Legislature(2005 - 2006)BELTZ 211

03/31/2005 03:30 PM Senate STATE AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 121 STATE OF AK CAPITAL CORP.; BONDS TELECONFERENCED
Heard & Held
*+ SB 122 AMERADA HESS INCOME; CAPITAL INCOME ACCT. TELECONFERENCED
Heard & Held
*+ SB 152 APPROP: COST-OF-LIVING SURVEY TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
              SB 152-APPROP: COST-OF-LIVING SURVEY                                                                          
                                                                                                                              
CHAIR THERRIAULT announced  the first order of business  to be SB
152.                                                                                                                            
                                                                                                                              
3:37:02 PM                                                                                                                    
                                                                                                                                
AMY SEITZ,  Staff to  Senator Thomas  Wagoner, explained  that SB
152 would make  an appropriation to the Division  of Personnel to                                                               
authorize  a cost  of living  study covered  in AS  39.27.030. It                                                               
deals with  pay schedules  of state  employees not  covered under                                                               
collective  bargaining  agreements.  The most  recent  study  was                                                               
conducted  in 1985  yet statute  calls for  such a  survey to  be                                                               
undertaken  at least  once every  five years.  The sponsor  feels                                                               
it's time  to look  at the  cost of living  around the  state and                                                               
update the numbers.                                                                                                             
                                                                                                                                
Statute  provides an  adjustment to  salary schedules  for exempt                                                               
and  partially exempt  employees  based on  where  they work  and                                                               
reside.  Classified employees  receive similar  adjustments based                                                               
on collective bargaining negotiations  every three years. It's in                                                               
the best  interest of  the state  that similarly  situated public                                                               
employees are paid at the same  rate as those who are classified.                                                               
Conducting a cost  of living study based on  current costs around                                                               
the state would level the playing field.                                                                                        
                                                                                                                                
3:39:11 PM                                                                                                                    
                                                                                                                                
SENATOR  WAGONER  reflected  on the  difficulty  associated  with                                                               
having two different funding sources  when he worked at the Kenai                                                               
Community  College. One  funding  source was  the borough  school                                                               
district and the other was the University of Alaska.                                                                            
                                                                                                                                
It's important to treat state  employees fairly and equitably and                                                               
that's what this study intends to do, he said.                                                                                  
                                                                                                                                
CHAIR THERRIAULT  said he remembers  the study from 20  years ago                                                               
and it was "hard fought and painful."                                                                                           
                                                                                                                                
SENATOR  KIM ELTON  asked how  it was  determined that  the study                                                               
would cost  $500,000. Also he questioned  whether there shouldn't                                                               
be a deadline established for completing the survey.                                                                            
                                                                                                                                
SENATOR  WAGONER said  the  amount was  best  guess estimate.  He                                                               
didn't favor a deadline because  you couldn't tell when the study                                                               
might be awarded.                                                                                                               
                                                                                                                                
3:42:10 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT opened public testimony.                                                                                       
                                                                                                                                
MICHAEL GARDNER, a  state employee from Kodiak,  reported that he                                                               
has worked in  Anchorage, Bristol Bay and Kodiak  over the course                                                               
of  more  than  20  years  and can  therefore  provide  a  unique                                                               
perspective on the serious impact that  a high cost of living can                                                               
impose on a state family.                                                                                                       
                                                                                                                                
He raised  three children in  Bristol Bay  and if he  bought milk                                                               
and  bread  locally it  cost  up  to four  times  as  much as  in                                                               
Anchorage. His other option was to  use a catalog service and pay                                                               
the  Anchorage  price  plus   airfreight.  Housing  options  were                                                               
limited and cost twice as much as in Anchorage.                                                                                 
                                                                                                                                
Currently  he lives  in Kodiak  where the  cost of  food is  more                                                               
reasonable but still  far in excess of Anchorage  prices. He said                                                               
he lives off the road  system and transportation to Anchorage can                                                               
cost nearly $300 per person.                                                                                                    
                                                                                                                                
"Geographical  pay differential  is a  critical benefit  to state                                                               
employees  serving  in  rural Alaska.  In  some  instances  state                                                               
employees would be living in  substandard conditions without it,"                                                               
he said.                                                                                                                        
                                                                                                                                
3:45:06 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  drew attention to the  sheet titled "Geographic                                                               
Pay  Differential  Comparisons"  and  asked  Mr.  Chance  for  an                                                               
explanation of the numbers listed as "Outside Anchorage."                                                                       
                                                                                                                                
ART   CHANCE,  Director   of  Labor   Relations,  Department   Of                                                               
Administration,  reviewed  the  chart  and  said  he  understands                                                               
"Outside Anchorage" to  be outside the Anchorage  base in Alaska.                                                               
Anchorage and  Juneau are considered  the Alaska and have  a zero                                                               
percent  differential.  For  purposes of  the  Public  Employment                                                               
Relations Act  the law  requires that  any state  salary schedule                                                               
must reflect  the cost of  living difference between  Seattle and                                                               
Alaska. The  Alaska definition  is normally  the Anchorage/Juneau                                                               
base.                                                                                                                           
                                                                                                                                
CHAIR  THERRIAULT asked  if had  any information  on what  such a                                                               
study might cost.                                                                                                               
                                                                                                                                
MR. CHANCE  said $500,000  is realistic  and offered  the opinion                                                               
that using the  greater Puget Sound area is a  more reliable base                                                               
for comparison than Seattle proper.                                                                                             
                                                                                                                                
Implementation brings another set of cost factors, he said.                                                                     
                                                                                                                                
CHAIR  THERRIAULT   asked  whether  the  last   study  was  fully                                                               
implemented.                                                                                                                    
                                                                                                                                
MR. CHANCE answered no and  elaborated on difficulties associated                                                               
with previous studies.                                                                                                          
                                                                                                                                
SENATOR ELTON  asked if there  should be  a second section  in SB
152  to provide  for adopting  some standard  other than  Seattle                                                               
proper.  If you  do  an RFP  would your  contractor  have to  use                                                               
Seattle, he questioned.                                                                                                         
                                                                                                                                
MR.  CHANCE replied  he isn't  compelled to  do so.  He suggested                                                               
that  either the  Division  of Personnel  be  given authority  to                                                               
design  the  target  area  or  the  Legislature  should  use  its                                                               
discretion because, "It is my  belief that Seattle Washington per                                                               
se ... is going to give you a very skewed comparative," he said.                                                                
                                                                                                                                
SENATOR  ELTON  said given  what's  happened  to the  economy  in                                                               
Seattle  the committee  ought  to consider  a  change that  would                                                               
allow the study to give a base other than Seattle.                                                                              
                                                                                                                                
CHAIR THERRIAULT asked  if the purpose is to  have equal salaries                                                               
compared to the  target or to come up with  a target then compare                                                               
all the different geographic areas of the state to it.                                                                          
                                                                                                                                
MR. CHANCE replied he doesn't have  a lot of first hand knowledge                                                               
regarding when  the legislation was  implemented about  that, but                                                               
he has read  the record of the early 1980s  Blue Ribbon Committee                                                               
reports that  the PERA changes  that led  to this were  based on.                                                               
The language  in PERA clearly says  there will be cost  of living                                                               
and  wage differentials  between  Seattle and  Alaska for  Alaska                                                               
Marine  Highway  System employees.  However,  it  was applied  to                                                               
everyone subject to collective bargaining.                                                                                      
                                                                                                                                
Some  state  employees work  outside  of  Alaska and  it  becomes                                                               
fairly important  to have to  have wage adjustments  downward for                                                               
those employees.                                                                                                                
                                                                                                                                
The other  use of  establishing a certain  base is  to understand                                                               
how  we   relate  to  our   market  and  whether  or   not  we're                                                               
appropriately paying  our own employees.  We need to know  how to                                                               
translate Alaska salaries to salaries  somewhere in the Lower 48.                                                               
Seattle is no longer a realistic comparative.                                                                                   
                                                                                                                                
3:55:06 PM                                                                                                                    
                                                                                                                                
CHAIR  THERRIAULT noted  AS 39.27.030  was modified  in 1996  and                                                               
also in 2000 and he was curious what those modifications were.                                                                  
                                                                                                                                
MR. CHANCE said  the 1996 modification was made as  a result of a                                                               
suit. A judge  ruled that the state had to  conduct the study and                                                               
the state's response was to repeal the statute.                                                                                 
                                                                                                                                
CHAIR THERRIAULT announced he would set SB 152 aside.                                                                           

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