Legislature(2015 - 2016)HOUSE FINANCE 519
03/14/2016 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Administrative Contracts: by Sheldon Fisher, Commissioner, Department of Administration | |
| Legal Opinion: Legislature's Legal Options Concerning Public Employee Collective Bargaining Agreements: by Dan Wayne, Attorney, Legislative Legal Services | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 14, 2016
1:32 p.m.
1:32:31 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:32 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg (Via Teleconference)
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Leslie Ridle, Deputy Commissioner, Department of
Administration; Kate Sheehan, Director, Division of
Personnel; Representative Lora Reinbold.
PRESENT VIA TELECONFERENCE
Dan Wayne, Attorney, Legislative Legal Services.
SUMMARY
ADMINISTRATIVE CONTRACTS: BY SHELDON FISHER, COMMISSIONER,
DEPARTMENT OF ADMINISTRATION
LEGAL OPINION: LEGISLATURE'S LEGAL OPTIONS CONCERNING
PUBLIC EMPLOYEE COLLECTIVE BARGAINING AGREEMENTS: BY DAN
WAYNE, ATTORNEY, LEGISLATIVE LEGAL SERVICES
Co-Chair Thompson reviewed the agenda for the day. He asked
that cell phones be turned off or silenced.
^ADMINISTRATIVE CONTRACTS: BY SHELDON FISHER, COMMISSIONER,
DEPARTMENT OF ADMINISTRATION
1:34:11 PM
LESLIE RIDLE, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, introduced the PowerPoint Presentation:
"Understanding Labor Contracts." She turned to slide 2:
"Bargaining 101":
· Negotiations are mandated by the Public Employment
Relations Act (PERA) AS 23.40.070-23.40.250.
· The State begins bargaining successor agreements
between October and December; start date may be
accelerated if both parties agree.
· Wages, hours and other terms and conditions of
employment are mandatory subjects of bargaining.
· The State may, but is not required to, negotiate
permissive subjects of bargaining.
o Classification, retiree benefits, representation of
non-permanent employees
· Monetary terms must be approved by the Legislature.
o Provided that monetary terms of agreements are
submitted to the Legislature by the 60th day, PERA
requires legislative session consideration during
that calendar year.
o If rejected by the Legislature, then it is as if
there is no agreement. The parties must renegotiate
to impasse or agreement.
· If negotiations do not lead to agreement and mediation
fails, employees have the right to strike.
o Exception: protective service personnel do not have
the right to strike but must enter binding
arbitration after impasse.
· Employees who are on strike do not get paid, but may
not be terminated because they choose to lawfully
strike.
· Striking employees may be replaced - either
temporarily for the duration of the strike, or
permanently under certain circumstances
Representative Gattis asked if the Department of
Administration (DOA) had a fiscal goal in mind when
negotiating. She suggested that the legislature's role was
to approve an appropriation. She wondered if the department
had any specific guidelines from the legislature.
Ms. Ridle responded that what Representative Gattis
suggested was partially true. However, the department
looked at several factors including the price of oil,
budget circumstances, layoffs, and the economy. Although
the goal was not tied to a specific number, the department
took into considerations the economic climate of the state
as well as the history of union contracts.
Representative Gattis responded that it helped her at any
other time except presently. She struggled with looking at
what had been done before and the current circumstances.
She thought there was not enough information for DOA to do
the will of the legislature. Ms. Ridle stated that the
department had finished three contracts that were all zero
and had furloughs attached to them. The administration had
heard from the legislature and the public of the need to
tighten the state's belts.
1:39:07 PM
Ms. Ridle turned to slide 3: "Monetary Terms." She
explained that slide listed the different bargaining groups
and the types of monetary terms that units might have.
Sometimes units had different needs based on the job
performed for the state.
Co-Chair Thompson announced that Representative Pruitt had
joined the meeting.
Representative Wilson asked about the STEP advancement
listed for the Vocational Education schools and wondered if
the increase was automatic in all the other contracts. Ms.
Ridle answered that for example the marine units did not
have merit increases and pay increments. Shae asked Kate
Sheehan to comment further.
KATE SHEEHAN, DIRECTOR, DIVISION OF PERSONNEL, DEPARTMENT
OF ADMINISTRATION replied that what the department had done
was listed some things unique to different contracts. She
furthered that the vocational technical center teachers had
a different pay plan similar to a teacher's salary rather
than the merit and pay increments for most of the other
contracts. They were listed because they were slightly
different. She noted that there were merit and pay
increments in all of the units with the exception of the
marine units.
Representative Wilson asked if they were both unique to
each other but not everything that had to be negotiated on
the sheet. Ms. Sheehan responded that she was correct.
Representative Gattis thought that the merit and pay
increments were in fact pay raises. She struggled with
justifying giving raises when the state was ratcheting back
in several areas. Raises were built into the contracts and
therefore not zero. She would allow the department to
continue with its presentation.
Ms. Ridle continued to slide 4: "Range of Options to Reach
Resolution." She indicated that the slide was a visual aide
to show what could happen in a negotiation. She pointed to
the left side of the slide. If an agreement could not be
made, the department would declare impasse. After a last
best offer DOA could implement a contract on the union,
although the state did not exercise the option frequently.
She was unaware of any in the recent past. The department
tended to obtain agreements but, it was an option. She
highlighted the middle of the slide. She relayed that if
both sides could not come to an agreement the department
could arbitrate. There were two kinds of arbitration. The
first was interest arbitration where the baby was split.
The second was baseball arbitration where the arbitrator
chose one side or the other. The department's goal was to
negotiate and settle with a union so that both sides came
to an agreement.
Ms. Ridle pointed to slide 5: "Bargaining Unit (BU)
Detail." She relayed that the slide showed where the
department was in negotiations with the bargaining units.
She reported that the department was still in negotiations
with Labor, Trades, and Crafts, Local 71 and with the
Supervisors' Union of Alaska Public Employees Association
(APEA). The Department of Administration had finished
negotiations with the Teachers Education Association of
Mount Edgecumbe (TEAME), Alaska State Employees Association
(ASEA) GGU, and finished the Confidential Employees
Association (CEA) the previous Friday. It would be
delivered to the legislature within 10 days as designated
in statute.
Co-Chair Thompson directed Ms. Ridle to review the acronyms
she was using. Ms. Ridle clarified that LTC stood for Labor
Trades and Crafts: SU stood for the Supervisors' Union:
TEAME stood for the Teachers at Mount Edgecumbe school in
Sitka: ASEA GU stood for the Alaska State Employees
Association Government Unit: CEA stood for the Confidential
Employees Association.
Ms. Ridle detailed that usually the same terms as the SU
were used for the non-covered employees. She reported that
the department had not yet come to an agreement with the
Supervisor's Unit. She suggested that if the units she had
reviewed were added together they equaled about 87 percent
of the state's employees. It had been a big year for
negotiations for DOA. She noted that in the coming fall the
department would be in negotiations with 5 bargaining units
including Alaska Vocational Technical Center Teachers
(AVTECTA), the Public Safety Employees Association (PSEA),
the Inlandboatmen's Union of the Pacific (IBU), the Marine
Engineers Beneficial Association (MEBA), and Masters,
Mates, and Pilots (MMP). The Alaska Correctional Officers
Association (ACOA) would be in negotiations afterwards.
Co-Chair Thompson acknowledged that Co-Chair Neuman had
joined the meeting.
1:44:33 PM
Co-Chair Neuman asked about how negotiations were set up.
It was laid out by the legislature not to provide for a
wage increase. He wondered if the department communicated
the will of the legislature to the unions prior to the
official negotiations. Ms. Ridle responded in the
affirmative. She explained that the department talked with
the unions frequently. She furthered that the three unions
representing the Alaska Marine Highway system did not have
merit and pay increments. Their only raises had been
through the Cost of Living Adjustment (COLA) and they had
different leave arrangements and shift schedules. The
department also met internally.
Co-Chair Neuman asked about the University employees. He
wondered who negotiated on their behalf and queried the
number of employees. Ms. Ridle stated that the university
handled its own negotiations. She did not know the
university's number of employees.
Co-Chair Neuman asked if the president or the board of
regents did the negotiating. Ms. Ridle thought it was
through the president's office. She offered to find out for
the committee.
Representative Gara realized Ms. Ridle had testified that
in the last round of negotiations for the most recent
contracts employees agreed to not receiving raises for the
following 3 years recognizing the fiscal situation. He
wondered if the employees had a right to strike. Ms. Ridle
responded that they did have the right to strike with the
exception of Public Safety Employees.
Representative Gara did not think the union would be trying
to negotiate additional raises given the fiscal situation.
He reported that often contracts looked similar between the
unions.
1:48:32 PM
Representative Gattis commented that in the contract
negotiations there was a portion called "pay raises" and
another portion referred to as "step increases." She
reported that the folks in her district thought that if
there was more money in a person's next pay check, it
constituted a pay raise. They did not care what it was
called. She furthered that if the state was paying more
money, it meant it was spending more. She thought it was
important to discuss step increments that equated to pay
raises based on longevity. She hoped Ms. Ridle would let
the legislature know how much the state would be spending
and about the corresponding increases. She also asked if
the state had ever frozen merit increases and pay
increments. Ms. Sheehan did not believe that the state had.
In 2008 pay increments were implemented in statute and
through bargaining. Prior to that there were service steps
and longevity that looked slightly different. The steps
ended at "M" step and there were various years in between.
She reiterated that to her knowledge the state had not
frozen merit or pay increments.
Representative Gattis asked how the legislature would go
about not paying the increments. She wondered if
legislation would be necessary. Ms. Sheehan confirmed that
for partially exempt employees pay increments and merit
steps were in statute.
Ms. Ridle moved to slide 6: "Negotiating framework: Cash
compensation." She explained the slide showed a typical
range 16 GGU employee hired in 2004 through 2015. Across
the employee base the high income professional employee
salaries tended to be below market such as doctors,
lawyers, and investment professionals. New employees also
tended to be below market when hired. The low income
employees started to be compensated a little higher above
market. The tenured employees also tended to be above as
they moved out on the steps. She pointed to the box on the
left of the slide. It indicated that merit increases
happened within the first through fifth year at 3.5 percent
per year. The person had to receive an acceptable
evaluation. Pay increments occurred from the fifth year and
beyond. The increment happened every other year and was a
3.25 percent increase for the remainder of their
employment.
Representative Wilson asked whether within her first 5
years of service she would have received an increase of
over 15 percent. Ms. Ridle answered that an employee
received an increase of approximately 3.5 percent each
year.
1:53:22 PM
Representative Wilson assumed that, because the steps for
the partially exempt were already in statute, the contracts
currently being negotiated included step increases
negotiated by the department rather than the legislature.
Ms. Ridle responded in the affirmative.
Representative Wilson asked if the steps were the same for
each bargaining unit. Ms. Sheehan stated that the steps
were generally the same. They were slightly different for
some bargaining units. Some units had a 3.75 percent merit
increase while others had a 3.25 percent increase. The
increment average was 3.5 percent.
Representative Wilson stated that although they were
referred to as merit increases they were given as long as
an employee was employed. She asked if she was correct. Ms.
Ridle answered that an employee would have to receive
acceptable or better on their evaluation. If an employee
was given an unacceptable evaluation ranking they could be
denied a merit increase.
Vice-Chair Saddler asked for the percentage of those
employees who did not receive merit increases. Ms. Ridle
would provide the information at a later time. Vice-Chair
Saddler asked for a rough idea. Ms. Sheehan responded that
it was less than 5 percent.
Vice-Chair Saddler asked about the cumulative effect of
raises for 5 years at 3.5 percent. Ms. Ridle would get back
to him with an answer.
Vice-Chair Saddler wanted to confirm that the merit
increases and the pay increments were exclusive of COLA.
Ms. Ridle confirmed that the merit and pay increments were
listed on the left of slide 6. The Cost of Living
Adjustment was represented by the blue line on the chart.
It had increased by about 25.5 percent over the years.
Vice-Chair Saddler summarized that normally receiving a
raise was when an employee made more in one year than in
the previous year. While people might say that the state
had a zero-zero-zero percent contract it did not mean state
employees did not get raises, they just did not get COLA.
They were getting 3.5 percent increases for their first 5
years of service and 3.25 percent raises every 2 years
thereafter as long as they were employed. He concluded that
there were raises. Ms. Sheehan indicated that Vice-Chair
Saddler was correct.
Representative Gattis asked about the compounded effect of
raises and whether it was greater than 15 percent. Ms.
Sheehan believed so but would follow-up with the answer to
her question. Representative Gattis stated that it was
more.
1:57:06 PM
Representative Gara understood not granting a COLA increase
because of the current budget crisis. He asked about the
impact of not recognizing the merit of employees. He used
the Alaska State Troopers as an example. His understanding
was that the state was already having a difficulty
recruiting troopers with the current pay and benefit
package. He wondered if he was correct. Ms. Sheehan believe
the State of Alaska was on par with the package the
Anchorage Police Department offered.
Representative Gara asked if she had any recruiting
statistics. Ms. Sheehan did not have any information on the
subject.
Representative Gara asked what would happen if the
committee decided there would be no merit increases for
police officers or state troopers who placed their lives on
the line. He wondered if it would impact morale or the
ability to recruit. Ms. Ridle could not answer his question
precisely. She speculated that in any of the departments if
merit and pay increases were frozen the state's workforce
might be affected. Some employees might choose to retire or
find other jobs.
Representative Gara raised the point in order for folks to
consider the ramifications of their decisions. Obviously,
the state needed to save money. However, saving money
without considering the impacts was not necessarily the
best course of action. He hoped the committee would
consider the issue further.
Co-Chair Thompson added that it was important to consider
that paying raises would leave less money available to keep
trooper positions intact.
Vice-Chair Saddler asked if anyone had alleged that the
Ferguson shooting was due to the troopers not receiving
their COLAs. Ms. Ridle asked Vice-Chair Saddler to repeat
his question.
Vice-Chair Gara interjected that he had not stated anything
like Vice-Chair Saddler was implying.
Vice-Chair Saddler restated his question. Ms. Ridle did not
know the answer to his question.
Co-Chair Thompson wanted to move on with the presentation.
Vice-Chair Saddler asked if anyone had alleged that
shootings were happening in Alaska because troopers were
not getting COLA increases. Ms. Ridle responded in the
negative.
Representative Wilson asked if merit increases occurred
within the first 5 years and then increases were referred
to as something else after that time. Ms. Ridle responded
affirmatively. After year 5 they were referred to as pay
increments.
Co-Chair Thompson directed Ms. Ridle to continue with the
presentation.
Ms. Ridle advanced to slide 7: "Negotiating framework:
Benefits":
Employee Benefits: Overall tend to be above market.
Health Benefit:
· Economy Plan - zero employee premiums
· Low deductible options across plans
· Flat rate for dependents
· Retiree health insurance with 10 years of service
· Retiree premium percentage lowers with longer term
of service
Pension: Alaska Public Employees' (PERS) and Teachers'
Retirement (TRS) Systems are hybrid defined benefit
and defined contribution plans providing:
· Contribution amounts structured to reach retirement
goals
o PERS: 8 percent employee + 5 percent employer +
12.26 percent SBS totaling : 25.26 percent
o TRS: 8 percent employee + 7 percent employer
+12.26 percent SBS totaling: 27.26 percent
o Most private plans offer employer match of 3
percent to 4 percent
Leave accrual (even with negotiated caps)
· Accrue 270 hours per year (36 days)
o After 10 years, if hired before 7/1/13
o After 15 years, if hired on or after 7/1/13
Job Flexibility
· Alternative work weeks
Hours worked: 37.5 hours
Co-Chair Thompson asked members to hold questions until the
end of the presentation because of being short on time.
2:01:40 PM
Ms. Ridle turned to slide 8: "Negotiating Framework: State
and National Trends":
National:
· 2007-2015 saw little to no pay increases
· Current trends include pay increases, elimination of
furloughs
State:
· Municipality of Anchorage: 1.5% COLA per year for 3
years
· Anchorage School District: 1% COLA + $1,000 bonus
through 2017
· Juneau School District: 2% COLA, 1-year agreement
Ms. Ridle discussed slide 9: "Bargaining Priorities." She
read from the slide:
Cash Component:
· Overall below market
· Current Fiscal climate requires modest reductions
o Zero-Zero-Zero percent
o 15 hours of furlough per employee per fiscal year
o Modest changes to other monetary terms of the
CBAs
Benefits:
· Overall above Market
· Healthcare costs are growing at a multiple of
inflation making cost containment a critical objective
of these negotiations
o Ask Employees to accept plan design changes and
contribute to monthly health care premiums in
order to control costs and align interests in
minimizing future cost increases.
o For employees that are not part of AlaskaCare, we
want to right-size health trust reserves
Other Priorities
· Performance Evaluations: Create a meaningful
performance view system
· Consistency
o Create consistency in our contracts
o For example: Leave, administrative manual, travel
rules, pay procedures
· Flexibility
o Create flexibility in our contracts.
o For example: contracting out, promotional rules
· Leave Terms - continue the progress of prior
negotiations to address leave accruals
Ms. Ridle talked about slide 10: "Status of Contracts
Before the Legislature":
TEAME (27 Employees)
· Contract expired June 30, 2015
· Agreement reached December 2015, ratified by members
· Contract pending Legislative approval
Terms Include:
· 0-0-0
· Addition of coordinators to improve student activity
sponsorship
· Improvements and clarifications to the grievance
process
· Additional time for management to complete annual
evaluations
· Contract language improvements regarding leave use,
cash-in, and donation
ASEA (GGU, 8,795 Employees)
· Contract expires June 30, 2016
· Agreement reached February 2016, pending ratification
by embers
· Contract pending Legislative approval.
Terms Include:
· 0-0-0
· Reduced health care contribution rate in FY17
· Furloughs
· Improvements to the grievance and complaint process
· Performance tied geographic limitation for layoffs
· Contract language improvements for finance and payroll
processing
· Transition fully to the Administrative Manual for
Travel and Per Diem
Ms. Ridle continued to slide 11: "Status of contracts to be
sent to the legislature":
Confidential Employees Association (CEA 204 Emp)
· Contract expires June 30, 2016
· Tentative Agreement reached 3/11/16
· Tentative Agreement will be sent to Legislature within
10 days
Terms Include:
· 0-0-0
· Furloughs
· Employee contribution to Health Care--Economy Plan
Ms. Ridle elaborated that for the first time they would
have an employee health care contribution to their economy
plan: $30 the first year, $40 the second year, and $60 the
third year. She also reported that earlier in the day the
department had finished its negotiations with the Marine
Engineers' Beneficial Association (MEBA). The group would
be sending their contract out for a vote no later than the
following day recommending a positive vote. During the
voting period members were not allowed to strike or do a
lock out. If the vote failed arbitration would follow.
2:06:51 PM
Ms. Ridle advanced to slide 12: "FY 2017 Savings." She
shared that the two charts showed the savings from
negotiations with each group. If CEA employees were
currently enrolled in the economy health plan and remained
enrolled the contribution amount would equal $195 thousand
in the first year. Their furloughs were worth about $93
thousand for the first year, and about $280 thousand over 3
years. The group was smaller with 204 members. She
explained that the second chart showed furlough savings. An
employee could cash in leave to offset their paycheck if
they took a furlough day. The department made an estimate
of how many employees would potentially cash in leave. If a
furlough was worth $1.3 million the department only used a
portion of that amount in anticipation that some employees
would cash in their leave. The second chart was
representative of what the department thought it would
actually be worth. She would supply members with a similar
chart for the CEA. She noted there was a summary of the
furloughs in the lower left corner.
Ms. Ridle continued to slide 13: "Update on Other
Negotiations":
Labor Trades and Crafts (LTC) - 1,772 Employees
· On-going
· Likelihood of reaching agreement by 60th Day
Supervisor's Union (SU) - 2,317 Employees
· On-going
· Challenging negotiations
· Possibility of not reaching agreement by 60th Day
Marine Engineers' Beneficial Association (MEBA) - 103
Employees
· Tentative agreement July 2014 (0%- 1%- 2%).
Legislature approved contract in 2015. MEBA has yet
to send contract for a vote. Mediation pending.
Ms. Ridle reported that the department's hope was to finish
the LTC negotiations on the 60th day. However, the next
meeting was on the 59th day. The department would be
getting the agreements to the legislature shortly
thereafter to allow for time to consider them. The state
law required that the department had them in by the 60th
day. She discussed the SU agreement. She reported that she
was unsure whether an agreement would be reached by the
60th day. She reiterated that the information regarding
MEBA was outdated. The agreement had been completed and was
going out for a vote in the current week.
Ms. Ridle discussed slide 14: "Next Steps":
· The Legislature decides whether to fund the monetary
terms.
o The monetary terms of a collective bargaining
agreement are subject to funding by legislative
appropriation. (AS 23.40.21)
o If the Legislature fails to fund the monetary terms of
an agreement, the next steps vary by bargaining unit
and may be affected by whether a tentative agreement
was reached with sufficient time to permit submittal
by the 60th day of session.
· A contract submitted to the Legislature after the 60th
day does not prevent the Legislature from either
considering or funding the contract.
· If a union fails to ratify the agreement, then the
funding is reduced proportionately, and we operate under
status quo and return to negotiations.
Ms. Ridle elaborated that if the legislature rejected a
contract the department would go back into negotiations. If
the contract was not funded the process would be different.
In the previous year the COLA was not funded but it was
absorbed in their budget. If a contract was not established
the groups operated under status quo until all of the steps
were taken.
Ms. Ridle explained slide 15: "Rejection of Monetary Terms:
CBA Terms." Ms. Ridle informed the committee that every
bargaining group had different rules if a contract was
rejected detailed on the slide. She indicated she would not
be reviewing the next set of slides. They provided a
breakdown of each bargaining unit including the number of
people in them, and how much they were paid on average.
Co-Chair Thompson appreciated all of the work the
administration was doing on negotiating. It appeared the
unions had been cooperating, were concerned about the
state's finances, and were responding in a positive way.
2:11:41 PM
Vice-Chair Saddler referred to slide 14 and the last bullet
point. He wondered about the term "Reduced
proportionately." Ms. Ridle deferred to Ms. Sheehan. Ms.
Sheehan stated that essentially if the state were to fund a
COLA and it failed ratification the funding would be
decreased by whatever the COLA amount was. For example, if
an employee was given a1 percent COLA the funding would be
decreased by 1 percent if they failed to ratify.
Vice-Chair Saddler referred to slide 11 and asked what $30
equated to as a percentage of the total health care benefit
cost in the economy tear. Ms. Ridle responded by first
reporting that the state's health care benefit was on a
calendar year starting January 1, 2017 rather than a fiscal
year. She added that the contribution percentage began at
about 5 percent, then 7 percent, then 9 percent from the
employee. She would get back to the representative with the
percentage of the overall total.
Co-Chair Thompson clarified that Vice-Chair Saddler was
asking for the overall total of the health care cost.
Vice-Chair Saddler wondered what percentage $30 represented
of the total cost to the state. Ms. Ridle replied that she
would get him the information. She pointed out that the $30
only applied to the economy plan. The employee contribution
was higher for the economy plus plan and a contribution had
always been paid for the standard plan. It was the first
time employees would be contributing to the economy plan.
2:14:25 PM
Representative Gattis asked about the overall increase to
the budget. Ms. Ridle clarified her question. She would
provide the information to Co-Chair Thompson's office.
Representative Gattis brought up the "zero, zero, zero"
comment. She wondered if there were other costs that should
be conveyed. Ms. Ridle responded that each unit negotiate
different things. She looked back to slide 3 which
discussed monetary terms. Regarding the merit and pay
increments the department did not send the amounts over
separately in the budgeting process. They were absorbed in
the personnel line. They have never appeared separately
like the COLAs.
Representative Gattis acknowledged that the state was doing
things differently in a different time.
Representative Gara had never been a fan of the high three
system for folks that received the pension benefit. For
example, a person that made $50 thousand for the majority
of their career but moved and received a cost differential
would get a substantially higher pension based on 3 years
of a 20-year career. He wondered if the state had any
protection against the arbitrary high three system. Ms.
Ridle indicated that the department did not negotiate
pension. She thought it was done through statute.
Representative Gara wondered if the department could decide
not to give an employee a transfer. Ms. Ridle supposed
there was the flexibility to do so but it was not part of
bargaining.
2:19:13 PM
Representative Edgmon asked for information regarding the
total number of state employees and a breakdown of exempt,
non-exempt, university, and teacher employees. He asked Ms.
Ridle to explain the furlough system. Ms. Ridle responded
that it was done by hour, 15 hours total, to give
flexibility to employees and the departments to figure out
what worked best in implementing the furloughs.
Representative Edgmon commented that if a person's salary
was reduced then somewhere down the road an employee's
retirement costs would be reduced as well. Ms. Ridle
concurred.
Representative Edgmon asked her to include information
regarding the number of employees in each tier and the
breakdown between defined benefit employees and defined
contribution employees. He thought that there was both an
immediate picture and a larger picture involved.
Representative Wilson asked about the $30, $60, $90
payment. Ms. Ridle responded that it was per month.
Representative Wilson asked if the state was aware of the
cost increases for the different plans. Ms. Ridle did not
know the specific number but thought the department was
working on it.
Representative Wilson suggested that along with discussing
how much employees would be pitching in any increases to
health insurance premiums should be part of the discussion
as well. Ms. Ridle thought the information would be
available later in the week. She added that healthcare
growth trends tended to be anywhere from 7 percent to 9
percent. However, the state was trying to manage down to 5
percent growth which would determine what the state brought
forward for the employer contribution.
Representative Wilson wondered about paying overtime to
employees covering for a furloughed employee. She thought
furloughs could potentially cost the state more money. She
surmised that Department of Corrections would be affected.
She wondered how a furlough savings was calculated. Ms.
Ridle answered that the department had tried to take
Representative Wilson's concerns into consideration. The
furlough time off did not count for any employee's personal
overtime. For example, if a person took furlough and came
back to work the hours would not be counted and would have
to work overtime based on when they actually worked. It was
also the reason the department used furlough hours rather
than days to provide more flexibility for departments and
employees. Hopefully, employees could take time off such
that it would not create more overtime.
Representative Wilson asked if the department could include
an overtime limit in the written negotiation contracts. Ms.
Ridle answered that it was a department duty. She thought
all of the departments would be using furloughs to meet
their budgets. It would behoove them to manage their
overtime to offset any savings with furloughs.
2:24:46 PM
Co-Chair Neuman asked about an effort by the administration
to replace higher level, more expensive employees with new
hires with lower tier levels. Ms. Ridle asked if he meant
something like a retirement incentive program.
Co-Chair Neuman was not referring to a retirement incentive
program. He thought that more and more employees were in
higher tiers. When discussing the circumstances with the
commissioner he had mentioned that employees enrolled in
the earlier tiers were being replaced by newer employees in
a higher tier costing the state less money. Ms. Ridle
responded that Tier I employees had been in the system for
a long time. She was a Tier II employee and had started
working for the state in the 90s. Tier I employees were
likely moving towards retirement. In terms of laying them
off, they probably had much higher layoff points and could
not be laid off prior to a younger employee. The savings
would come when Tier I employees naturally retired. An
exception would be for partially exempt employees that did
not have the same layoff rights. A manager might have the
discretion to lay off a longer term partially exempt
employee and keep a newer employee.
Co-Chair Neuman stated that there had been discussions
about hiring people that have already retired. He thought
the legislature had urged the administration to move away
from rehiring retired employees with the hope of saving
money. Ms. Ridle explained that if someone retired they
could only come back as a non-permanent employee. She did
not believe they would displace a permanent employee in a
layoff but they would also not be receiving retirement
payments etc. She was unsure if she was answering Co-Chair
Neuman's question.
Vice-Chair Saddler asked whether the state had ever
evaluated whether it would be cost effective to have
employee buyouts by offering retirement incentives. It
could result in a long term savings to the state. He had
constituents that were state employees that expressed a
willingness to take a buyout. Ms. Ridle responded in the
affirmative. She believed it had been in the early 2000s
when a similar situation had existed. She elaborated that
the evaluation revealed there were several people that
retired and, after a certain amount of waiting time, came
back to the state. They were not necessarily cheaper and
were not necessarily replaced with a much cheaper employee.
If the state was going to considering re-upping the state's
retirement incentive plan, it would need to take into
account what happened previously. It was questionable
whether the state actually saved money.
2:29:32 PM
Vice-Chair Saddler asked about the expense of evaluating a
retirement incentive program. Ms. Ridle responded that the
department would be doing an evaluation, as it was not
expensive. She was aware of more than one piece of
legislation and reported that the idea had been discussed
by others as a means of saving money.
Vice-Chair Saddler pointed to slide 11 and asked for the
number of healthcare benefit plan tiers within the state
system. Ms. Ridle answered that within the Alaska Care Plan
there was economy, economy plus family, standard, and
standard plus family, all of which required an employee
contribution. There was also a premium plan, a higher cost
plan, and she assumed a premium plus family plan.
Vice-Chair Saddler pointed to slide 3 related to monetary
terms. He asked where the legislature would see the expense
if there were changes in sea duty pay or a tool allowance.
Ms. Ridle asked for clarity.
Vice-Chair Saddler elaborated that if there were changes in
the monetary terms of a contract would they be folded into
the contract. Ms. Sheehan replied that if there was a
change to what was currently in the agreement it would be
highlighted in the monetary terms report provided to the
legislature.
Representative Gattis recognized that the changes would be
highlighted. However, she wondered about the things already
imbedded that still had a cost. What she had heard earlier
was that Ms. Riddle would get back to the committee about
merit increases and pay increments. She also wondered if
Ms. Ridle would get back to her about other things that had
increases that were already imbedded but the state would
have to pay for. Ms. Ridle replied in the affirmative.
Representative Gattis asked if she knew how many other
states paid 100 percent for health insurance for their
state employees. Ms. Ridle did not know how many paid 100
percent. She offered that there was a PEW report that
indicated that the average contribution was about 16
percent. She thought there was a chart available.
Representative Gattis had the chart and there were 4 other
states that paid 100 percent. All of the other states had
their employees participating in paying for a portion of
their premium. She opined that employees needed to be a
part of the solution.
Co-Chair Thompson requested that the materials be sent
through his office.
2:33:57 PM
Representative Munoz understood Ms. Ridle to say that the
COLA was zero-zero-zero in the next round of contracts
recently approved. She asked if merit increases and pay
increments were discussed during negotiations. Ms. Ridle
responded affirmatively. There were different proposals
considered in the most recent negotiations.
Representative Munoz asked if the pay increments or merit
increases had ever been altered. Ms. Ridle indicated that
the department had recently reduced them. She invited Ms.
Sheehan to comment further. Ms. Sheehan reported that in
the last round of negotiations with the GGU, SU, and CEA
the pay increments were reduced from 3.75 percent to 3.25
percent. The same was done in statute for the partially
exempt.
Representative Pruitt asked for the state employee turnover
percentage. Ms. Ridle deferred to Ms. Sheehan. Ms. Sheehan
responded that it was an average of approximately 11
percent.
Representative Pruitt asked if exit interviews were
conducted. Ms. Sheehan answered in the affirmative but
added that they were not mandatory.
Representative Thompson relayed that in the remainder of
the slides they showed each unit listing the average years
of service.
Representative Pruitt wondered about the most common reason
for employees departing state service. Ms. Ridle replied
that she was unsure if there was a notable time
consistently. It depended on what an employee was going
through. She noted that the exit interviews were not very
exhaustive because they were not mandatory or a great tool
for gathering detail.
2:36:22 PM
Representative Pruitt noted employee benefits were above
market. He wondered about the point at which the state
could determine whether pay or benefits impacted an
employee's decision to stay with the state or impacted a
potential employee to take a job with the state. Ms. Ridle
answered that the department did not have much data. She
believed that layoffs across the state in different sectors
and the economy overall would affect the state's workforce.
She added that the state was in competition with the
federal government because they were not seeing the same
budget cuts that Alaska was seeing. It was possible that
people were being hired away from state jobs to work for
the federal government. The department would be working on
gathering state data on the topic.
Representative Pruitt asked how long jobs stayed open after
posting them. Ms. Sheehan answered that it varied for
departments and for positions. For example, within her
division there was a 4-week vacancy factor before a
position could be filled. Each agency determined its
parameters around vacancies.
Representative Gara provided an example concerning an
employee who had a municipal assembly job. He had seen them
in the hallway one day working for one of the departments.
They had gone from a job that paid $20 thousand per year to
a job that paid $85 thousand per year. The representative
asked the employee what they were doing there. The person
responded that they were getting their high 3s. He believed
there was a cost to the state. He thought the state should
look at whether someone was going to burden the retirement
system by filling a position. He was sending a message
along. He noted that the state's health care premiums went
up much faster that the rate of inflation. In Alaska
medical costs were either the first or second highest in
the nation almost every year. The rate of increases were
first or second in the nation almost every year. He
supposed that unless the legislature and the governor's
office work together to figure out how to get control over
the private sector's medical costs, overall pay packages
would go up very quickly due to the cost of health
insurance continuing to rise. He hoped the legislature
could take some time to do something about the rise in
medical costs rather than placing the burden on the
employees. He believed the state should share some of the
burden.
2:40:07 PM
Representative Guttenberg did not believe that the
committee was touching on the issue of medical costs. The
state was obligated for a significant amount of medical
costs and many components. At different times he had asked
the different administrations what they had been doing to
drive down the costs of health care. He had never received
a satisfactory answer. He posed the same question to Ms.
Ridle. Ms. Ridle responded that the state was considering
an employee contribution to health care. She also reported
conducting better negotiations with providers to make sure
the state received group rates. She mentioned the
administration looking at possibly joining some health care
coalitions. The administration was encouraging employee
participation in wellness programs. She relayed that the
state had an improvement plan in which a group of members
from the employee bargaining units and the state came
together to work on ways of reducing costs to both the
state and to employees. The department was trying to engage
the group more than in the past inviting employees to be a
part of the solution to reducing health care costs. A large
part of mitigating costs was negotiating with private
providers.
2:43:02 PM
Representative Guttenberg thought it was time to negotiate
with providers who were reluctant or resistant to
negotiating for reductions. He urged the department to
encourage more medical tourism (when people were sent out
of state to have major medical procedures done at a cost
reduction of close to 20 percent.) If the state was going
to play a constructive role in driving down the cost of
health care, the state had to take a stronger position with
the providers. He encouraged using the option of medical
tourism as a negotiation tool with providers.
Vice-Chair Saddler echoed the previous speaker. He thought
there were many ways to reduce costs. He encouraged medical
tourism and joining with other entities for coalitions. He
had heard from some constituents that the Tier IV defined
contribution as opposed to defined benefit in Tier I, Tier
II, and Tier III was a disinhibiting factor from providers
wanting to join up with the state. He wondered if the state
had any information that indicated that the Tier IV defined
contribution was making it difficult to recruit or hold
state employees. Ms. Ridle did not believe the department
had any proof to that effect.
Vice-Chair Saddler asked if exit interviews were mandatory
or if the state could require them. Ms. Ridle responded
that it could be a cultural change that managers were asked
to encourage exit interviews more. She concurred with Vice-
Chair Saddler that getting more information would be
helpful.
Vice-Chair Saddler suggested making the completion of an
exit interview a condition for an employee to receive their
final paycheck.
2:46:14 PM
^LEGAL OPINION: LEGISLATURE'S LEGAL OPTIONS CONCERNING
PUBLIC EMPLOYEE COLLECTIVE BARGAINING AGREEMENTS: BY DAN
WAYNE, ATTORNEY, LEGISLATIVE LEGAL SERVICES
DAN WAYNE, ATTORNEY, LEGISLATIVE LEGAL SERVICES (via
teleconference), explained that the legislature's role was
somewhat limited. He referred to a Legal Services memo
dated March, 12, 2016 regarding the legislature's role in
collective bargaining (copy on file). He pointed to the
second paragraph on page 1. It indicated that the state was
represented by the executive branch in collective
bargaining. The legislature's role was to enact laws
related to collective bargaining. He reported that the
legislature's part became clear when the Public Employment
Relations Act (PERA) was established. The legislature gave
itself a limited role which was to review monetary terms of
proposed contracts and either fund them or not.
Representative Gara asked if Mr. Wayne was completed with
his presentation. Mr. Wayne was open to any questions. He
had just described the legislature's role in collective
bargaining. The memo went on to talk about limitations on
the legislature's ability to make changes to existing
agreements. The legal obstacles were problems that could
arise if the legislature were to insert itself into
bargaining before negotiations were completed.
Co-Chair Thompson asked how changing state laws fit into
any problems with the constitutionality of what was in
place in the state. Mr. Wayne referred to Article 5.6 of
the Constitution of the State of Alaska which required
state employment to be a merit-based system. He referred to
Article 12.6 of the constitution that addressed the state
personnel act. The purpose of the act was to establish a
system of personnel administration that was based on the
merit principle. It included recruiting, selecting, and
advancing employees on the basis of their relative ability,
knowledge, and skills. Retention of employees with
permanent status was based on their adequacy of their
performance. The merit system was used to ensure equal
treatment of applicants and employees. The idea was to
protect the employment system from discriminatory behavior
or decisions being made for political reasons. The
legislature could adopt laws to regulate collective
bargaining or regulate the employment of state employees.
However, they were subject to the merit system requirement.
2:50:29 PM
Representative Wilson asked if he was saying that through
statute the legislature could implement a step program
where increases equaled 2 percent every 2 years versus
allowing the terms to be negotiated through collective
bargaining. Mr. Wayne thought that the legislature would
have to amend PERA. The Public Employment Relations Act
stated that collective bargaining included wages and hours.
He thought that it was possible to change terms in future
rounds of negotiations if it was the will of the
legislature.
Representative Wilson asked if the legislature would have
to apply the change in other PERA. Mr. Wayne answered that
the legislature could be fairly surgical in changing the
statute.
Representative Wilson asked if the legislature was limited
to taking certain unallocated amounts out if nothing
changed. She wondered if the departments would decide how
many people they would keep. Mr. Wayne stated that if the
law did not change the legislature was limited to reviewing
a collective bargaining agreement and deciding whether to
fund the negotiated monetary terms.
Co-Chair Thompson referred to what Mr. Wayne stated in his
memo about a substantial impairment of a contractual
relationship noting that the impairment would be examined
to see if it was reasonable or necessary to serve an
important public purpose. He wondered what would be
considered an important public service. Mr. Wayne pointed
out that the section Representative Thompson was referring
to through the middle of Page 4 was talking about existing
contracts. It would be a situation where the legislature
passed a law that impaired the obligation of an existing
contract. There were constitutional bars to doing so. They
were strong obstacles to overcome but not absolute. He
noted that on page 3 that an impairment might be
constitutional if it was reasonable and necessary to serve
an important public interest. The discussion started at the
bottom of page 3. If the state were to adopt a law
impairing a collective bargaining unit the court would
apply a 2 prong test. The first would be to determine
whether the new law operated as a substantial impairment of
a contract. If the answer was, "yes", then it was
determined if the impairment was reasonable and necessary.
In certain cases courts had approved temporary adjustments
to a contract such as a city being without any money, for
example. However, the courts had been pretty careful not to
let the legislature do whatever it wanted. An emergency
situation might be an exception.
2:55:43 PM
Representative Gattis wanted to be clear about step or
merit pay. She wondered if the state was obligated to
provide merit pay because of the constitution. Mr. Wayne
was not saying that the only merit system that would meet a
constitutional requirement was the current system the state
was using. He was saying that it was the system the
legislature adopted in statute. The system had been
adjusted in the past. It was a combination of an automatic
raise and a raise based on performance. He furthered that
it was not really automatic because the state had to show
that the employee received the evaluation and that it was
acceptable or better. He noted a state regulation that
talked about merit increases for employees. The service of
the employee had to be of progressively greater value to
the state. If an employee was worthy of an increase they
would automatically receive one at a certain time each year
based on their date of hire and length of service. He
continued that when an employee reached a certain step the
increases would occur every 2 years, referred to as "pay
increments." Both were merit-based.
2:58:47 PM
Representative Gattis asked about passing legislation that
could remove merit pay and pay increments (automatic
raises). Mr. Wayne stated that the legislature could draft
a bill that would remove anything. The question would be
whether it could survive a legal challenge if someone
contested it. He elaborated that most likely a bill that
affected the penny of many people would be vulnerable to or
cause a legal challenge. The outcome would depend on what
was in the law and the applicability.
Representative Gattis wanted to be fair to state employees
and believed that it was the function of the merit system.
However, she did not believe the state needed to have
built-in raises and steps. She challenged the attorney that
the state had to have automatic increments built into state
labor contracts. She struggled with the state having
financial challenges and having to look to reduce spending
while automatic raises were still in effect. She understood
that the legislature was charting new territory. She
disagreed with giving out raises in the current fiscal
climate. She appreciated his comments.
Vice-Chair Saddler asked Mr. Wayne to confirm that under
public employees versus state employees each year of a
multi-year contract was subject to separate appropriations.
Mr. Wayne responded in the affirmative.
Vice-Chair Saddler asked if it was all or nothing such that
the legislature could not appropriate 90 percent of the
required amount. He asked if he was correct. Mr. Wayne
answered that his understanding was that it was all or
nothing. He suggested to do otherwise would then be
negotiating, a power the legislature did not have under
PERA.
Vice-Chair Saddler asked if it had ever been tried. Mr.
Wayne did not know.
Vice-Chair Saddler asked about the process of the
legislature exercising its authority under PERA - if the
state did not appropriate money to pay for the full amount.
Mr. Wayne responded that it depended on the contract and
terms. It depended on the language of the contract. He
noted the administration's chart that was fairly useful.
There was a list of what could happen. Essentially, if the
monetary terms were not funded by the legislature then the
parties would likely have to renegotiate. It would be
different depending on which contract was involved.
3:03:32 PM
Vice-Chair Saddler asked if saving money was an important
public purpose. Mr. Wayne supposed that it would always be
something that had a public purpose.
Representative Munoz understood that the Retired Public
Employees Association had filed a suit against the State of
Alaska over diminishment of health care benefits. She asked
him to speak to the issues of that particular case and to
its status. Mr. Wayne was unfamiliar with the current
status of the case. He relayed that his office was not
defending the case.
Representative Gara referred to page 2 of the memo that
read that the United States Supreme Court looked more
closely at the reasons the legislature tried to get out of
the impairment clause. It also stated that a governmental
entity could always find a use for extra money, especially
when taxes did not have to be raised or the state could
reduce its financial obligations. The contract clause would
provide no protection at all. He asked how the Supreme
Court case factored into Mr. Wayne's analysis. Mr. Wayne
stated that saving money might not be a sufficient public
purpose. It would depend on the facts of a particular case
as to whether it would overcome the constitutional
protection against impairment of contracts. He thought the
quote from the Supreme Court case was an attempt to point
out that the court applied more scrutiny to laws passed by
the legislature that impaired a contract that it was a
party to. It was a sort of conflict of interest. The
Supreme Court might compare contracts between
transportation companies and their customers. The
legislature would not be a party to the contract in the
same way they would be a party to a contract between the
state and the employees of the state.
3:07:08 PM
Representative Gara suggested that the constitution stated
that Alaska should use the merit principle in its
employment practices. He wondered if the merit principle
would be violated if the state did not recognize merit. Mr.
Wayne did not know what a court would say. If there was a
law that stated no one ever received a raise and it was
applied to everyone equally. It could possibly be another
way of protecting the employment system from political
influences. However, if you had a system where some
employees received raises and some did not, it would likely
work better in the private sector rather than the public
sector. The public sector was managed by political leaders.
The merit principle helped protect the employment process
from politics.
Representative Gara asked if there was any case law about
the merit principle where one employee was provided a merit
raise and one received a raise without merit. Mr. Wayne did
not know.
3:09:22 PM
Representative Gattis thought she heard Mr. Wayne
suggesting that the state had to be fair to everyone. When
talking about merit pay it should not be political. She
thought if there was going to be a salary freeze, for
example, it should be applied across the board. She
believed the state had been paying merit increases no
matter an employee's performance. She thought the state had
been doing the opposite.
Vice-Chair Saddler asked if there was any guidance in case
law that set a standard for merit increases. Mr. Wayne did
not know of a case law that determined where the bar should
be set. He thought that the constitutional requirement in
Alaska was that there be a merit-based system. There could
probably be many variations on the definition of a merit-
based system. However, the underlying principle was that
decisions about hiring, retention, and promotion were based
on merit. The constitutional requirement meant there needed
to be a system based on merit as opposed to a system that
was called the "spoils" system where the people that were
in charge just got to decide. The result of a spoils system
was that many people ended up complaining about not being
treated fairly. There were less complaints with a merit-
based system. However, there would always be some people
who felt like they were not receiving their due in any
system.
Vice-Chair Saddler certainly wanted to be fair, to have a
clear system that rewarded good behavior and good work for
the state. He asked if days off, shift assignments, and
work assignments could be negotiated. He asked if he was
accurate. Mr. Wayne read from the Public Employment
Relations Act. Collective bargaining meant the performance
of the mutual obligation of the public employer or the
employer's designated representatives and the
representative of the employees to meet at reasonable times
including meetings in advance of the budget making process
in negotiating good faith in respect to wages, hours, and
other terms and conditions of employment. He also read the
definition of terms and conditions of employment which
meant the hours of employment, the compensation and fringe
benefits, and the employer's personnel policies affecting
the working conditions of employees. It did not mean the
general policies describing the function and purposes of a
public employer.
Co-Chair Thompson thanked Mr. Wayne for his time and for
his legal opinion.
3:15:21 PM
Representative Gara stated that the end of Mr. Wayne's memo
he talked about breach-of-contract. If there was a 3-year
labor agreement and in the third year the legislature
decided not to honor it, he wondered if it would bring in
breach-of-contract implications. Mr. Wayne responded in the
affirmative.
Co-Chair Thompson referred to a case from the 80s where the
legislature decided not to fund a 3 percent raise in the
following year. He asked what happened. Mr. Wayne relayed
that the court upheld the legislature's decision not to
fund the third year. The court had stated that every year
the monetary terms of a collective bargaining agreement
were subject to independent legislative approval.
Vice-Chair Saddler asked if it was allowable for the
legislature to decide not to appropriate the final year of
a 3-year contract. Mr. Wayne responded no, it was the
legislature exercising its prerogative to either fund or
not fund the monetary terms of a collective bargaining
agreement which could be broken down by year.
Vice-Chair Saddler asked him to reconcile his answer to his
question and Vice-Chair Gara's question. Mr. Wayne thought
he probably misunderstood Vice-Chair Gara's question. The
question assumed there was a contract violation. If
something was done to violate the contract, then the party
who felt that the contract was violated could allege
breach-of-contract. In the case of not funding the monetary
terms of a collective bargaining agreement in its third
year would not be a violation of the contract, it would be
the legislature exercising its legal prerogative not to
fund it.
3:17:48 PM
Representative Pruitt asked Mr. Wayne if departments could
decide whether to lay people off and provide raises to the
remaining personnel if the legislature did not provide
funding. He wondered about adding intent language. He
queried the process when the legislature chose not to
provide funding in the 80s example. Mr. Wayne asked if
Representative Pruitt was talking about page 7 of the memo
and the discussion of the Public Employees Local 71 case
from the 80s.
Representative Pruitt responded in the affirmative and
added that he was asking about funding the third year of
the contract. Mr. Wayne did not know if he could answer the
question about the options the administration would have if
the legislature withheld funding. He was unsure if raises
could be given. Union employees were subject to specific
layoff terms outlined in their union contract. Contracts
dictated how and when the employer could lay people off.
The employees that would be laid off had rights and it was
unlikely that laying off a union employee would be simple.
As long as the administration did not violate the
contractual terms it could juggle things around slightly.
However, there were legal limitations set by the
legislature. It would depend on the facts of the case and
which contract applied.
Co-Chair Thompson thanked the testifier and reviewed the
agenda for the following day.
ADJOURNMENT
3:21:14 PM
The meeting was adjourned at 3:21 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DOA-HFIN_Labor_Contracts_3 1 16 FINAL.pdf |
HFIN 3/14/2016 1:30:00 PM |
|
| HFIN -Collective Bargaining Legal Opinion Wayne 3-12-16.pdf |
HFIN 3/14/2016 1:30:00 PM |
HFIN |