Legislature(2005 - 2006)SENATE FINANCE 532

04/25/2005 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 133 AVIATION ADVISORY BOARD TELECONFERENCED
Moved SB 133 Out of Committee
+ SB 150 ALASKA CHILDREN'S TRUST FUND GRANTS TELECONFERENCED
Moved CSSB 150(HES) Out of Committee
Bills Previously Heard/Scheduled
+= SB 151 DECOUPLING FROM FED TAX DEDUCTION TELECONFERENCED
Moved SB 151 Out of Committee
+= SB 71 NONUNION PUBLIC EMPLOYEE SALARY & BENEFIT TELECONFERENCED
Heard & Held
                                                                                                                                
     SENATE BILL NO. 71                                                                                                         
     "An  Act  relating  to  the  compensation   of  certain  public                                                            
     officials,  officers, and employees  not covered by  collective                                                            
     bargaining  agreements; and providing  for an effective  date."                                                            
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
MIKE TIBBLES,  Deputy Commissioner,  Department  of Administration,                                                             
testified in support  of the legislation. This bill  would align the                                                            
statutory pay schedule  for partially exempt and exempt employees in                                                            
the  executive,  legislative,  and  judicial  branches  with  recent                                                            
negotiated union  contract salary schedules. It is  anticipated that                                                            
"complicated issues" would arise were the bill denied.                                                                          
                                                                                                                                
Mr.  Tibbles  stated  that  the area  of  interest  is  the  process                                                            
involved  in  making State  employees  wage  adjustments:  the  wage                                                            
adjustment process  for Union employees is addressed  via collective                                                            
bargaining  negotiations and, once  an agreement is reached  at that                                                            
level, the proposed monetary  terms are submitted to the Legislature                                                            
for   approval;  partially   exempt   or  exempt   employee   salary                                                            
adjustments  are  addressed by  the  submittal of  legislation  that                                                            
would update  State wage  Statutes.  SB 71 is  the vehicle for  that                                                            
wage adjustment this year.                                                                                                      
                                                                                                                                
Mr. Tibbles  noted that due  to the fact  that partially exempt  and                                                            
exempt wage  bill proposals have not  always "moved forward",  there                                                            
is currently  an approximate  five-percent  disparity between  their                                                            
wage schedules and those  represented by collective bargaining. This                                                            
disparity would  increase further in FY 2006 and 2007  as contracted                                                            
wage implementations occur.                                                                                                     
                                                                                                                                
Mr.  Tibbles stressed  that  were  the salary  scales  of  partially                                                            
exempt or exempt employees  not brought into alignment with those of                                                            
union employees,  three issues could  arise. The first is  an equity                                                            
issue in  that all State  employee positions  are assigned  a salary                                                            
range based on  the nature and complexity of work  and the amount of                                                            
supervisory  oversight. Since State  Statutes require "like  pay for                                                            
like work", the Department's  opinion is that were SB 71 to not move                                                            
forward, a  disparity between the  two salary schedules would  occur                                                            
which would violate  "the like pay for like work"  statutory mandate                                                            
at the point "when  we get to a nine-percent difference  between the                                                            
two salary schedules".                                                                                                          
                                                                                                                                
Mr. Tibbles also shared  that difficulties have arisen in situations                                                            
where an effort was made  to "move a position laterally" in the same                                                            
range. For example,  were an exempt fiscal analyst  position to open                                                            
in the  Office of  Management and  Budget, a  collective  bargaining                                                            
fiscal  analyst employee  would  be  disinterested  in the  position                                                            
because "there  was such  a difference in  pay". This situation  has                                                            
become problematic.                                                                                                             
                                                                                                                                
9:45:52 AM                                                                                                                    
                                                                                                                                
Mr. Tibbles stated  that a second issue is that recruitment  efforts                                                            
become more  difficult as  the disparity  between the two  schedules                                                            
increases;  particularly in  the case of  recruiting professionals,                                                             
especially  as "managers and directors  are asked to do more".  Were                                                            
this "bill  to not pass, the message  being sent is that  we are not                                                            
respecting  the management that they  do perform ... in many  cases,                                                            
individuals" they supervise  would be making more money than them at                                                            
the point in time  that a nine-percent difference  in the two salary                                                            
schedules occurs.                                                                                                               
                                                                                                                                
Mr. Tibbles communicated  that the third issue is  that when a large                                                            
disparity   between  the  two  salary   schedules  is  reached,   it                                                            
discourages people  "from moving up" into management  positions. The                                                            
State  is "required  to encourage  career progression"  and, in  his                                                            
opinion, that  requirement could not  be met when it would  not take                                                            
"that many years in merit  step" increases for an individual to earn                                                            
more than  his or  her own  new supervisor.  This is  exampled  by a                                                            
situation in  which an individual  in a Range 23 Step D supervisory                                                             
position  would be earning  more than  his or her  Range 26,  Step A                                                            
supervisor.  This  situation  is reflected  in  the  "Comparison  of                                                            
Statutory   and  Supervisory   Salary  Schedules   after   bargained                                                            
increases"  chart  depicted  on page  three  of the  "Comparison  of                                                            
Statutory, Judicial and  Supervisory Salary Schedules" handout [copy                                                            
on file].                                                                                                                       
                                                                                                                                
Mr.  Tibbles  summarized  that  this bill  is  "very  important"  in                                                            
addressing  the  inequity,  recruitment,  and difficulty  in  upward                                                            
progression  issues. It would  provide a  better playing field.  The                                                            
"union  contracts have  been submitted  to the  Legislature and  are                                                            
moving  forward in  the budget  process". He  asked the Committee's                                                             
support in adjusting "the statutory schedules as well".                                                                         
                                                                                                                                
Senator Hoffman asked when  the exempt and partially exempt salaries                                                            
were  last  adjusted; specifically   the salaries  of  Alaska  Court                                                            
System employees                                                                                                                
                                                                                                                                
Mr. Tibbles  stated that the historical  wage increases for  exempt;                                                            
partially exempt;  and Court System  employees are depicted  on page                                                            
two of the aforementioned  handout. Court employees wage adjustments                                                            
are specified  in the column titled  "Wage Increases for  XJ". Their                                                            
most recent  wage  adjustments included  a two-percent  increase  in                                                            
2001 and a three-percent increase in 2002.                                                                                      
                                                                                                                                
9:46:32 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green  understood  therefore,   that,  under  the  current                                                            
system, were  a Range 10, Step "E"  or Step "F" employee  encouraged                                                            
to advance  in their career and increased  to a Range 12,  Step A or                                                            
Step  B  position,  "they  would actually   lose money"  by  such  a                                                            
promotion.                                                                                                                      
                                                                                                                                
Mr. Tibbles responded  that is possible. He also noted  that were an                                                            
employee  to move  from a classified  position  to a non-classified                                                             
position, they would be  moving from a collective bargain negotiated                                                            
schedule that  is higher than the  non-classified schedule  existing                                                            
in Statute.                                                                                                                     
                                                                                                                                
Co-Chair Green asked for  further information regarding how the Step                                                            
placement  for a person earning  the highest  step in one range  but                                                            
who is being advanced to the next range would be determined.                                                                    
                                                                                                                                
Mr. Tibbles  responded  that there  are "certain  rules that  govern                                                            
advanced step  placement". Continuing,  he noted that the  operating                                                            
procedures  in place  in the Executive  Branch  of State  government                                                            
specify  that  an individual  "can't  be  moved into  longevity  and                                                            
certain  criteria must  be met" before  one could  be placed  within                                                            
advanced   steps.  Such   things   as  "exceptional   service"   are                                                            
considerations.  He was  unfamiliar  with the  Legislative  employee                                                            
rules in this regard.                                                                                                           
                                                                                                                                
Co-Chair  Green concluded  therefore,  that this  legislation  would                                                            
serve to  make "the  smoothing much  easier" and  more aligned  with                                                            
employee  counterparts  in  non-exempt positions.  While  this  wage                                                            
issue might "have  been overlooked or intentional  in years past for                                                            
various  reasons",  this  legislation  would  serve to  correct  the                                                            
situation.  It  would  make  it "even,  equal"  and  provide  parity                                                            
amongst between the two groups of employees.                                                                                    
                                                                                                                                
9:49:12 AM                                                                                                                    
                                                                                                                                
Co-Chair Green  introduced her grandsons, Connor and  Noel Leaf, who                                                            
were visiting from Kenai.                                                                                                       
                                                                                                                                
9:49:30 AM                                                                                                                    
                                                                                                                                
CHRIS  CHRISTENSEN,  Deputy Administrative  Director,  Alaska  Court                                                            
System,  voiced  appreciation   for Court   System  employees  being                                                            
included in this Administration  sponsored legislation. Of the Court                                                            
System's  approximate   733  permanent  employees,   62  are  judges                                                            
appointed by the  Governor, 39 are magistrates, and  the majority of                                                            
the remaining  employees are  clerical in  nature. The Court  System                                                            
consumes less than two-percent  of the State's operating budget, and                                                            
even though it  is one of the smallest departments  in the Executive                                                            
branch, more  private citizens interact  with the System  on a daily                                                            
basis than any  other entity in State government with  the plausible                                                            
exception of  the University of Alaska  system. The majority  of the                                                            
private citizens with whom  the Court System's staff work with every                                                            
day are  unfamiliar  with the  workings  of the  Court System,  "are                                                            
angry  or  scared,  and  might  be  undergoing  the  most  traumatic                                                            
experience  of their  lives".  In addition,  more  than 150,000  new                                                            
cases were  filed with  the Court  System the  previous year.  While                                                            
Court employees  work hard under very stressful conditions  and most                                                            
of them work  "at a very low salary",  they are, nonetheless,  proud                                                            
of their work and believe that what they do matters.                                                                            
                                                                                                                                
Mr. Christensen  informed the Committee  that because approximately                                                             
70-percent  of  the employees  are  Range  15  or below,  the  Court                                                            
experiences  large  turnover   rates.  This,  in  turn,  results  in                                                            
management  issues.   Currently  there  is  a  50-percent   employee                                                            
turnover rate  for employees who have been with the  System for less                                                            
than  five years.  The turnover  rate in  Rural  locations, such  as                                                            
Kotzebue,  is 100 percent  for five-year or  less employees,  and at                                                            
times the turnover  has been 100-percent in one year.  One factor in                                                            
the  high Rural  turnover  is  that  the local  boroughs  or  Native                                                            
Corporations offer  higher compensation to employees  than the State                                                            
does for similar work.                                                                                                          
                                                                                                                                
Mr. Christensen  reminded  the Committee  that  the Legislature  has                                                            
historically provided non-judicial  Court employees a cost of living                                                            
adjustment  (COLA) equal to  the COLA provided  to union  employees.                                                            
When this failed  to occur in 1993, non-supervisory  Court employees                                                            
voted to  join the  IBEW union.  In 1996, the  Legislature  provided                                                            
both  union and  non-union  employees a  COLA amount  that  restored                                                            
parity. Subsequently, those  Court employees voted to de-certify the                                                            
IBEW when  the first collective  bargaining  agreement expired.  Pay                                                            
equity  rather than  working  conditions appears  to  have been  the                                                            
driving force behind the  initial vote. Currently, "the Court System                                                            
has the largest non-union shop in State government".                                                                            
                                                                                                                                
Mr. Christensen  informed the Committee  that while the salaries  of                                                            
the Alaska  Court System's judges  "were ranked first in  the nation                                                            
in 1982", today, "according  to the National Center of State Courts,                                                            
the salary  of a  Superior Court  Judge in Alaska  ranks 49th,  once                                                            
adjusted for cost of living".  This decline has occurred in a little                                                            
more than twenty  years. "The average  annual increase for  Superior                                                            
Court Judges  in other states  during the  period from 1992  to 2004                                                            
was  three-point-one  percent.  In  Alaska  it  averaged  under  one                                                            
percent which  was well under  half the rate  of inflation  … unlike                                                            
other  State   employees,  Judges   do  not  get  annual   longevity                                                            
increases".  The salary  of a  new Judge  is exactly  the same  as a                                                            
Judge with 15 years of  experience. There are no longevity increases                                                            
to compensate  for missed cost of  living adjustments. In  addition,                                                            
the  geographic  differential  (GD)  provided  to  Rural  judges  is                                                            
substantially less than  that of other State employees. For example,                                                            
a union employee in Barrow  receives a 43-percent GD and a non-union                                                            
employee receives a 31.5  percent GD. The local Superior Court Judge                                                            
receives   a  17-percent   GD.  In  addition,   Judges'   geographic                                                            
differential is  calculated only on the first $40,000  of his or her                                                            
salary.  Other State  employees' GD  is calculated  on their  entire                                                            
salary.  Due  to  the  combination   of there   being  no  longevity                                                            
increases  and a limited  GD, there  are places  in Rural Alaska  in                                                            
which the local  prosecutor or the local public defender  makes more                                                            
than the local Superior Court Judge.                                                                                            
                                                                                                                                
Mr. Christensen  stated that  this bill  would provide non-judicial                                                             
Court employees a salary  adjustment effective in FY 2006 that would                                                            
place the Court's  salary schedule  on par with the salary  schedule                                                            
approved last  year for Alaska Public  Employees Association  (APEA)                                                            
members. Nonetheless,  Court employees have lost substantial  ground                                                            
to inflation  over  the last  two decades.  Judges  would receive  a                                                            
salary  increase  equal  to  the  percentage  increase  that  SB  71                                                            
proposes  for a Range 28  Step E in the  Executive Branch,  as State                                                            
Statutes ties a Judge's salary to that Range.                                                                                   
                                                                                                                                
Mr. Christensen  observed that this increase would  improve Alaska's                                                            
judges' ranking  of 49th in the nation  to 47th place. The  increase                                                            
would be appreciated,  and by approving this bill,  "the Legislature                                                            
would send  a message that it values  Court employees as  much as it                                                            
does union  employees in  the Executive Branch  and that it  doesn't                                                            
take their  hard work for  granted." Support  of this bill  would be                                                            
appreciated.                                                                                                                    
                                                                                                                                
9:55:00 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green understood  therefore  that the  Court System  views                                                            
this legislation "as a good thing for its employees".                                                                           
                                                                                                                                
Mr. Christensen affirmed.                                                                                                       
                                                                                                                                
9:55:24 AM                                                                                                                    
                                                                                                                                
PAM VARNI,  Executive Director,  Legislative  Affairs Agency,  noted                                                            
that  in  the  1980s  and  again  in  the 1990s,   Executive  Branch                                                            
employees   received  salary  increases   that  Legislative   Branch                                                            
employees did  not. "Currently, Legislative employees'  salaries are                                                            
roughly five-percent behind  their counterparts in the Executive and                                                            
Judicial Branches with  the exception of partially exempt employees.                                                            
This bill should be passed  as a matter of fairness and to eliminate                                                            
any  suggestion  that employees  doing  similar  work  are not  paid                                                            
equally.  It is long overdue.  You want to  retain the best  and the                                                            
brightest  employees".  Numerous "employees  have been  lost to  the                                                            
Executive Branch because  they can take a position at the same range                                                            
and step and  make more money or they  accept positions at  a higher                                                            
range, and receive an additional five percent increase in pay".                                                                 
                                                                                                                                
Ms. Varni stated  that absent parity  in salary, it is difficult  to                                                            
retain   employees   such  as   attorneys,   programmers,   personal                                                            
assistants,   and   Legislative   staffers.   When   reviewing   the                                                            
Legislative  budget, "the drain" of  long-term Legislative  staff is                                                            
noticeable  as the number of Legislative  staff receiving  longevity                                                            
Step increases  is decreasing. In addition to this,  the Legislative                                                            
Affairs Agency is experiencing  difficulty in recruiting Legislative                                                            
Information  Office (LIO) teleconference  moderators in Rural  areas                                                            
as the "private sector  wages are higher". It is difficult for staff                                                            
at the lower  Range levels  "to keep up with  cost of living".  Wage                                                            
adjustments  are not keeping  pace with the  cost of living.  In the                                                            
15-year  period from  1988  to 2003,  the Anchorage  Consumer  Price                                                            
Index (CPI) increased 49.89-percent  while Legislative pay increased                                                            
14.72-percent:   a  difference   of   35.08-percent.   "This  is   a                                                            
significant  difference". When comparing  Alaska's Legislative  wage                                                            
increases for the past  five years to other state's it is found that                                                            
in contrast to Alaska's  five percent increase, New Mexico increased                                                            
14.5-percent,  Louisiana  increased  30-percent,  Indiana  increased                                                            
12.7-percent,  Virginia  increased  11.8-percent,  and Rhode  Island                                                            
increased 12.3-percent.                                                                                                         
                                                                                                                                
Ms. Varni  thanked  the Committee  for  their attention,  and,  as a                                                            
manager and  personnel officer, she  urged for passage of  this bill                                                            
in order "to make  wages fair and equitable to all  employees in the                                                            
Legislative branch".                                                                                                            
                                                                                                                                
Co-Chair  Wilken noted that,  regardless  of political affiliation,                                                             
over the years, Administrations  have "struggled" in their search to                                                            
find individuals  to fill commissioner positions.  Extended searches                                                            
have occurred  and oftentimes,  the people  filling those  positions                                                            
"have the financial  means" that allow them to fulfill  their public                                                            
service. This  is a re-occurring situation every election  cycle. To                                                            
that point, he  asked whether this bill would be the  avenue through                                                            
which commissioner salaries could be addressed.                                                                                 
                                                                                                                                
9:59:12 AM                                                                                                                    
                                                                                                                                
Mr. Tibbles replied  that the salaries of commissioners  "are unique                                                            
because  they are  tied  to a  range  and a  step". That  creates  a                                                            
situation  in which  the salaries  are  frozen. As  a result,  other                                                            
employees' salaries could  increase beyond that of the Commissioner.                                                            
He noted  however,  that people  serve the  state for  a variety  of                                                            
reasons: some of them "are  financially able" to accept the position                                                            
at  a lower  salary  than  they would  make  in  other professions.                                                             
Generally;  however,  this is  a concern.  There  were three  acting                                                            
commissioners  this year. He shared that a number  of the applicants                                                            
would  be taking  a pay  cut from  their current  job  were they  to                                                            
become commissioner.                                                                                                            
                                                                                                                                
Co-Chair Green  asked whether the applicants who would  have taken a                                                            
pay reduction were existing State employees.                                                                                    
                                                                                                                                
Mr. Tibbles  affirmed  that a number  of the  applicants were  State                                                            
employees who  would have received less compensation  had they taken                                                            
a commissioner position.                                                                                                        
                                                                                                                                
10:00:32 AM                                                                                                                   
                                                                                                                                
Co-Chair  Wilken suggested  that the  commissioner  salary issue  be                                                            
addressed in this  legislation. Doing so could assist  in making the                                                            
process of hiring a commissioner  easier for the next governor. Such                                                            
conditions  as  implementing  a salary  upgrade  effective  date  to                                                            
coincide with the seating  of the next governor could be considered.                                                            
                                                                                                                                
Co-Chair  Green  noted  that  action  eliminating   the statutorily                                                             
specified salary  range and allowing  the position to be  subject to                                                            
the range and step process could also be considered.                                                                            
                                                                                                                                
Mr. Tibbles opined that  a simple solution would be to eliminate the                                                            
Step "E" designation and  simply include the Range 28 designation in                                                            
Statute.  This would allow  the commissioner  salary to move  up the                                                            
steps in the same manner that other State employees do.                                                                         
                                                                                                                                
Co-Chair Green  asked whether the  Range 28 Step "E" designation  is                                                            
frozen at its  original level or would  increase in line  with other                                                            
State salary increases.                                                                                                         
                                                                                                                                
Mr. Tibbles  verified that it increases  with the State's  statutory                                                            
schedules.                                                                                                                      
                                                                                                                                
Co-Chair  Green asked  for confirmation  that  the salary  currently                                                            
increases in that manner.                                                                                                       
                                                                                                                                
Mr. Tibbles affirmed.                                                                                                           
                                                                                                                                
Co-Chair Green  stated that further  work on this legislation  would                                                            
be conducted.                                                                                                                   
                                                                                                                                
The bill was HELD in Committee.                                                                                                 

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