Legislature(2009 - 2010)BELTZ 211

03/17/2009 01:30 PM Senate LABOR & COMMERCE

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02:12:08 PM Start
02:13:35 PM SB106
03:02:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
        SB 106-REJECT RECOMMENDATION OF COMP. COMMISSION                                                                    
2:13:35 PM                                                                                                                    
CHAIR PASKVAN announced SB 106 to be up for consideration.                                                                      
SENATOR  BUNDE, sponsor  of  SB 106,  introduced  his aide,  Jane                                                               
Alberts, "to fill in any of the blanks" that he might draw.                                                                     
He then explained  that this bill was introduced not  to cast any                                                               
judgment on the findings of  the salary commission, but rather to                                                               
allow an opportunity for public  debate, discussion and a vote by                                                               
the  legislature on  this issue.  Good arguments  can be  made on                                                               
both sides  of this issue and  without this bill, the  pay raises                                                               
would go into effect without any discussion at all.                                                                             
He added that  the Commission was established  by the legislature                                                               
on a strong  positive vote. When he voted for  it, he didn't mean                                                               
that  the legislature  wouldn't have  any  input, and  this is  a                                                               
vehicle for that.                                                                                                               
2:16:51 PM                                                                                                                    
JANE ALBERTS, staff to Senator  Bunde, said since they were short                                                               
on time she would simply answer questions.                                                                                      
Seeing  no  questions,  CHAIR  PASKVAN  invited  Mr.  Halford  to                                                               
2:17:18 PM                                                                                                                    
RICK  HALFORD,  Chairman,   Alaska  State  Officers  Compensation                                                               
Commission,  said  he  was  glad   to  be  here  to  explain  its                                                               
recommendations.  He  agreed  that  the  debate  and  process  is                                                               
worthwhile, but the process of  not reaching a solution which has                                                               
occurred over  the last  20 years  hasn't worked.  The Commission                                                               
didn't  have the  opportunity to  set  up the  rules it  operated                                                               
under. He  was asked to  join it, and part  of the reason  he was                                                               
willing to do that is because:                                                                                                  
     Frankly, I  felt a little  bit guilty about  being here                                                                    
     all  those years,  and not  being  a part  of a  better                                                                    
     compensation  package for  legislators.  I  was one  of                                                                    
     those  who were  fortunate  enough to  have a  seasonal                                                                    
     self employment income, and I  was able to make it work                                                                    
     for  me. But  a lot  of people  weren't. And  a lot  of                                                                    
     people who  gained by experience and  could have stayed                                                                    
     didn't stay and some people  who could have run, didn't                                                                    
     So, I  was willing  to take on  the task  of addressing                                                                    
     this, but the Commission  was a wonderful commission in                                                                    
     that we had Gordon Harrison  who has a great reputation                                                                    
     here in  Juneau, wrote the  book on the  explanation of                                                                    
     the Constitution,  an author  who was  the head  of the                                                                    
     legislative research arm for a  while. We had Rick Cook                                                                    
     who is the city manager  of Kenai, Tom McGrath who owns                                                                    
     the  Frigid North,  the big  electronics wholesaler  in                                                                    
     Anchorage,  and we  had  former  Senate President  Mike                                                                    
     Miller  who   had  also   served  as   commissioner  of                                                                    
     Administration. So,  we had  a group  of people  that I                                                                    
     think were very well  experienced in the private sector                                                                    
     and in the public sector.                                                                                                  
     And  about the  first  thing  we did  is  we adopted  a                                                                    
     policy that we were not  going to do anything unless we                                                                    
     had unanimous  consent. Because this  is an  issue that                                                                    
     has  been  divisive  in  the  past,  we  did  not  want                                                                    
     anything that  we couldn't all wholeheartedly  agree to                                                                    
     be our recommendation.                                                                                                     
     We  had a  very  short  timeline; we  came  out with  a                                                                    
     recommendation that  included the  governor, lieutenant                                                                    
     governor,  commissioners and  the  legislature. We  met                                                                    
     the  requirement for  the timing  and the  hearings and                                                                    
     the process  to deliver it,  but just barely. We,  as a                                                                    
     matter  of  fact,  asked  for  the  Attorney  General's                                                                    
     advice to make  sure that we could meet it,  and do all                                                                    
     the  things that  we  had  to do.  But,  I believe  the                                                                    
     recommendation  is very,  very reasonable.  As a  final                                                                    
     recommendation  -  you know  that  we  dropped out  the                                                                    
     governor and  lieutenant governor  and the  major piece                                                                    
     remaining  is  the  legislative pay  equalization.  But                                                                    
     what it  does is it  takes out  the out of  session per                                                                    
     diem  that  people  took  in  their  homes  on  a  very                                                                    
     differential basis  and it sets  the salary  at $50,400                                                                    
     per year.                                                                                                                  
2:20:45 PM                                                                                                                    
MR.  HALFORD said  that Alaskans  want  citizen legislators,  but                                                               
expectations with regard  to conflict of interest  make it harder                                                               
and harder  for people to have  other work to be  able to support                                                               
their families and  be able to participate in  this process. It's                                                               
very  difficult to  live  on $24,000  per year  and  deal with  a                                                               
family's needs.  This is a  minimum step in the  right direction.                                                               
It is  unanimously supported  by the  commission, and  it doesn't                                                               
take effect until next year. He stated:                                                                                         
     I believe  that you are  the board of directors  of one                                                                    
     of  the greatest  natural resource  corporations -  and                                                                    
     human resource corporations - on  earth. I believe that                                                                    
     you sit  across the  table from  some of  the toughest,                                                                    
     single-minded,  well-educated,   well-funded  interests                                                                    
     who come for our resources  or for our interest, and it                                                                    
     doesn't  matter  whether  they are  a  national  health                                                                    
     corporation  or a  national resource  corporation. They                                                                    
     have phenomenal  resources at  their disposal  in these                                                                    
     negotiations.  You  have  to   go  to  consultants  for                                                                    
     information who  are often looking  for their  next job                                                                    
     from the  opposite side of  the table. You have  a very                                                                    
     tough job and you are worth it.                                                                                            
     I  wish  we   could  have  come  up   with  a  stronger                                                                    
     recommendation for  a better compensation  package, and                                                                    
     in the  future we may. But  for the short term  I think                                                                    
     it's a  strong step in  the right direction.  Again, it                                                                    
     gets away  from the questions  that the public  has had                                                                    
     about  how the  in-district  per diem  was  taken on  a                                                                    
     differential basis  by individuals, and that  was often                                                                    
     based  on  what they  felt  they  could establish  with                                                                    
     their constituency regardless  of whether they actually                                                                    
     spent the  time working. Often people  were not willing                                                                    
     to  take per  diem that  they were  really due  because                                                                    
     they didn't  think their constituency  would appreciate                                                                    
CHAIR  PASKVAN asked  him  to  explain the  range  of wages  they                                                               
considered, so  people understand  the thought process  they went                                                               
2:23:40 PM                                                                                                                    
MR.  HALFORD  introduced Micki  Neal,  staff  to the  Commission,                                                               
being  the  director of  personnel,  who  did "a  wonderful  job"                                                               
gathering  information onto  a website.  It now  has a  wealth of                                                               
information  including projections  based  on cost  of living  to                                                               
other  states.  He  explained  the  legislature  doesn't  get  to                                                               
approve contracts.                                                                                                              
SENATOR BUNDE reiterated that bill is  not a criticism of his and                                                               
their work, but rather a necessary dialogue.                                                                                    
2:26:44 PM                                                                                                                    
MR. HALFORD reiterated  that on one hand Alaskans  have very high                                                               
expectations with regard to conflict  of interest and that's very                                                               
difficult for people to deal with.  "On the other hand, we assume                                                               
that legislative sessions  are 90 or 120 days when,  in fact, the                                                               
record  in  recent  years,  when you  add  special  sessions  and                                                               
everything  else, is  more than  a half-a-year  when you  add the                                                               
time to get ready. Every  legislator is continuously available to                                                               
his  constituency. So  the legislative  jobs  are not  90 or  120                                                               
days;  they are  long-term  jobs. The  time  requirement is  much                                                               
higher than people understand it to be.                                                                                         
He  said the  Commission looked  back  at the  salary of  Supreme                                                               
Court judges that  used to be tied the  salaries of commissioners                                                               
for the first 15  years of statehood when it was  hard to get the                                                               
very best commissioners.  If those two were  still tied together,                                                               
commissioners  would  be  paid something  like  $165,000  a  year                                                               
A good long  term goal might be after the  next election to start                                                               
with the  governor's salary  and use the  75th percentile  of the                                                               
governor's  of the  nation, and  then pay  the commissioners  and                                                               
lieutenant  governor at  a percentage  of the  governor's salary.                                                               
You  would   pay  the   legislature  at   a  percentage   of  the                                                               
commissioners' salary and  base that percentage on  what the work                                                               
commitment  of the  legislature really  is. An  integrated system                                                               
that pays those who are in  public office at a reasonable rate so                                                               
that you can  keep the best quality people  involved is important                                                               
and should be one of the long-term goals.                                                                                       
CHAIR PASKVAN  said the  report addressed  the legislature  as an                                                               
equal branch of government and asked him to expand on that.                                                                     
2:29:57 PM                                                                                                                    
MR.  HALFORD  said the  Commission  was  set  up with  a  limited                                                               
purview; the  effective date  of what  they did  was in  the law.                                                               
They  had rules  to follow  that said  they covered  only certain                                                               
elected or  top-appointed officials. There  were a lot  of parity                                                               
questions. However,  he felt  the legislative  branch has  lost a                                                               
lot of ground in  that balance in a number of  ways over the last                                                               
few years -  in the staff is paid, legislators,  in the shortness                                                               
of the sessions, their inability to  set their own agenda and the                                                               
continuous special  sessions that  are set by  the agenda  of the                                                               
2:32:10 PM                                                                                                                    
PAM VARNI,  Executive Director, Legislative Affairs  Agency, said                                                               
she  and Karla  Schofield, Deputy  Director, Legislative  Affairs                                                               
Agency, prepared the  fiscal note for SB 106.  She explained that                                                               
legislators' salaries  used to  be tied  to a  range 10,  and now                                                               
they are equivalent to a range  5. When state employees receive a                                                               
3 percent  cost of  living increase  on July 1  of this  year, it                                                               
will be entirely off of the salary schedule.                                                                                    
She said  in 2006, the Council  of State Governments did  a trend                                                               
analysis  of state  legislators' compensation  from 1975  to 2005                                                               
with the CPI  adjusted, and Alaska had one of  the largest salary                                                               
decreases in real  dollars at a minus 55.94 percent.  A full year                                                               
of the new  compensation package is an increase  of $1.2 million.                                                               
That increase is  split between two years in the  fiscal note. So                                                               
for FY10 it's  an increase of $833,600, and for  FY11 - $383,600.                                                               
This eliminates  a total  of $810,000 for  interim per  diem over                                                               
that two-year period.  She said some other  efficiencies would be                                                               
realized  in  legislators'  and legislative  staff  time  by  not                                                               
having  to  fill out  the  interim  per  diem  forms and  by  the                                                               
accounting section not having to process them.                                                                                  
2:33:57 PM                                                                                                                    
SENATOR  BUNDE   said  it  appears   to  him  that   Juneau  area                                                               
legislators receive  another per diem  for every day they  are in                                                               
session and it appears to  him that they're getting an additional                                                               
salary. Why do they get that for living in their own homes?                                                                     
MS. VARNI  explained that  issue came  up quite  a few  years ago                                                               
when  it was  decided that  Juneau legislators  would receive  75                                                               
percent of what  the other 57 members get, but  they are taxed on                                                               
it; whereas if you live more  than 50 miles from the capital like                                                               
the other  57 legislators  do, you qualify  for that  session per                                                               
diem -  so they  can pay  their mortgages back  home and  pay for                                                               
their rent here.  That was a Legislative Council  decision and it                                                               
could be reversed.                                                                                                              
2:37:43 PM                                                                                                                    
CHAIR PASKVAN called an at ease at 2:37.                                                                                        
2:41:29 PM                                                                                                                    
He called the meeting back to order at 2:41.                                                                                    
2:41:53 PM                                                                                                                    
CHAIR PASKVAN announced  an at ease at 2:41  because of technical                                                               
difficulties and to move to another committee room.                                                                             
2:49:25 PM                                                                                                                    
He called the meeting back to order at 2:49.                                                                                    
JASON  BRUNE, Executive  Director,  Resource Development  Council                                                               
(RDC), opposed SB 106. Currently  Alaskan legislators are grossly                                                               
underpaid, he  said. "The fact  that legislators  are compensated                                                               
at levels  below their lowest  staff member is appalling."  It is                                                               
difficult  for legislators  to  find  and have  a  job  or to  be                                                               
reliable  employees outside  of the  legislature especially  with                                                               
the number of special sessions  that have been held. Furthermore,                                                               
he said,  the common denominator  for the legislators in  jail is                                                               
money, and not much of it.                                                                                                      
The current  system in Alaska  allows only for  the independently                                                               
wealthy,  retirees or  people who  are willing  to live  in their                                                               
offices   and  eat   ramen  noodles.   Alaska  relies   upon  the                                                               
responsible development of its natural  resources as a foundation                                                               
of  its  economy.  Decisions  made  by  the  legislature  have  a                                                               
significant  financial  impact on  corporations  as  well as  the                                                               
state's citizens,  and it  should be imperative  to lure  more of                                                               
the best and brightest to Juneau.                                                                                               
2:53:15 PM                                                                                                                    
SENATOR  BUNDE pointed  out that  the proposed  pay increase  for                                                               
some  legislators that  claim per  diem would  actually be  a pay                                                               
decrease for other legislators who didn't claim any.                                                                            
MR. BRUNE agreed,  but he added that  he is happy that  this is a                                                               
start in the right direction, though.                                                                                           
2:55:01 PM                                                                                                                    
KATE  GIARD,  Commissioner,  Regulatory  Commissioner  of  Alaska                                                               
(RCA), opposed SB 106. RCA  commissioners are not impacted by the                                                               
decisions  of  the  Compensation  Commission.  While  she  didn't                                                               
agreed  with  the  language  of Senator  Bunde's  bill,  it  does                                                               
provide an important public forum  for this discussion within the                                                               
legislative arena,  and she is  grateful for this  discussion. In                                                               
her eyes there is no replacement  for a public hearing before the                                                               
Alaska  legislature.  In  matters related  to  compensation,  the                                                               
highest degree  of public participation  will provide  the Alaska                                                               
legislature with the highest degree  of integrity in any decision                                                               
to   take   action  or   not   on   any  Compensation   Committee                                                               
MS. GIARD said she wanted to  talk about public trust in a system                                                               
with  internal  controls. Both  of  these  strongly indicate  the                                                               
elimination of  long-term per  diem is and  must be  completed as                                                               
soon as possible.                                                                                                               
As  a state  regulator and  former  CFO for  the Municipality  of                                                               
Anchorage and past internal auditor  for the school district, she                                                               
knows that a system of internal  controls in the public sector is                                                               
essential to insure  that the public can  trust elected officials                                                               
and  its  public institutions.  On  page  6 of  the  Commission's                                                               
report  beginning  with  the   word  "Disparity"  the  Commission                                                               
generally  describes  a few  possible  reasons  for the  apparent                                                               
difference in  the use of  long-term per  diem by members  of the                                                               
Alaska  legislature, including  striking  inequities  in the  how                                                               
legislative per diem is viewed.                                                                                                 
She  said,  "The   long-term  per  diem  system   is  absent  any                                                               
meaningful internal control,  and I don't know if it  can even be                                                               
audited in  any real  sense." To qualify  for long-term  per diem                                                               
the legislator  must attend a  meeting for legislative  or public                                                               
purpose  or  spend  four  hours  on  legislative  or  constituent                                                               
business. Little documentation is  required and opportunities for                                                               
third-party  verification are  few. In  2007, based  on the  2007                                                               
legislative  salary and  business expense  report, long  term per                                                               
diem  exceeded $650,000.  She knew  of  no other  place in  state                                                               
government  where the  internal controls  over an  expenditure of                                                               
that much money was so weak.                                                                                                    
After reading  the history of the  legislature's compensation she                                                               
found and acknowledges  that long-term per diem  resulted from an                                                               
inability  of   past  legislators  to   appropriately  compensate                                                               
members  for  their public  service.  Based  on that  history,  a                                                               
legislator is  encouraged to view  long-term per diem as  part of                                                               
the overall compensation package. The  fact of the matter is that                                                               
being an elected  representative is a year-round  duty, and there                                                               
is  a  remarkable inequity  in  the  use  of long-term  per  diem                                                               
between  legislators  that does  not  reflect  the difference  in                                                               
demands, but rather in their  personal feelings about billing per                                                               
diem.  Thus the  long-term per  diem as  a substitute  system for                                                               
compensation  has   failed  miserably   to  recognize   the  work                                                               
contribution of Alaska legislators. The  system is broken; it has                                                               
little  to no  internal controls  or uniformity  in applications,                                                               
and, therefore it can't engender  public trust. Replacing the per                                                               
diem  system  with a  straight  salary  provides a  far  improved                                                               
system  of internal  controls and  eliminates the  very troubling                                                               
aspects of public service provided by our elected officials.                                                                    
MS.  GIARD   said  she  didn't  think   this  legislature  should                                                               
interfere in any way with  the immediate elimination of long-term                                                               
per diem, which is contemplated  by the Compensation Commission's                                                               
recommendations. Her  other thoughts on  the report  are included                                                               
in the records that are maintained on the Commission's website.                                                                 
3:01:24 PM                                                                                                                    
CHAIR PASKVAN thanked her, and  closed public testimony. He noted                                                               
that he would hold SB 106.                                                                                                      
SENATOR BUNDE wrapped up that  more money doesn't produce ethical                                                               
legislators, but possibly a larger talent pool that would.                                                                      

Document Name Date/Time Subjects
SB 106 Bill Packet.pdf SL&C 3/17/2009 1:30:00 PM
SB 106