level of education and experience necessary to perform the duties of their jobs. And that's what's meant by the concept of internal alignment. 9:47:36 AM MS. COSGROVE noted that those working at range 21-22 are high- level, professional, technical experts with "a fairly broad scope of responsibility and consequence of error." In response to a question from Chair Seaton, she said the division tries to weigh each job against a series of eight factors; it is an established methodology of position classification and a legitimate system in the broad scheme of things. 9:49:31 AM CHAIR SEATON said, "The internal alignment is then only within state job classifications within the ... state-provided jobs." 9:49:43 AM MS. COSGROVE answered that's correct. 9:50:29 AM CHAIR SEATON offered his understanding that regulation allows both internal and comparative [studies]. 9:50:40 AM MS. COSGROVE responded that it is not regulation to which Chair Seaton is referring. She stated that the Division of Personnel has policies related to classification, and her description of how the division introduces market-based pay is a description of how the division's operations have operated. When in doubt, she said, the division refers to the Personnel Act, which contemplates, under the merit system of personnel, the concept of like pay for like work. She offered her recollection that this is articulated in AS 39.25.150. She said there are issues regarding being competitive, especially in the higher levels of the state's professional ranks. She added, "It's a complicated scenario." She continued: At this point, we have discussed with the Department of Law and our labor relations folks, and we are comfortable that we can begin to introduce more elements of market-based pay without violating the statute, or the classification plan, or the pay plan. And we're in the process of developing guidelines and analyzing data that will allow us to do that. And simply, what we're looking at is: when there's a demonstrated history of recruitment difficulty and our turnover rate exceeds our hire rate, and when we're looking outward at projections for increased demands in certain occupational fields, we will go out and do a market survey. And if the market survey indicates that we're not competitive, we will look at adjusting salary ranges one or two ranges, depending on what that market data looks like - so ... that's roughly 7.5-15 percent. And we're in the process of developing those guidelines, getting it approved by the Personnel Board, and we expect to be able to role that out on July 1, absent any other unseen hurdles at this point. I don't anticipate that there will be any, but we still have some administrative hoops to jump ... through. So, that will allow us, in a fair and equitable manner, and in an objective manner, to apply market pay data, but we still won't do it by individual job class. We want to be able to do it by job class family, because we still have to care for the other part of the personnel rules. In the Personnel Act they talk about internal alignment and a clear career progression. So, within a job class family, we need to make sure that things are still aligned. So, pharmacists don't sit alone in the world as a job class family; they're in with some other medical professionals, like occupational therapists, recreational therapists, et cetera. If we were to raise pharmacists under this new scheme, all of those other job classes would go up as well. 9:53:29 AM CHAIR SEATON asked if Ms. Cosgrove is saying that the only way to solve the problem with the pharmacists is to change to an exempt category and that the system of classification really doesn't function at this point in time to "get us to where we need to be ...." 9:53:48 AM MS. COSGROVE replied that she reluctantly came to that conclusion. She stated that she is a big proponent of the system of employment. She said she thinks it's there for a reason and she doesn't think it's a "light action to remove people from the classified service." However, even if pharmacists are raised to the top of the pay scale, they still would not be "competitive." She offered her understanding that currently the Department of Health & Social Services is paying pharmacists the equivalent of a range 29 A, which she added, "Is just to get people in the door." She pointed out that that pay scale is not even contemplated on the General Government Unit (GGU) or Supervisory Unit (SU) pay scales; "that's pegged at the partially exempt pay scale." She said this is not dissimilar to what occurred with physicians and medical doctors, which are exempt. She said, "We can't pay them enough to be competitive. With some professions over time I think we may find that that's true." She mentioned the national crisis in the medical professions - the shortage of skilled workers and the increase in demand. She stated, "I very reluctantly agreed to the establishment of a ... temporary exempt position for the pharmacists, because the option was closing down the pharmacy, and that didn't seem like a viable option to us, and it certainly wasn't a viable option to the Department of Health & Social Services." 9:55:33 AM MS. COSGROVE, in response to a question from Chair Seaton, said once something becomes exempt, she has no administrative authority over where the salary range gets set; that would be at the discretion of the Office of the Governor. However, she added that "for these types of positions" the Office of the Governor generally consults with the Division of Personnel to ask about its findings and for its recommendation. 9:56:14 AM REPRESENTATIVE GARDNER queried, "You've talked about a national crisis, the medical professions, and the difficulty for pharmacists specifically. Does that apply also to the forensic auditors?" 9:56:28 AM MS. COSGROVE replied, "There are other issues with the auditor positions. Obviously they're not medical professions. So, the answer to that would be no." 9:57:08 AM REPRESENTATIVE GARDNER asked what other job categories the state is having trouble filling. 9:57:24 AM MS. COSGROVE said her staff is doing a study; therefore, she cannot answer that question today with 100 percent accuracy. In general, however, she said the difficulty in recruiting is due to the lack of competitive wages for high-level positions, nurses, engineers, auditors, and possibly others. 9:58:23 AM REPRESENTATIVE GARDNER said she would rather wait to address the issue until all the data is available. 9:58:47 AM MS. COSGROVE said the study will be completed within the next 30-60 days. Although all the data is not available at present, she said there is salary data which shows that if [pharmacists] are brought "competitive to market" they will be "beyond the currently negotiated pay scale." She indicated that the ranges in which a pharmacist can fall are paid roughly between $60,648- $75,000. She indicated that a cross independent study done by Milliman, Inc. shows that "we're looking at a fairly conservative seventy-fifty percentile, which is a fairly conservative average wage of $100.000 a year." She said, "That's a big difference; that's difficult for us to make up in our current salary schedule. And, to me, that's what pushes them over the threshold." 10:00:21 AM REPRESENTATIVE GARDNER asked what the commonalities in job classes are. 10:00:45 AM MS. COSGROVE listed the three basic types of employment in the executive branch: classified, partially exempt, and exempt. Those in classified service are fully subject to personnel rules, and the majority of them are covered by collective bargaining. She described three ways a person may be partially exempt: through statute through the authority vested in the legislature; because they are policy-level decision makers; or because of some odd recruitment threshold that would lead the personnel board to believe that filling those positions could only be done by direct appointment. Partially exempt employees are exempt from the portions of the personnel rules that are related to recruitment and hiring. If they are dismissed, they do not have a grievance "avenue" under the personnel rules. In response to a question from Chair Seaton, she said partially exempt employees are subject to the classification and pay plan articulated in AS 39.27. She noted that AS 39.25.110 is the statute related to exempt service. Legislative action is required in order to be in exempt service. She indicated that the jobs that are in exempt status are there because they can't be legitimately placed on the salary schedule. Medical professionals are one example of that, she said. She offered other examples. Exempt employees are, technically, "at will employees," and they are exempt from the personnel rules. From a human resource standpoint, she said, "you still need to have a reason to dismiss them from their employment; you can't just do that willy-nilly." 10:05:11 AM JERRY BURNETT, Director, Administrative Services, Department of Revenue, regarding the previous question about service on the ARM Board, said Michael Williams was appointed by the governor from a list recommended by the bargaining unit representatives. He stated, "It does not require that he be a member of the union. It does not require that he be a member of the PERS or TRS systems. It only requires that he is recommended on that list." He indicated that the proposed legislation would have no effect on that. 10:06:29 AM ROBYNN WILSON, Director, Anchorage Office, Tax Division, Department of Revenue, said prior to being appointed to her current position she was a private tax auditor, thus she brings the perspective of the auditors to the table. Ms. Wilson reviewed that corporate income tax auditors audit all corporations that do business in Alaska, with their main focus on those corporations that do business in multiple states. She added, "And these are groups of companies that have hundreds of subsidiaries." She said the job of the auditors is to figure out what will be taxed, what the pie is, and what Alaska's share of the pie is. She said there are two sets of rules: one that applies to the oil and gas taxpayers and one that applies to the other corporations. The oil companies' pie includes their worldwide income. Auditors look not only at the domestic income that may show up on a company's federal income tax return, but also at income earned in all other countries in which that company does business. She explained, "And so, it's a real challenge to ... quantify that income, especially the foreign income, because the domestic income, to an extent, is quantified by the Internal Revenue Service." She said auditors look at foreign books of record. Some corporate groups have "foreign parents." She offered further details of the auditors' considerations. Ms. Wilson explained that Alaska's share is determined, based on the level of activity a company conducts in Alaska versus everywhere else. Comparisons are made in the realm of: property, sales, extraction - in the case of oil and gas companies, and payroll - in the case of companies that are not oil and gas related. She offered an example of a property comparison. Ms. Wilson noted that an audit usually takes a year, between 600 and 1,000 audit hours. 10:10:50 AM MS. WILSON said when she came on board with the state 10 or 11 years ago there were 10 income tax auditors. At that time, the market for the auditors was out of public accounting firms, as well as the federal government. Public accounting businesses were recruiting people out of college and working them "to death" - typically 70-80 hours a week, thus, working for the state had an appeal. Historically, the state used to pay better than the federal government, she said. Over the years, the number of [state] auditors has been reduced to two. One factor is that several auditors who were recruited 10-15 years ago have retired. Another factor is that the public accounting field has stopped working its new associates quite so hard. The public accounting field has collapsed, meaning less firms from which the state can recruit. Ms. Wilson offered her recollection that there have been seven recruiting efforts made by the state for experienced auditors in the last ten years - the last successful recruitment occurring in 1998. 10:13:38 AM MS. WILSON stated that "clearly auditors are not life and death," as pharmacists are. She added, "But we have, in the accounting profession, had our own set of forces that have brought this sort of to a head." She said she thinks everyone is familiar with the situation that occurred in 2001 regarding the Enron Corporation. Since that time, she said, "auditors and accountants have just been snatched up by companies." Simultaneously, public accounting firms have, in last five to seven years, made a lot of money selling tax shelters, which means less people for the state to recruit. She said audits are becoming increasingly complex. Tax shelters are extremely difficult to ferret out, are very time consuming, and "the people on the other side of the desk are becoming more and more sophisticated in responding to them." The bottom line is that the state has less recruits and more complex audits. 10:16:47 AM MS. WILSON said the state has tried looking for less experienced auditors in hopes of training them. That effort has not been very successful. Currently, there are not enough experienced people to train in order to get the normal amount of audits done. She mentioned an internal study which addressed the Auditor III level [included in the committee packet]. She said she thinks all the auditors are underpaid and the pay issues are even worse at the higher levels. Ms. Wilson said the state is requesting three exempt positions. She stated her belief that all the auditors are underpaid. She said, "I fully support the administration's move to a market-based system." Moving the classified positions up a range or two will not solve the immediate problem and the situation is at a crisis point, she said. 10:19:06 AM REPRESENTATIVE LYNN asked if a market-based study has been done as well. 10:19:32 AM MS. WILSON said the study that was done by the economists was focused on auditors and "other similar accounting [positions]." There is a premium on auditors and a super premium on those with income tax backgrounds. She indicated that the study made comparisons with federal jobs and with other states' jobs "and to put those dollars on an Alaskan basis, taking into account cost of living." 10:20:19 AM REPRESENTATIVE LYNN asked, "Can't you just move them up the pay scale without going to exempt?" 10:20:39 AM MS. WILSON responded that the division supports the effort to move the auditors up the pay scale, but at this point the 10 or 15 percent increase that would result from moving up the pay scale one or two ranges will not fix the problem. 10:21:35 AM CHAIR SEATON recalled a discussion a couple years ago regarding auditors and return on investments. 10:22:07 AM MR. BURNETT responded as follows: This past year ..., when we were doing the [fiscal year (FY) 06] budget for the Department of Revenue, there was an increment for $1 million requested ... to increase our audit presence. There were seven positions that were authorized by the legislature, and we did get a $750,000 increment in the budget. The discussion at that time and the paper work was that for a million dollars invested in this ... we were absolutely certain that we would produce at least $5 million in return on an annual basis, and I think the return possibly is higher than that. I think our tax division ... annual report does speak to audit effort and the effect of that. ... So, there's a significant return to audit work. 10:23:04 AM MS. WILSON, in response to a question from Chair Seaton, confirmed that her previous notation that there are only two auditors left in the state system does mean that there are eight unfilled positions. 10:23:17 AM CHAIR SEATON remarked, "It shows a significant problem with recruiting - that's for sure." He asked Ms. Cosgrove if the numbers are similar for auditors as compared with pharmacists - that they are "outside of the classification scale" that the state is able to provide in order to recruit personnel. 10:23:48 AM MS. COSGROVE answered yes, based on a cursory review of the data gathered by the Department of Revenue and "our own initial forays into the market." She noted that she doesn't have an independent third-party source to verify that data. 10:24:10 AM CHAIR SEATON asked Ms. Cosgrove if she also sees the necessity of having the aforementioned positions be made exempt. 10:24:26 AM MS. COSGROVE said at the highest level, yes, which is the level being considered. She reported that the Department of Revenue has done some extremely aggressive recruiting maneuvers. The department has a 43 percent failure rate in its job postings. She concluded, "So, their business need is real and very pressing." 10:24:58 AM CHAIR SEATON asked the committee members to present any questions they want any of the departments to address at the next hearing of the bill. 10:25:20 AM REPRESENTATIVE GARDNER posited that the problem encompasses more than just the two job positions being discussed. 10:25:52 AM MS. COSGROVE, in response to a request from Representative Gardner, said it is not possible to prepare even a preliminary report by the next hearing. 10:26:14 AM REPRESENTATIVE GARDNER asked if it would be possible to find out how many jobs in the state departments are budgeted for, but not filled. 10:26:34 AM MS. COSGROVE explained, "There are differences between budgeted vacancies and difficulties in recruitment." She revealed that she carries a vacancy factor in her own division of approximately 7.5-9 percent, in order to meet her budget. She explained, "I haven't tried to fill those positions, because I simply wouldn't be able to pay for them by the end of the year." She offered to provide Representative Gardner with a list showing a group of job classes for which administrative service directors said recruitment difficulties were impacting their program areas' abilities to deliver service and meet the missions of their agencies. 10:27:20 AM REPRESENTATIVE GARDNER confirmed that she would like that list. [HB 485 was heard and held.]
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