Legislature(1995 - 1996)

06/04/1996 10:00 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  SENATE BILL NO. 1003                                                         
                                                                               
       An Act relating to public employees.                                    
                                                                               
       Discussion  was  had with  Senator  Mike Miller,  Wendy                 
       Redman,  Art  Snowden,  Mark  Boyer, Jim  Baldwin,  Don                 
       Valesko, Bruce Ludwig, and Bob Stalnaker.  A draft CSSB
       1003 (Fin), version "O" was adopted and REPORTED OUT of                 
       committee with a "do pass" recommendation.                              
                                                                               
  After convening  the meeting, Co-chairman  Halford announced                 
                                                                               
                                                                               
  that the committee  would review  work on SB  1003, done  by                 
  Senator  Miller,  and would  then proceed  to  SB 1005.   He                 
  explained that SB 1005  was returned to the drafter  since a                 
  drafting change impacted "a whole number of sections of  the                 
  bill."   The bill, with  newly drafted portions  relating to                 
  appropriation  versus allocation,  will be  before committee                 
  later in the day.                                                            
                                                                               
  SENATOR  MIKE MILLER came  before committee, referenced CSSB
  1003  (Fin)  (9-LS1893\O),  and   explained  that  the  only                 
  difference  between  the  new  version  and  that  discussed                 
  earlier  in the special  session reflects the  fact that the                 
  administration  came  forward  with  a different  retirement                 
  benefit  for  new  employees.    Under  the  old  bill,  new                 
  employees entering the  system after July 1,  1996, would be                 
  eligible for paid  health care benefits upon  retirement and                 
  would be able to buy one-half  for their dependents or their                 
  spouse. That was eliminated  in the new version.   Under the                 
  new version an employee entering the system would have to be                 
  in the system for ten years before they could "vest out" for                 
  health benefits only.   An  employee would still  be in  the                 
  system for five years for vesting  for the plan itself.  The                 
  costs  savings   are  the   same  or   very   close.     The                 
  administration  feels  there  is   less  objection  to  this                 
  particular health benefit  area than  what was contained  in                 
  the previous bill.                                                           
                                                                               
  The bill covers five major items:                                            
                                                                               
       1.   Geographic differential, as passed by the Senate.                  
                                                                               
       2.   Tier III  retirement  system  which  requires  ten                 
  years of       services  prior  to  eligibility  for  health                 
                 benefits  upon retirement.    For  police and                 
                 firemen, vesting occurs after five years, but                 
                 an individual must be 50 years old to retire.                 
                                                                               
       3.   Calculation of the high five  years of salary when                 
            computing retirement.                                              
                                                                               
       4.   Restructuring  of  cost  of   living  differential                 
  language to         utilize permanent fund  data as proof of                 
                      residence.                                               
                                                                               
       5.   Leave is cashed in at the rate it is earned.                       
                                                                               
  Senator Miller directed attention to  Sections 30 through 43                 
  and noted  that  they  represent  the  retirement  incentive                 
  portion  of  the   bill.    Section  50   approves  monetary                 
  contracts.   Other sections also approve pay raises for non-                 
  covered employees throughout the state.                                      
                                                                               
  Co-chairman  Halford  voiced  his  understanding  that   the                 
  retirement incentive applies to the state, university, court                 
                                                                               
                                                                               
  system, and  court administrator.   He  then referenced  the                 
  teacher retirement  incentive passed during  regular session                 
  and asked if  teachers excluded  from that legislation  were                 
  included  in  CSSB  1003 (Fin).    Senator  Miller direction                 
  attention  to  Section  34  and  noted authorization  for  a                 
  retirement  incentive  for  employees of  regional  resource                 
  centers.  Co-chairman Halford voiced  his understanding that                 
  it includes  central correspondence.  Senator Randy Phillips                 
  requested clarification, for the record.                                     
                                                                               
  BOB  STALNAKER,   Director,  Division   of  Retirement   and                 
  Benefits, Dept. of Administration,  explained that one group                 
  of teachers were  missed in  HB 354.   They were  previously                 
  called  correspondence  study  teachers  for  the  Dept.  of                 
  Education.  They  are now designated Alyeska  Schools.  They                 
  are included in the proposed bill.   AVTEC and Mt. Edgecumbe                 
  were included under HB 354.   Two of the three schools under                 
  the  Dept.  of   Education  were   funded  in  the   earlier                 
  legislation.  The proposed bill picks up the third.                          
                                                                               
  Senator  Zharoff  referenced   earlier  concerns   regarding                 
  whether all  items within  the  bill fit  under the  initial                 
  special session call.  He then asked  if the contents of the                 
  proposed bill fit  under the expanded call.   Senator Miller                 
  responded affirmatively.                                                     
                                                                               
  Co-chairman   Halford  referenced   a  legal   opinion  from                 
  Legislative Legal  Services "on  the way  the call  actually                 
  works."  He explained that the  constitution says a call can                 
  be limited to subjects.  While the call may be more limiting                 
  than subjects in  its wording,  limitations beyond what  the                 
  constitution considers subjects would be ineffective.  There                 
  should be  no question  that everything  within the  bill is                 
  within the call.   The one  question might be the  effective                 
  date.  The  Co-chairman said he  did not believe putting  an                 
  effective  date  in   a  call  has  "any  impact   at  all."                 
  Legislative attorneys agreed with that opinion.                              
                                                                               
  Senator Rieger directed attention to Sections 44  and 45 and                 
  noted  the description  of  "non-covered  employees" in  the                 
  executive branch and  "non-collective bargaining  employees"                 
  in the university system.   He then asked if  the difference                 
  in wording was intended to have  different effects.  Senator                 
  Miller said he did not know.  He explained that the proposed                 
  bill was intended to "pick up everybody . . . eligible for a                 
  salary increase, whether  they were under union  contract or                 
  not."  He voice his belief that the only "folks that are not                 
  covered in this particular bill are legislators themselves."                 
                                                                               
                                                                               
  Senator Rieger asked if funding for Section 45 is sufficient                 
  for  the  1.5  percent  increase   to  apply  to  university                 
  employees  "the  same  as  to  the  other  executive  branch                 
  employees."  Senator Miller deferred the question to Finance                 
                                                                               
                                                                               
  Committee  chairs.    Co-chairman Halford  advised  that the                 
  funding   bill  includes  a   substantial  amount   for  the                 
  university, both in a FY 96  supplemental and FY 97 funding.                 
  He then voiced  his understanding  that the university  gets                 
  the 1.5 percent.  Co-chairman Frank clarified the situation,                 
  saying that the University would  actually receive less than                 
  that because the  Governor "put in  1.5 percent times  their                 
  entire personnel costs."  Some contracts are higher than 1.5                 
  percent.   The resulting  funding is $300.0  to $400.0  less                 
  than  the cost of fully  funding approved contracts plus 1.5                 
  percent for non-covered.  Funding  was provided, however, at                 
  the Governor's number.                                                       
                                                                               
  Co-chairman Halford noted that the  funding is not contained                 
  within the proposed bill.  Schedules within the bill reflect                 
  "whatever  is  necessary  to pay  the  total  amount."   The                 
  funding is in SB  1005. Senator Rieger suggested, "in  a way                 
  it's in this bill, by omission."  He then directed attention                 
  to Section 44 and noted language saying:                                     
                                                                               
       Employees who are not otherwise covered are entitled to                 
       receive salary adjustments comparable to those received                 
       by the classified and partially exempt employees of the                 
       executive branch under sec. 13                                          
                                                                               
  University  employees  have  been carved  out  and  not made                 
  subject to that provision.   Co-chairman Frank stressed that                 
  the  university  "has its  own  way  of doing  things."   It                 
  recently  implemented  a  new   merit-based  program.     He                 
  suggested a  representative of  the university  be asked  to                 
  further clarify the situation.                                               
                                                                               
  WENDY   REDMAN,   Vice-President,   University  of   Alaska,                 
  Statewide Systems, came before committee.  She said that the                 
  language  in  the   proposed  bill  is  appropriate.     The                 
  University is not  under the same pay scale  as the State of                 
  Alaska.   The board  of  regents has  its  own scale.    The                 
  companion bill containing  the funding does not  contain the                 
  same amount of  money other  state employees are  receiving.                 
  Ms.  Redman  said that  could be  dealt  with "in  the other                 
  context."                                                                    
                                                                               
  Senator Rieger asked if the board of regents would implement                 
  a  1.5 percent pay adjustment for  employees if that funding                 
  was  forthcoming.  Ms.  Redman said the  university does not                 
  give across-the-board  increases or  annual step  increases.                 
  The university system  is merit based.  It  will apply to no                 
  more than  80 percent  of the  employees.  The  cost of  the                 
  program will  be approximately $1 million less  than what is                 
  presently  in the  draft  companion  bill.    The  total  is                 
  approximately  $2.3 million for  non-covered employees.  The                 
  university now has  $1.3 million "that  is left in what  the                 
  Governor put in."  Senator Rieger asked if the funding would                 
  cover  anticipated   merit  increase  costs.     Ms.  Redman                 
                                                                               
                                                                               
  acknowledged  it would  not cover  all the  employees.   The                 
  draft  bill  contains  $1,389.0  for  the 3,150  non-covered                 
  employees  of  the 3,500  total  university employees.   The                 
  amount  needed to  cover  salary increases  for  non-covered                 
  employees is  $2,353.0 million.   The university is  thus $1                 
  million short.                                                               
                                                                               
  Senator Zharoff  asked why  items within  the proposed  bill                 
  (retirement  incentive, contract  approval,  etc.) were  not                 
  dealt with in separate pieces of legislation.  That approach                 
  was the preference of the administration, minority  members,                 
  and bargaining units.  Senator Miller voiced his belief that                 
  the items should be handled as a package.  He acknowledged a                 
  likely floor amendment to separate the issues.                               
                                                                               
  Senator Donley asked  if judges  are included  in the  early                 
  retirement  incentive.    Co-chairman  Halford  voiced   his                 
  understanding that a  different system  is involved.   Court                 
  employees  and  the  administrative  director are  included,                 
  however.  ART SNOWDEN, Administrative Director, Alaska Court                 
  System, said that judges are not included.                                   
                                                                               
  MARK BOYER,  Commissioner,  Dept.  of  Administration,  came                 
  before committee.  He said the Governor does not support the                 
  bill  as  currently  drafted.    Many provisions  go  beyond                 
  "anything that  the Governor  could support  at this  time."                 
  Some of those items include a change in benefit calculations                 
  (the so called  ramp).  The  bill also lacks the  separation                 
  incentive plan listed on the expanded call.                                  
                                                                               
  Mr. Boyer attested to an issue which places a cloud over the                 
  legality of the bill as drafted; specifically, the effective                 
  date.  He  suggested that a  representative of the Dept.  of                 
  Law speak to the problem.                                                    
                                                                               
  Co-chairman   Frank   directed   attention  to   area   cost                 
  differentials within Section 10 and voiced his understanding                 
  that  they do  not apply  to revenue  sharing and  municipal                 
  assistance.   Commissioner  Boyer  concurred.   He explained                 
  that the  differential for municipal assistance  and revenue                 
  sharing  is also used for non-covered (statutory) employees.                 
  While  those  differentials have  been restated,  no changes                 
  have been made.                                                              
                                                                               
  JIM  BALDWIN,  Assistant   Attorney  General,   Governmental                 
  Affairs Section, Dept.  of Law, next came  before committee.                 
  He referenced a June 3, 1996, legal opinion by Tam Cook, and                 
  voiced his  belief  that it  does not  reflect the  contents                 
  earlier suggested by Co-chairman Halford.  The opinion spots                 
  the issues but does not resolve them.  Mr. Baldwin said that                 
  the   Governor's  call  should   not  be   characterized  as                 
  stipulating an effective date for various provisions.  It is                 
  intended to stipulate a class of  employees to which the new                 
  tier III,  or other  aspects of  the call  relating to  cost                 
                                                                               
                                                                               
  saving  measures,  would apply.    That  is  the  way  court                 
  decisions  characterize how  changes  in retirement  systems                 
  apply.   It is  meant to characterize  when a  new class  of                 
  employee, to  which tier III would apply,  would be created.                 
  The stipulation is to the class of employee to which the law                 
  is applicable rather than to a stipulated effective date.                    
                                                                               
  Mr. Baldwin acknowledged that the subject is restrictive and                 
  narrow.   The legal  question is, Is  it overly restrictive?                 
  Are  we attempting  to excessively  limit the  power  of the                 
  legislature?  Mr. Baldwin said he did not know the answer to                 
  the foregoing  questions.   Only  a  court could  make  that                 
  determination.  A cloud  is placed over the validity  of the                 
  law because established court decisions in other states have                 
  said that if the legislature exceeds the call, the resulting                 
  legislation is void.  Mr. Baldwin  reiterated that the Legal                 
  Services opinion  correctly spots  the issues  but does  not                 
  resolve them.                                                                
                                                                               
  Commissioner  Boyer emphasized that the Governor's intent is                 
  one  of fairness in  treatment of new  employees impacted by                 
  changes in the retirement system per  the proposed bill.  He                 
  further  attested  to  need  to   treat  those  impacted  by                 
  reductions in geographic differentials with  a fair and even                 
  hand.  That is  why the administration is seeking  a uniform                 
  effective date for all  provisions.  To the extent  that the                 
  proposed bill does not provide a fair and even approach to a                 
  class  of  employees,   the  Governor   is  in   opposition.                 
  Commissioner Boyer suggested  that one means of  clearing up                 
  the cloud would be  to address the issue of  effective dates                 
  within the bill.                                                             
                                                                               
  Co-chairman Halford asked if the foregoing approach would be                 
  consistent  with   what  the   administration  proposed   as                 
  geographic differential changes  "far more  drastic than  in                 
  this  bill."    The administration's  changes  were  to take                 
  effect this year.  Commissioner Boyer  responded negatively.                 
  He noted  that the  bill, introduced  by the  administration                 
  last year, contained a one-year grace period that would have                 
  protected everyone at current levels until June 30, 1997.                    
                                                                               
  Co-chairman  Halford  pointedly   inquired  concerning   the                 
  effective date of  the administration's original  geographic                 
  differential bill.  Commissioner Boyer acknowledged June 30,                 
  1996;  however,  provisions  allowed  for  a  one-year  hold                 
  harmless.   The practical  effect was  June 30,  1997.   Co-                 
  chairman Halford noted that the entire bill became effective                 
  as  of  that date  while  CSSB  1003 (Fin)  provides  a five                 
  percent ramp so the effect takes  (in some cases) four years                 
  to apply.                                                                    
                                                                               
  Senator Rieger asked  if the  grace period  in the  original                 
  bill  applied  to   people  hired   after  June  30,   1996.                 
  Commissioner  Boyer responded  negatively.   Senator  Rieger                 
                                                                               
                                                                               
  suggested that the Governor's call referred only to the June                 
  30,  1997,  class  of  employees   hired  after  that  date.                 
  Commissioner Boyer concurred.  Senator  Rieger noted lack of                 
  consistency in  treatment of employees  under the Governor's                 
  original bill versus  the Governor's  position at this  time                 
  and asked why  the issue of  fairness was now being  raised.                 
  Commissioner Boyer explained that the issue  at the time the                 
  bill was introduced was more narrowly focused on  ability to                 
  reopen contracts at the heart of this discussion.  Threshold                 
  percentages  would  have allowed  for  a quick  reopening of                 
  contracts, with area  cost differentials,  in July of  1996.                 
  The differentials could then be renegotiated to more closely                 
  match  those  in  statute.   That  was  the  reason for  the                 
  immediate  effective  date for  new  hires.   Senator Rieger                 
  voiced his understanding that the issue was not fairness but                 
  logistical consideration.  Commissioner Boyer commented that                 
  the issue has become  more complex since then.   He stressed                 
  that the  theme of  fairness has been  "absolutely clear  in                 
  this bill since we introduced it."  That continues to be the                 
  administration's theme.                                                      
                                                                               
                                                                               
  Senator   Rieger  said  that   in  discussion  of  different                 
  treatment for  new hires versus  former hires, he  failed to                 
  see "the magic  of one  effective date  versus another,"  as                 
  long as  the date is  not retroactive.   Commissioner  Boyer                 
  stressed  that the effective date of the original bill ("not                 
  unlike  the  effective date  in  this  bill,  either  as  it                 
  currently is  drafted or  as the  Governor had  suggested it                 
  might be in the amended call) treats all new hires equally."                 
  It  makes  no  difference  whether  the  new  hire  would be                 
  entitled to  a geographic differential.  It would treat them                 
  all  similarly,  regardless  of  the  timing.    Co-chairman                 
  Halford  noted  that the  proposed  bill would  do likewise.                 
  Commissioner Boyer agreed  but added that what  the proposed                 
  bill  does not  address is,  "What  happens to  those people                 
  already  enjoying  a benefit--for  instance,  the geographic                 
  differential?"   It differentiates between  those employees.                 
  Co-chairman Halford noted, "Your bill knocked them  off--all                 
  at once--in one year."  The  proposed bill limits the effect                 
  to no more than five percent in any given year.  In the case                 
  of large geographic differentials, in  bush communities, the                 
  proposed bill requires four or five years to implement.  The                 
  administration's bill "cut them  off in one year."   The Co-                 
  chairman then asked which would be more fair.                                
                                                                               
  Senator Rieger suggested that there  would always be a point                 
  at which  new hires are treated differently.  He said he did                 
  not see a difference between a 1997 start date, a 1996 date,                 
  or "anywhere in between."    He again questioned  what would                 
  be accomplished by delaying the effective date.                              
                                                                               
  Senator  Sharp  asked  if  the  administration  would   look                 
  favorably  upon delay  of the  RIP until  next June 30.   He                 
                                                                               
                                                                               
  suggested that if that is not done,  the state will not gain                 
  the advantage of the lower benefit level scheduled to become                 
  effective July 1, 1997.                                                      
                                                                               
  DON VALESKO,  Business Manager,  Public Employees  Local 71,                 
  next  came  before committee.    He  advised that  Local  71                 
  represents approximately 1,700 labor, trades, and classes of                 
  employees  working for the state.   He informed members that                 
  the  proposed bill contains  "some good parts."   He focused                 
  upon pay increases for judges and advised, "It's nice to see                 
  that people that  make $99,996.00 a year are going  to be up                 
  to  $110,436.00  a year."   He  noted  that both  judges and                 
  employees within his union work for  a living and voiced his                 
  expectation that  when union members "come to the table with                 
  a ten  to fifteen  percent raise,"  the committee  will look                 
  upon it as favorably.                                                        
                                                                               
  Mr.  Valesko voiced  support  for the  retirement  incentive                 
  program,  noting that it would  allow workers to leave state                 
  employment  early and  effect savings by  replacing retirees                 
  with lower range employees.  He  expressed doubt that any of                 
  the members of  Local 71  would qualify for  the RIP,  since                 
  they have  seldom qualified  for past  incentives.   Layoffs                 
  have  instead  been  implemented  for  union workers.    Mr.                 
  Valesko stressed  that Alaska has  "less equipment operators                 
  working for  the state now than we had before oil dollar one                 
  flowed into the state."                                                      
                                                                               
  Approval of  collective  bargaining  agreements  is  another                 
  favorable aspect  of  the bill.    Noting that  labor  feels                 
  betrayed  by  the  process,  Mr.  Valesko provided  a  brief                 
  history of  bargaining negotiations.   Local 71 came  to the                 
  bargaining table twice in the last  two years.  In the first                 
  agreement, the union agreed  to reduce the leave  package by                 
  nine days a year in converting from sick and annual leave to                 
  personal leave.  It further agreed to hold the line on wages                 
  for  a  three-year period.    It also  proposed  to increase                 
  productivity (maintain more buildings and roads) and go to a                 
  forty-hour  work  week.     That   was  rejected,  and   the                 
  legislature  indicated that  the 6.7  percent "extra  money"                 
  members would receive by going to a forty-hour work week was                 
  too much,  but that if the percentage was  lowered to 2 to 3                 
  percent, it would have  been approved last year.   The union                 
  thus returned  to the table  and reached  an agreement  that                 
  contained the leave reduction and a 1.4 percent increase for                 
  1996.    Battles  over  approval  continued.    Mr.  Valesko                 
  stressed  that indication  from  legislative leadership  was                 
  that if agreements  came in at a  reasonable rate of 2  to 3                 
  percent,  the  contracts  would  automatically be  approved.                 
  That did not  happen.  That  is discouraging.  The  proposed                 
  bill further reduces areas that  have already been addressed                 
  in collective bargaining agreements.                                         
                                                                               
  Mr. Valesko took exception to the  proposed tier III for new                 
                                                                               
                                                                               
  hires  and  lack  of a  separation  incentive  for long-term                 
  employees at Harborview.  He said that tier III would reduce                 
  the standard of  living for  future Alaskans and  questioned                 
  whether  the legislature  wished to have  on record  a lower                 
  standard  of  living  for future  retirees.    That approach                 
  appears  to be  contrary to past  legislative encouragements                 
  (such as the longevity bonus) to remain in Alaska.  Tier III                 
  would instead encourage retirees to leave the state and find                 
  a  cheaper place to  live.  That  is a step  backwards.  Mr.                 
  Valesko urged that members take "a look at that."                            
                                                                               
  Referencing   provisions   relating   to    geographic   pay                 
  differentials, Co-chairman Halford  voiced his belief  that,                 
  because of the  longer transition period, the  proposed bill                 
  would be  less of a  problem than legislation  introduced by                 
  the  administration.  Mr.  Valesko voiced  his understanding                 
  that bill provisions  would impact those not  represented by                 
  collective bargaining.   If approved,  the contract  between                 
  Local 71 and the  state would call for the union  to go back                 
  to the  bargaining table  on geographic  differentials.   He                 
  acknowledged that a phase-in over a number of years would be                 
  preferable to an immediate effective date.                                   
                                                                               
  Mr. Valesko referenced the geographic differential for Local                 
  71,  and Co-chairman  Halford  advised of  his understanding                 
  that the  union had "already  negotiated down  to about  the                 
  numbers that are in  the bill."  Mr. Valesko attested to the                 
  fairness of the differential  in place since 1976 in  that a                 
  person making $45,000 a year receives approximately the same                 
  as one making $25,000.   Co-chairman Halford noted that  the                 
  proposed bill  limits differential  reductions to  5 percent                 
  annually, over a period of time.                                             
                                                                               
  Senator Randy  Phillips voiced  his  understanding that  the                 
  Local 71 bargaining  unit does not receive  merit increases.                 
  Mr. Valesko concurred.  He then  noted, for the record, that                 
  union members  receive  two, three  percent longevity  steps                 
  after seven and nine years of service.                                       
                                                                               
  In  response  to  a question  from  Senator  Sharp regarding                 
  inability of  Local 71 members to qualify for the retirement                 
  incentive,   Mr.  Valesko   said   members  are   journeymen                 
  craftsmen.   They do  not need  a training  period to  learn                 
  their jobs.  New employees come  on and within six months go                 
  up to full journeymen pay.                                                   
                                                                               
  Co-chairman Halford  advised that  the merit  system creates                 
  the steps  that make  the  retirement incentive  economical.                 
  That is why it does not work for Local 71 employees.                         
                                                                               
  Discussion  followed between Senator  Miller and Mr. Valesko                 
  regarding the pay differential within Local 71.  Mr. Valesko                 
  advised  of  payment  of roughly  a  $2.00  differential for                 
  workers  in Fairbanks.   Senator  Miller  noted that  in the                 
                                                                               
                                                                               
  Governor's original bill  "he would have taken  Fairbanks to                 
  zero which would  have allowed him to  reopen your contracts                 
  to bring your workers down." He then inquired concerning the                 
  union's  position  on   the  bill.     Mr.  Valesko   voiced                 
  opposition, stressing that the bargaining unit presently has                 
  a  system in place.   He added that he had  no fear in going                 
  back to the bargaining table and justifying "what we have as                 
  far as a subsistence schedule, throughout our contract."  He                 
  stated his belief that there is a geographic differential in                 
  Fairbanks, for which employees should be compensated.                        
                                                                               
  Senator Randy  Phillips voiced  his understanding  that some                 
  trade and craft  employees, within the bargaining  unit, are                 
  paid less than the  private sector.  Mr. Valesko  responded,                 
  "tremendously  less."   As  an  example,  he noted  that  an                 
  equipment operator makes  approximately $20  to $22 an  hour                 
  after  nine  or eleven  years.    As a  comparison,  he told                 
  members his youngest  son, with no experience,  had recently                 
  gone to work for a contractor, as a flagman, at $22 an hour.                 
  A labor under  Local 71's  contract starts at  approximately                 
  $14 an hour.                                                                 
                                                                               
  END:      SFC-96, FSS #4, Side 1                                             
  BEGIN:    SFC-96, FSS #4, Side 2                                             
                                                                               
  Mr. Valesko acknowledged that  in some classifications union                 
  members may earn  a bit  above what is  paid in the  private                 
  sector.  He  noted difficulties associated with  comparisons                 
  when the jobs being compared are not equal.                                  
                                                                               
  Mr. Valesko attested to union responsibility for maintenance                 
  of roads, airports,  and buildings  and reiterated that  the                 
  state now has fewer equipment  operators today than in 1978.                 
  There  is  need  for  more.    Previous  governors  and  the                 
  legislature have acknowledged deferred maintenance needs.                    
                                                                               
  Mr. Valesko cited situations in  which three maintenance and                 
  three custodial positions for the international airport were                 
  eventually filled as an administrative position.  Letters of                 
  frustration to both the Governor and the legislature did not                 
  do much good.  Co-chairman  Halford acknowledged, "We remain                 
  over managed and under staffed."                                             
                                                                               
  Senator Randy Phillips  stressed that employees in  Local 71                 
  perform the basic  functions of  government that the  public                 
  expects.  More attention should be paid to this area.                        
                                                                               
  Senator Zharoff voiced his understanding that the Governor's                 
  geographic differential only impacted non-covered employees.                 
  Mr. Valesko  said that unless certain items are removed from                 
  collective bargaining, legislation impacts those who are not                 
  covered.  The tie-in with the Local 71 contract was that the                 
  agreement contained a reopener in  the event of introduction                 
  and passage of  the administration's geographic differential                 
                                                                               
                                                                               
  legislation.  He acknowledged that renegotiation may produce                 
  the existing differential system.   He also advised that the                 
  reopener would allow him to ask for improvements.                            
                                                                               
  Senator Zharoff referenced lack of  a separation program for                 
  employees of  Harborview and asked  if others would  also be                 
  separated.  Mr. Valesko said there may be others, but he was                 
  aware  of those  at Harborview  because  of labor/management                 
  committee meetings  attempting to facilitate  employee needs                 
  through transfers or a separation package.  The union covers                 
  maintenance  workers,  cooks,   housekeepers,  and   laundry                 
  workers at the facility.                                                     
                                                                               
  BRUCE LUDWIG,  Business  Manager,  Alaska  Public  Employees                 
  Association; Alaska  Federation of Teachers;  and secretary-                 
  treasurer  of  the Alaska  State  AFL-CIO, next  came before                 
  committee.  He voiced opposition to portions of the bill and                 
  noted  that Mr.  Valesko reviewed  the  good portions.   Two                 
  major areas of disagreement relate to:                                       
       1.   Drastic changes to the retirement system.                          
                                                                               
       2.   Drastic changes in the geographic differential.                    
                                                                               
  Mr.  Ludwig  expressed  his  belief   that  neither  of  the                 
  foregoing are warranted.  There has been no study indicating                 
  that  state  pay  or benefits  are  out  of  line.   Present                 
  geographic differentials  result  from  a  1984  study  that                 
  measured spending patterns and how  "people bought things in                 
  the  bush and in  town and  what the  prices of  those items                 
  were."  Actual living expense differences  were highlighted.                 
  The study  showed that it  cost 38 percent  more to live  in                 
  Bethel.  The cost of living in Bethel has not gone down, yet                 
  the proposed bill would cut  the differential to 20 percent.                 
                                                                               
                                                                               
  Mr.   Ludwig   said   he   represents   state   supervisors,                 
  municipalities, school districts,  boroughs, and  university                 
  employees.  The greatest concern over lower differentials is                 
  ability to  hire  people.   The chief  probation officer  in                 
  Bethel has  serious concern whether he can  find a qualified                 
  person to fill a job when  it comes open.  He further  noted                 
  that union  jobs for  auditors are  far below  those of  the                 
  private  sector.   He  stressed that  the state  should have                 
  "just as good  an auditor that  looks over Exxon's books  as                 
  what Exxon has putting them together."   A comparison of pay                 
  and  benefits  indicates  they  are  not  comparable.    The                 
  situation is similar for engineers.                                          
                                                                               
  A decrease in  the differential will inhibit  willingness to                 
  transfer  and  injure employees  who  take transfers.   Both                 
  troopers within the Dept. of Public  Safety and staff at the                 
  Dept. of Corrections  face forced transfers.   It becomes  a                 
  hardship upon the  individual to  "take that kind  of a  pay                 
  cut."    A transfer  from Kotzebue  to  Nome would  entail a                 
                                                                               
                                                                               
  reduction from 42  percent to 22  percent.  That will  cause                 
  the state  to lose people  who would be  unable to  take the                 
  cut.                                                                         
                                                                               
  Senator  Miller   characterized  the  approach   within  the                 
  proposed bill  as much  "softer than  the Governor's  bill."                 
  Mr.  Ludwig  acknowledged  that it  is  "less  unfair."   He                 
  expressed opposition  to the  Governor's original  proposal,                 
  and indicated that both approaches would have "a devastating                 
  effect on the quality of people that you're going to be able                 
  to attract."                                                                 
                                                                               
  Senator  Rieger referenced staff attendance at pension board                 
  meetings and advised of his  understanding that state policy                 
  is to "only attempt to achieve 95 percent of full funding of                 
  the actuarial soundness of our two major pension funds."  He                 
  then asked if  that was true.   ROBERT STALNAKER again  came                 
  before committee.  He explained that a system is actuarially                 
  funded over  a certain  number of  years.  Alaska's  funding                 
  time frame is twenty-five years.   Twenty-five years is much                 
  more  conservative than 40  years and puts  more pressure on                 
  "trying  to  collect  the  money  immediately."    There  is                 
  volatility in funding a  system over time.  That  volatility                 
  means "you're going  to guess the right  way, sometimes, and                 
  you're not going  to guess the right way  other times."  The                 
  funding  ratio   will  also   be  higher   and  lower   than                 
  anticipated,  in  wave-like actions.    Managers attempt  to                 
  develop  a  process  that  removes  as  much  volatility  as                 
  possible.   The  actuary  funds at  95  percent for  several                 
  reasons.  It does an employer no good to collect 110 percent                 
  since it means  holding money  the employer could  otherwise                 
  use.  The real question is, "What's a fair target . . . over                 
  a twenty-five year period?"  The 95 percentile was selected.                 
                                                                               
                                                                               
  The reality is  that PERS is currently funded  at 96.5%.  By                 
  funding at 95 percent, the expectation is that there will be                 
  times it will approach  100 percent and other times  it will                 
  be down to 93 percent.  The end result is  that the state is                 
  collecting the  money needed to fund the  system.  Selection                 
  of 100 percent would be arbitrary because at times the level                 
  would be 105 percent, and the state would be returning money                 
  to the  employer.   At other  times the  level  would be  95                 
  percent, which "is still very well funded."                                  
                                                                               
  In his closing  comments, Mr. Stalnaker reiterated  that the                 
  target over  the long  term is 95  percent.   At that  rate,                 
  adequate moneys  are  collected  to  sufficiently  fund  the                 
  system at a rate  better than most in the nation  and at the                 
  same time give proper  deference to the employer, since  the                 
  state is not holding more moneys than needed.                                
                                                                               
  Senator Rieger voiced  his understanding  that the PERS  and                 
  TRS fund totals  $7 or $8 billion.  A 5 percent underfunding                 
                                                                               
                                                                               
  equates to $400  million.  He  said he found it  distressing                 
  that the state  is "almost  intentionally shooting for  $400                 
  less than what 100 percent would require . . . ."                            
                                                                               
  Further discussion  followed between Senator Rieger  and Mr.                 
  Stalnaker regarding fluctuation  in stock market investments                 
  and impact on  retirement systems.   Mr. Stalnaker  stressed                 
  that funding  assumptions for  the system are  conservative.                 
  He voice  his belief  that "for  the  most part  we will  be                 
  overfunding this system as we go through time."                              
                                                                               
  Additional  discussion  followed   regarding  operation   of                 
  private  pension   plans.     Mr.   Stalnaker  attested   to                 
  flexibility in private sector funding of retirement systems.                 
                                                                               
                                                                               
  Co-chairman Frank MOVED for adoption of CSSB 1003  (Fin) (9-                 
  LS1893\O).    Senator  Zharoff  OBJECTED,  saying  that   he                 
  believed  matters incorporated  within the  draft should  be                 
  handled  separately.   Senator  Donley  also OBJECTED.   Co-                 
  chairman Halford called  for a  show of hands.   The  motion                 
  carried on a  vote of 4 to 2 (Senator  Sharp was temporarily                 
  absent), and CSSB 1003 (Fin) was ADOPTED.                                    
                                                                               
  Co-chairman Frank MOVED for passage of  CSSB 1003 (Fin) with                 
  individual recommendations.  Senator  Zharoff OBJECTED.  Co-                 
  chairman Halford called  for a  show of hands.   The  motion                 
  carried  on  a vote  of  5 to  2,  and CSSB  1003  (Fin) was                 
  REPORTED OUT of  committee.   Co-chairmen Frank and  Halford                 
  and   Senators  Phillips,  Rieger,   and  Sharp  signed  the                 
  committee report with a "do  pass" recommendation.  Senators                 
  Donley  and  Zharoff  signed,  "do  not pass,  use  separate                 
  bills."                                                                      

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