Legislature(2001 - 2002)
02/14/2002 01:52 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 14, 2002
1:52 PM
TAPE HFC 02 - 26, Side A
TAPE HFC 02 - 26, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:52 PM.
MEMBERS PRESENT
Representative Eldon Mulder, Co-Chair
Representative Bill Williams, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative John Harris
Representative Ken Lancaster
Representative Jim Whitaker
MEMBERS ABSENT
Representative John Davies
Representative Bill Hudson
Representative Carl Moses
ALSO PRESENT
Linda Sylvester, Staff, Representative Kott; Ed Flanagan,
Commissioner, Department of Labor and Workforce Development;
Pam LaBolle, President, Alaska State Chamber of Commerce;
Thyes Shaub, Lobbyist, National Federation of Business;
PRESENT VIA TELECONFERENCE
Karen Rogina, ARBA, Anchorage.
SUMMARY
HB 56 An Act relating to minimum wages.
HOUSE BILL NO. 56
"An Act relating to minimum wages."
LINDA SYLVESTER, STAFF, REPRESENTATIVE KOTT testified in
support of the legislation on behalf of the sponsor. She
stated that HB 56 increases the minimum wage to a level that
will help ensure a minimum standard of living Alaska's
lowest paid workers.
Ms. Sylvester maintained that, since 1938 when the United
States established the Fair Labor Standards Act, Americans
have believed that it is appropriate for the government to
establish a minimum wage floor for workers. She asserted
that Alaska statutes were crafted to echoed that conviction.
The preamble of the Wage and Hour Act of 1959 states that:
It is the public policy of Alaska to:
(1) Establish minimum wage and overtime compensation
standards for workers at levels consistent with
their health, efficiency, and general well-being;
and
(2) Safeguard existing minimum wage and overtime
compensation standards that are adequate to maintain
the health, efficiency, and general well being of
workers against unfair competition of wage and hour
standards that do not provide adequate standards of
living.
Ms. Sylvester observed that the proposed committee
substitute for HB 56 contained the following findings:
An increase in the minimum wage will help ensure a
minimum standard of living for the health, safety, and
well being of every Alaskan.
The Legislature notes that currently, Washington,
Oregon and California have surpassed Alaska in
providing for a minimum standard of living for its
workers.
Finally, the Legislature finds that for a minimum wage
to be fair, it must be indexed to the cost of living to
help low-income workers keep pace with inflation.
Ms. Sylvester observed that HB 56 amends section 2 (a) so
that:
· Effective January 1, 2003, an employer shall pay each
employee not less than $7.15 an hour, for hours worked
in a pay period.
· As well, each year, not later than September 30, the
minimum wage shall be adjusted for inflation, effective
the following year.
· The adjustment for inflation shall be calculated at 50%
of the Consumer Price Index for Anchorage or $1.00 more
than the federal minimum wage, whichever is greater.
Ms. Sylvester explained that the original version of HB 56
would have increased the minimum wage to $6.90 in two steps.
There were three hearings on the bill, which failed to
progress beyond House Labor and Commerce Committee. An
initiative petition was subsequently circulated, which
proposed to raise the minimum wage to $7.15. The initiative
also proposed automatic future increases tied to the CPI of
Anchorage, as opposed to relying on federal or state action.
The proposed committee substitute offered by Representative
Kott reflects the language of the initiative, with the
exception that the cost of living adjustment factor is set
at 50% of the Anchorage CPI.
Ms. Sylvester emphasized that the "question of the day" is
whether or not the proposed committee substitute would be
sufficient to supplant the initiative petition. The test to
determine if a bill supplants an initiative is found in
Warren v. Boucher.
Ms. Sylvester added that Article 11, sec 4 Constitution of
the State of Alaska states:
INITIATIVE ELECTION. An initiative petition may be
filed at any time. The lieutenant governor shall
prepare a ballot title and proposition summarizing the
proposed law, and shall place them on the ballot for
the first statewide election held more than 120 days
after adjournment of the legislative session following
filing.
The Constitution also states: If, before the election,
substantially the same measure has been enacted, the
petition is void.
Alaska statute, AS 15.45.210 states:
Determination of void petition. If the lieutenant
governor, with the formal concurrence of the attorney
general determines that an act of the legislature that
is substantially the same as the proposed law was
enacted after the petition had been filed, and before
the date of the election, the petition is void and the
lieutenant governor shall notify the committee.
Ms. Sylvester explained that the test of how similar a
measure enacted by the legislature and an initiative must be
for the legislative measure to invalidate the initiative was
set out in Warren v. Boucher, 543 P.2d 731:
If the main of the legislative act achieves the same
general purpose as the initiative, if the legislative
act accomplishes that purpose by means or systems,
which are fairly comparable, then substantial
similarity exists. It is not necessary that the two
measures correspond in minor particulars, or even as to
all major features, if the subject matter is
necessarily complex or requires comprehensive
treatment. The broader the reach of the subject matter,
the more latitude must be allowed the legislature to
vary from the particular features of the initiative.
It is clear that the legislative act need not conform
to the initiative in all respects, and that the framers
intended that the legislature should have some
discretion in deciding how far the legislative act
should differ from the provisions of the initiative.
The question, of course, is how great is the permitted
variance before the legislative act becomes no longer
substantially the same.
Ms. Sylvester observed that the initiative language is not
particularly precise where it discusses the increase based
upon CPI. The initiative states that the minimum wage shall
be adjusted annually for inflation by "using the CPI-
Anchorage."
Ms. Sylvester maintained that the lack of specificity
indicates that the primary purpose is to tie the wage to
local economic changes rather than rely on keeping slightly
ahead of the federal prevailing minimum wage or upon the
Alaska State Legislature to inject a raise into the minimum
wage scale. The key element is that the minimum wage is
attached to an elevator independent of the political
process. She concluded that HB 56 is substantially the same
measure at 50% of the CPI of Anchorage.
Vice-Chair Bunde questioned if there is any indication
whether or not there would be a lawsuit [if the initiative
were suspended with enactment of HB 56.]. Ms. Sylvester
responded that there have been indicators that the sponsors
of the initiative are supportive.
Vice-Chair Bunde responded that he has heard concerns that
jobs would be lost, as smaller businesses are affected by
the increase. Ms. Sylvester acknowledged that the issue is
the dilemma of the bill. She pointed out that the preamble
of the Wage and Hour Act of Alaska instructs worker
protection. Only a small percentage of Alaskans are working
at minimum wage.
Vice-Chair Bunde maintained that workers above the minimum
wage would demand similar increases to retain their relative
position above the minimum wage. Ms. Sylvester acknowledged
that there would be some impacts on the economy since the
legislation would increase the minimum wage by 26 and a half
percent.
Vice-Chair Bunde observed that there is currently a low
inflation rate, but pointed out that the rate could be in
the double digits in the future. He questioned the impact of
double-digit inflation. Sylvester responded that if the rate
of inflation, in Anchorage, follows the same pattern as
existed through the 1990's, then there should be a one
percent increase at 50 percent of the CPI. She stressed that
the earning power of workers is being eroded by the rate of
inflation.
Vice-Chair Bunde questioned if the rate of inflation during
the 1970's had been calculated. Ms. Sylvester did not have
the inflation rates for the 1970's but recalled that there
was one year during that time with a negative inflation
rate, which would also be reflected in the minimum wage.
Representative Harris referred to the fiscal impact. He
observed that school bus drivers receive, by state law, a
minimum of two times the minimum wage. He questioned the
impact of the increase on state school transportation costs.
Ms. Sylvester noted that most of the school transportation
contracts would expire in 2006. She stated that the impact
would not be immediate. She observed that there is no
guarantee that the state of Alaska will continue to pay for
pupil transportation. She added that most school bus drivers
earn twice the minimum wage at $11.30 an hour. In Anchorage,
the maximum salary of a school bus driver is $14.90, which
is close to where the statutes would set their salary once
contracts expire.
Representative Harris asked if it would be difficult for
someone bidding on a school bus contract to calculate future
wages. Ms. Sylvester did not think it would be difficult.
She observed that the Department of Education and Early
Development seeks to encourage competition. They are
attempting to issue contracts on a five-year scale. It would
be fairly easy to predict the CPI.
Co-Chair Mulder agreed with Representative Harris and
expressed surprise that there was no fiscal note by the
Department of Education and Early Development. He asked the
sponsor to request a fiscal note from the Department of
Education and Early Development.
Co-Chair Mulder pointed out that the determination of what
is substantially similar is like "dancing on the head of a
pin". He expressed concern that the duties are regulated to
the lieutenant governor with consultation from the
Department of Law to determine what is substantially
similar. He noted that it is a statutory delegation not a
constitutional delegation. He suggested that the issue be
revisited by the Legislature to determine if it is an
appropriate abrogation, because it is not constitutionally
required that the lieutenant Governor be the determiner. He
reiterated that the Constitution states: If, before the
election, substantially the same measure has been enacted,
the petition is void. He noted that the legislature states
through statute that if the lieutenant governor, with the
formal concurrence of the attorney general determines that
an act of the legislature that is substantially similar
should be taken off. He emphasized that the legislature
should clarify the issue and set up a mechanism that is more
equitable. He maintained that it is a political football,
which becomes an inherently political decision when left in
the hands of the person that is running for governor.
Representative Whitaker stated that he is confident that the
intent is to have the substantially similar questioned
answered by an uninterested third party. He agreed that
there is no longer an uninterested third party and stated
that he would support an effort [to assure that there is an
uninterested third party].
Vice-Chair Bunde questioned if the statutory requirement for
school bus drivers should be should be continued. He stated
that he would not want to take any action that would remove
state support for transportation.
KAREN ROGINA, ALASKA RESTAURANT AND BEVERAGE ASSOCIATION,
ANCHORAGE testified in support. She explained that the
Association supports the process of directing any minimum
wage increases through the legislative process instead of
the ballot process. She maintained that HB 56 is
substantially similar to the ballot initiative. She felt
that tying the increase to the CPI was inappropriate, but
would support a 50 percent inflation index over a 100
percent inflation index. She also spoke in support of a
graduated effective date to allow employers two years to
adjust to a 26 percent mandated wage increase.
Representative Croft commented on the "substantially
similar" issue. He stressed that the Warren v. Boucher case
dealt with a huge, complex issue. He maintained that the
case noted that the more complex the issue the more
latitude. He pointed out that the [minimum wage initiative]
is a very simple case. He maintained that the point of tying
the increase to an inflation index is to keep the real
purchasing power the same. If it is indexed to half of the
rate the real purchasing power would be decreased. He did
not think that the legislation would implement the intent of
the initiative, but would deteriorate the minimum wage
slowly in terms of its buying power. He stressed that there
is a huge difference between keeping up with inflation and
not keeping up with inflation and thought a court case would
be the most likely result. He stressed that the bill would
not keep up with inflation and maintained that the
legislature must do something to keep up with inflation if
the initiative is to be kept off the ballot.
Co-Chair Mulder disagreed with the issue of complexity. He
maintained that the issue is no less complex. He
acknowledged that there are less moving parts, but
emphasized that subtle ramifications are complex. He did not
think that it would be a "slam dunk" issue. He spoke to the
issue of the lieutenant governor being the arbiter. He
stressed that a more objective analysis would be less
suspect to being political and noted that there is always
the relief or remedy of court. He stressed that if there is
concern about one person's determination that they should
look at a process that is less suspect and open to vagaries
of campaign year politics.
Vice-Chair Bunde saw negative impacts in regards to public
policy and stated that he preferred to let the people judge
the issue. He questioned if "it is better to have fewer jobs
that make two bucks an hour more or is it a case of getting
100 percent of nothing because you get a raise and loose
your job".
Representative Croft felt that the Lieutenant Governor would
take the job seriously and that the determination would be
made on the legal advise provided and the decision made on
the best estimate of the information. He did not think that
the current Lieutenant Governor or future lieutenant
governors would base their decision mainly or partially on
politics.
Representative Whitaker stated that there is no intention to
impugn the Lieutenant Governor, but to put the process above
suspicion. Co-Chair Williams agreed with Representative
Whitaker's assessment.
PAM LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE
observed that 35 percent of their members stated that they
could go with a minimum wage [as proposed by Representative
Kott], 32 percent objected and 28 percent were undecided.
Six hundred members were polled and they received 100
responses. She observed that 69 percent of the respondents
pay $8.00 an hour or more already, but noted that they are
concerned that the floor would be raised. She added that 14%
of the respondents stated that the increase would reduce
hours or jobs for part-time employees; 12% responded that it
would reduce hours for full-time employees; and 18 percent
stated that it would increase prices for products and/or
services. She stressed that there is no support for an
automatic increase of the minimum wage. She maintained that
the legislature should initiate increases.
Vice-Chair Bunde thought that cost of services would rise
with wage increases and questioned why only 18 percent of
the respondents would raise the cost of their products. Ms.
LaBolle observed that 69 percent of those surveyed already
pay beyond $8.00 per hour.
Vice-Chair Bunde concluded that there would be no net gain
because the cost of living would increase with the increase
in wages.
Representative Harris asked when the last time the minimum
wage was increased. He pointed out that inflation has
continued to increase. He noted that the federal minimum
wage has only been increased once in 20 or 25 years. He
stressed the need to consider the purchasing power of lower
wage employees. He stressed that there has to be some
responsibility to bring up the wages of lower paid workers.
Ms. LaBolle pointed out that 35 percent of those surveyed
supported Representative Kott's proposal. The strongest
opposition is to the Governor's proposal and the automatic
increase mechanism.
In response to a question by Co-Chair Williams, Ms. LaBolle
expressed her hope that the Legislature would resolve the
question as best as they can, without long term harm to the
business community. Co-Chair Williams assured her that it
was their intent to do so.
THYES SHAUB, LOBBYIST, NATIONAL FEDERATION OF INDEPENDEDNT
BUSINESS (NFIB) provided members with a Statement of
Opposition and the results of a survey (copy on file). She
noted that NFIB tends to represent business with 5 or fewer
employees. She observed that many businesses do not have the
ability to increase prices when their costs increase.
Co-Chair Mulder observed that 33 percent of the NFIB members
responding to the survey stated that a minimum wage would
result in the reduction of hours and/or jobs for full or
part-time employees. He stressed the need to proceed
cautiously.
Ms. Shaub observed that [the affect of a raise in the
minimum wage on increases to product cost] is a complex
issue and differs from business to business. She observed
that the survey showed that the largest bracket [19 percent]
of minimum wage employees were 15 - 18 years old. She
stressed that small businesses utilize minimum wage for
seasonal and entry-level employees.
ED FLANAGAN, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE
DEVELOPMENT expressed appreciation for changes in the
proposed committee substitute which more closely reflect the
Governor's original bill and the initiative. He observed
that 50,000 Alaskans signed the initiative. He noted that
most businesses must pay over the minimum wage in order to
attract workers. The only difference [between the Governor's
proposal and Representative Kott's] is the level of the CPI
He noted that the last federal raise to the minimum wage was
a two step increase: .50 cents in October 1996 to $4.75 and
a .40 cent raise in September 1, 1997 to $5.15. The Alaskan
minimum wage was increased at the same time to $5.65 [by the
end of the second year]. He noted that testimony during the
last increase predicted reductions in the food and drinking
industry jobs. Statistics show that there has been an
increase every year since the increase and reductions were
not realized. There have been four minimum wage increases in
the last 12 years.
Commissioner Flanagan observed that there was discussion
about rising the Alaskan minimum wage one dollar over the
federal minimum wage. The Alaskan minimum wage was .50 cents
over the federal minimum wage in 1959 when the federal
minimum wage was one dollar.
TAPE HFC 02 - 26, Side B
Commissioner Flanagan observed that a family of four with
one wage earner working 60 hours a week or two working a
combined amount of 60 hours a week at $7.15 an hour would
only be a few dollars over the federal poverty level.
Commissioner Flanagan observed that there has been a major
revision in how the CPI has been computed. He noted that the
increases have been less pronounced. He observed that the
CPI is being applied to the floor. He stressed that it is a
very small margin for survival. The Administration implores
the adoption of the full CPI amount.
Commissioner Flanagan summarized that Alaska's last two
raises to the minimum wage were in 1996 and 1997 ($4.75 to
$5.65). He thought that there had previously been a one-
dollar increase in two steps in 1990 and 1991.
Co-Chair Mulder pointed out that most of the increases were
at .50 increments over a five to ten year time frame. He
expressed concern with the CPI adjustment. He estimated that
the minimum wage would be doubled over the next 10 years [if
the full CPI were used]. He acknowledged the justification
of incremental increase but questioned if that is where we
need to be, to provide entry-level jobs to kids.
Commissioner Flanagan stressed that the minimum wage has
lost more ground over the last ten years then during any
period since the 1950's. There used to be federal
adjustments three times a decade, which were the result of
bipartisan efforts. Before the last increase in the mid
1990's the minimum wage adjusted for inflation proofing was
80 percent of the purchasing power that it had had: the
lowest purchasing power it had at any time. He noted that
the cost of living in Alaska has come down in relation to
other states. He observed that the perception is that the
minimum wage earner is a teenager. The low wage industry
includes cannery, childcare and food service workers. The
minimum wage in those occupations is in the late 20's and
early 30's. He maintained that even teenagers working full-
time, even if they are living at home should, make the
statutory minimum wage. He maintained that $7.15 results in
a "fairly basic" floor. He noted that the minimum wage would
be $7.79 after five years at 2 percent of the full CPI. At
one percent it would be $7.50 dollars per hour.
Co-Chair Mulder noted that the Permanent Fund utilizes a 2.9
percent inflation rate.
HB 56 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 2:55 PM
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