Legislature(1997 - 1998)
04/21/1997 01:48 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE April 21, 1997 1:48 p.m. MEMBERS PRESENT Representative Joe Green, Chairman Representative Con Bunde, Vice Chairman Representative Brian Porter Representative Norman Rokeberg Representative Jeannette James Representative Eric Croft Representative Ethan Berkowitz MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 124 "An Act relating to items not subject to collective bargaining and to application of the Public Employment Relations Act to municipalities and other political subdivisions." - MOVED CSHB 124(JUD) OUT OF COMMITTEE HOUSE JOINT RESOLUTION NO. 25 Proposing amendments to the Constitution of the State of Alaska to guarantee the permanent fund dividend, to provide for inflation-proofing, and to require a vote of the people before spending undistributed income from the earnings reserve of the permanent fund; and relating to the permanent fund. - HEARD AND HELD SENATE BILL NO. 19 am "An Act relating to enforcement of federal laws relating to fish and game; and repealing the power and duty of the commissioner of fish and game to assist in the enforcement of federal laws relating to fish and game." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 124 SHORT TITLE: PERA: LOCAL EXEMPTION/NONNEGOTIABLE ITEMS SPONSOR(S): REPRESENTATIVE(S) VEZEY JRN-DATE JRN-PG ACTION 02/12/97 314 (H) READ THE FIRST TIME - REFERRAL(S) 02/12/97 314 (H) STATE AFFAIRS, JUDICIARY 03/11/97 (H) STA AT 8:00 AM CAPITOL 102 03/11/97 (H) MINUTE(STA) 03/12/97 631 (H) STA RPT 2DP 2DNP 3NR 03/12/97 631 (H) DP: HODGINS, VEZEY 03/12/97 631 (H) DNP: ELTON, BERKOWITZ 03/12/97 631 (H) NR: JAMES, DYSON, IVAN 03/12/97 632 (H) 2 ZERO FISCAL NOTES (LABOR, ADM) 04/21/97 (H) JUD AT 1:45 PM CAPITOL 120 BILL: HJR 25 SHORT TITLE: CONST. AM: PERM. FUND INCOME & DIVIDEND SPONSOR(S): REPRESENTATIVE(S) AUSTERMAN JRN-DATE JRN-PG ACTION 02/26/97 483 (H) READ THE FIRST TIME - REFERRAL(S) 02/26/97 483 (H) STATE AFFAIRS, JUDICIARY, FINANCE 03/11/97 (H) STA AT 8:00 AM CAPITOL 102 03/11/97 (H) MINUTE(STA) 03/13/97 (H) STA AT 8:00 AM CAPITOL 102 03/13/97 (H) MINUTE(STA) 03/15/97 (H) STA AT 11:00 AM CAPITOL 102 03/15/97 (H) MINUTE(STA) 03/17/97 688 (H) STA RPT CS(STA) 3DP 4NR 03/17/97 689 (H) DP: JAMES, HODGINS, DYSON 03/17/97 689 (H) NR: ELTON, BERKOWITZ, VEZEY, IVAN 03/17/97 689 (H) FISCAL NOTE (GOV) 03/17/97 689 (H) ZERO FISCAL NOTE (REV) 03/17/97 689 (H) REFERRED TO JUDICIARY 03/21/97 789 (H) CORRECTED STA CS SUBMITTED 04/21/97 (H) JUD AT 1:45 PM CAPITOL 120 BILL: SB 19 SHORT TITLE: REPEAL FED ENFORCEMENT DUTIES/F&G COMSNR SPONSOR(S): SENATOR(S) SHARP, Taylor, Donley JRN-DATE JRN-PG ACTION 01/03/97 19 (S) PREFILE RELEASED 1/3/97 01/13/97 19 (S) READ THE FIRST TIME - REFERRAL(S) 01/13/97 19 (S) RES, JUD 02/05/97 (S) RES AT 3:30 PM BUTROVICH ROOM 205 02/05/97 (S) MINUTE(RES) 02/06/97 247 (S) RES RPT 6DP 1NR 02/06/97 247 (S) DP: HALFORD, TAYLOR, TORGERSON, 02/06/97 247 (S) LEMAN, GREEN, SHARP; NR: LINCOLN 02/06/97 247 (S) ZERO FISCAL NOTE (DPS) 02/19/97 (S) JUD AT 1:30 PM BELTZ ROOM 211 02/19/97 (S) MINUTE(JUD) 02/20/97 428 (S) JUD RPT 3DP 02/20/97 428 (S) DP: TAYLOR, PARNELL, PEARCE 02/20/97 428 (S) PREVIOUS ZERO FN (DPS) 02/21/97 (S) RLS AT 10:45 AM FAHRENKAMP RM 203 02/21/97 (S) MINUTE(RLS) 02/24/97 469 (S) RULES TO CALENDAR & 1NR 2/24/97 02/24/97 473 (S) READ THE SECOND TIME 02/24/97 473 (S) AM NO 1 OFFERED BY SHARP 02/24/97 473 (S) AM NO 1 ADOPTED Y14 N5 A1 02/24/97 474 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/24/97 474 (S) READ THE THIRD TIME SB 19 AM 02/24/97 474 (S) COSPONSOR(S): DONLEY 02/24/97 475 (S) PASSED Y15 N4 A1 02/24/97 475 (S) ADAMS NOTICE OF RECONSIDERATION 02/25/97 502 (S) RECONSIDERATION NOT TAKEN UP 02/25/97 502 (S) TRANSMITTED TO (H) 02/26/97 478 (H) READ THE FIRST TIME-REFERRAL(S) 02/26/97 478 (H) RESOURCES, JUDICIARY 04/10/97 (H) RES AT 1:00 PM CAPITOL 124 04/10/97 (H) MINUTE(RES) 04/18/97 1167 (H) RES RPT HCS(RES) 2DP 4NR 04/18/97 1168 (H) DP: DYSON, OGAN 04/18/97 1168 (H) NR: WILLIAMS, GREEN, MASEK, HUDSON 04/18/97 1168 (H) SENATE ZERO FISCAL NOTE(DPS) 2/6/97 04/21/97 (H) JUD AT 1:45 PM CAPITOL 120 WITNESS REGISTER REPRESENTATIVE AL VEZEY Alaska State Legislature Capitol Building, Room 13 Juneau, Alaska 99811 Telephone: (907) 465-3719 POSITION STATEMENT: Sponsor of HB 124. LUCY HOPE, President Mat-Su Education Association 701 East Bogard Road Wasilla, Alaska 99654 Telephone: (907) 373-5204 POSITION STATEMENT: Testified in opposition to HB 124. DON VALESKO, Business Manager Public Employees Local 71 2510 Arctic Boulevard Anchorage, Alaska 99503 Telephone: (907) 276-7211 POSITION STATEMENT: Testified in opposition to HB 124. JIM SAMPSON, Mayor Fairbanks North Star Borough P.O. Box 71267 Fairbanks, Alaska 99707 Telephone: (907) 459-1304 POSITION STATEMENT: Testified in opposition to HB 124. DON OBERG 406 Rogers Road Kenai, Alaska 99611 Telephone: (907) 283-4233 POSITION STATEMENT: Testified in opposition to HB 124. ANNE GENTRY 36980 Chinulna Court Kenai, Alaska 99611 Telephone: Not provided POSITION STATEMENT: Testified in opposition to HB 124. ED FLANNIGAN, Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99811 Telephone: (907) 465-2784 POSITION STATEMENT: Provided department's position and answered questions regarding HB 124; opposed bill. HOLLY SALO ATKINS (ph) c/o Bartlett High School 25500 Muldoon Road Anchorage, Alaska 99506-1698 Telephone: (907) 337-1585 POSITION STATEMENT: Testified on HB 124. JOHN CYR, President NEA-Alaska 114 Second Street Juneau, Alaska 99801 Telephone: (907) 586-3090 POSITION STATEMENT: Testified in opposition to HB 124. MIKE McMULLEN, Personnel Manager Division of Personnel Department of Administration P.O. Box 110201 Juneau, Alaska 99811-0201 Telephone: (907) 465-4431 POSITION STATEMENT: Provided department's position and answered questions regarding HB 124. MARILYN PILLIFANT 5824 Bristol Drive Anchorage, Alaska 99516 Telephone: (907) 345-2660 POSITION STATEMENT: Testified on HB 124. REPRESENTATIVE ALAN AUSTERMAN Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 Telephone: (907) 465-2487 POSITION STATEMENT: Sponsor of HJR 25. JOSEPHINE HARDY, Legislative Secretary to Senator Bert Sharp Alaska State Legislature Capitol Building, Room 516 Juneau, Alaska 99801 Telephone: (907) 465-3004 POSITION STATEMENT: Presented sponsor statement for HCS SB 19(RES). ACTION NARRATIVE TAPE 97-59, SIDE A Number 0001 CHAIRMAN JOE GREEN called the House Judiciary Standing Committee meeting to order at 1:48 p.m. Members present at the call to order were Representatives Green, Bunde, Porter and James. Representative Rokeberg arrived at 1:50 p.m., and Representatives Croft and Berkowitz arrived at 1:52 p.m. HB 124 - PERA: LOCAL EXEMPTION/NONNEGOTIABLE ITEMS Number 0060 CHAIRMAN GREEN announced the committee would first hear House Bill No. 124, "An Act relating to items not subject to collective bargaining and to application of the Public Employment Relations Act to municipalities and other political subdivisions." REPRESENTATIVE AL VEZEY, sponsor of HB 124, said the bill attempts to change Alaska law to recognize the autonomy of the political subdivisions of the state. He noted that the Public Employees Relations Act (PERA) is not a contract but a means of conducting relationships between employers/management and employees. However, the court had ruled that once a political subdivision is covered by PERA, it could never get out from under it. This bill provides a means of local determination through the democratic process. REPRESENTATIVE VEZEY said the proposed committee substitute would change the democratic process from a vote of the people to a measure passed by the elected or governing body of a municipality. Recommended by the Alaska Municipal League, it was something Representative Vezey had considered previously. He would leave to the committee which method is preferable, as he believes either would work well. REPRESENTATIVE VEZEY explained that the bill also adds privatization or contracting out services to the list of items not subject to bargaining for employers and employees covered under PERA. In moving toward privatizing many government services, the largest obstacle is that when public employee unions negotiate contracts, one of the first things they want in the contract is that the employer cannot go outside of the bargaining unit to have work performed. REPRESENTATIVE VEZEY had just returned from a symposium on privatization, where the consensus was that privatization can be put in place, and does work, only when the concerns of public sector employees are adequately addressed. In most cases, that means a guarantee that their jobs will not end, even though in some cases their employers may change. However, starting off with a playing field that is tilted to prohibit out-sourcing or privatization of public services unduly restricts the state's ability to manage that. This bill attempts to level the playing field in terms of what can be negotiated in a collective bargaining agreement. It also allows municipalities, whether or not they are covered by PERA, a choice of whether to use the system. Number 0387 REPRESENTATIVE CON BUNDE asked Representative Vezey to clarify the intent of Section 2 of the proposed committee substitute. REPRESENTATIVE VEZEY explained that it would not require any action to maintain the status quo. It does require action to change the status quo, under both the proposed committee substitute and the original bill. (See page 25 at number 1862 for correction by sponsor.) REPRESENTATIVE JEANNETTE JAMES moved to adopt the proposed committee substitute, 0-LS0540\B, Cramer, 4/21/97, as a work draft. There being no objection, that version was before the committee. Number 0512 LUCY HOPE, President, Mat-Su Education Association, testified via teleconference in opposition to HB 124. The association represents 850 teachers in the Matanuska-Susitna Borough. They have a long history of collective bargaining. Last year, because of the financial situation in the borough and school district, they bargained their contracts a year early, thereby saving the district considerable money. MS. HOPE said last week, the district announced that because of negotiated salary freezes, they had saved $1.9 million. In addition, negotiated savings in health insurance costs would be $1.2 million. They had accomplished that through negotiations. Ms. Hope believes it is important to have a collective bargaining process because it provides a formal opportunity to sit down and address concerns on both sides, and it is usually mutually beneficial. MS. HOPE expressed concern that the community, if asked to vote on whether education employees should be part of the collective bargaining process, would need a lot of education on the benefits of that. Association members would rather focus on improving education for kids. They believe HB 124 either attempts to fix something that is not broken or wrecks something that is working. Number 0673 REPRESENTATIVE JAMES asked whether Ms. Hope had a copy of the proposed committee substitute. MS. HOPE said no. CHAIRMAN GREEN noted that a copy had been faxed. REPRESENTATIVE JAMES compared the original bill, which says the municipality may opt out by a vote of the public, with the proposed committee substitute, which says a municipality may opt out by ordinance. She voiced her belief that the proposed legislation would not be a threat to the Ms. Hope's association. She said it appears that Ms. Hope has a good working relationship with the Matanuska-Susitna Borough and would be able to argue, very strongly, to prohibit the borough from opting out. She cautioned, however, that other municipalities may not be so fortunate. She believes the policy makers should have this opportunity. She stated her understanding that the bill does not take away collective bargaining but indicates what issues cannot be addressed. MS. HOPE agreed that periodically, there is a good relationship between the employees of the school district and the school board and borough assembly; now is one of those times. However, that is not always the case. When situations are not as good, that leads to the need for the collaborative efforts they are currently experiencing. As assembly members come and go, voting their constituents' opinions, things can change regarding public employees in the borough. As local property taxes increase to fund schools, assembly members look less favorably on what can be bargained, for example; she believes that is the concern. There are 850 people working as hard as they can. They feel that they need the process guaranteed to them to address the issues important to their profession and to students. REPRESENTATIVE JAMES commented that she had heard primarily from teachers on this issue. She said the bill does not necessarily take away current rights; rather, it specifies things that cannot be included in an agreement. She asked: Don't you believe that if the municipality had a tool, just as teachers have a tool in the ability to strike, that it wouldn't make a little better, level playing field? Number 0899 MS. HOPE requested clarification. REPRESENTATIVE JAMES suggested if the relationships are consistently not good, the municipality should be able to opt out. MS. HOPE replied that removing items from the scope of discussion is not effective because the problems could still exist. Many times, the only way to solve a problem is by talking about it, and often the collective bargaining arena is the most appropriate place to do that. Number 0988 DON VALESKO, Business Manager, Public Employees Local 71, testified via teleconference from Anchorage, saying he had been with the union since 1978 as the business representative and since 1988 as a business manager. He had worked for the state since 1964, both prior to collective bargaining laws and afterwards, and he now represents employees who work for the state and other public entities around Alaska. MR. VALESKO referred to page 2, lines 2 through 4, which removes from collective bargaining the "right of the employer to contract out or privatize services or functions previously performed by employees or that could be performed by employees." He was unaware of contracts with the state or anyplace else where the contracts prohibit a public employer's contracting out for services. MR. VALESKO cited as an example the language in the current Local 71 contract with the state. He read: "Prior to the contracting or subcontracting of any work covered by this agreement which would result in the layoff of permanent or probationary employees, the employer agrees to conduct a cost-efficiency study. And unless the study shows that the work can be performed by the contractor/ subcontractor with less cost to the employer, no permanent, probationary employee shall be laid off and replaced by contracted or subcontracted work." MR. VALESKO said similar language is in most of the state contracts that he knows about. The language is primarily to protect the wages and standard of living for Alaskans. MR. VALESKO specified that he was testifying against the bill. If it is not the intent to allow the employer to privatize, with a resulting cost savings, but to spend more, then he believes it is wrong to remove this from the collective bargaining process. Furthermore, contracting out would result in lower wages. MR. VALESKO referred to "the second part of the bill" and noted that he did not have a copy of the proposed committee substitute but had been listening to the previous conversation. He stated, "That, to me, would result in utter chaos in the work place." He said the law of the land in the U.S. allows employees to gather together for the right of collective bargaining with their employers. What PERA does is extend the law in the private sector to those in the public sector. Mr. Valesko referred to comments made by Representative James and said the proposed legislation would change the playing field in midstream. MR. VALESKO discussed a hypothetical situation, saying even though the employees would have the right to strike, a political body could choose to no longer bargain, even in the middle of negotiations, by a mere vote of the assembly, for example. He said that is inherently unfair. He urged the committee to vote against the bill. MR. VALESKO pointed out that the state has a long history of collective bargaining; PERA has existed since 1972, and in large part, it has been beneficial regarding job stability for both public employers and employees. Number 1284 JIM SAMPSON, Mayor, Fairbanks North Star Borough, testified via teleconference, saying he represents a municipality of 85,000 residents. The municipality has been subject to PERA for 25 years and has had an excellent labor/management relationship with its employees. MR. SAMPSON advised members that he had been commissioner for the Department of Labor, with responsibility to administer AS 23.40.070 for all municipalities and political subdivisions of the state. In 1990, as commissioner, he recommended to the governor Executive Order 77, which combined the Alaska Railroad Board, the Alaska Labor Relations Agency and the Department of Labor's Labor Relations Agency into one agency, which is the Alaska Labor Relations Agency now described in statute. MR. SAMPSON was also commissioner when 54 school districts went from Title 14 to Title 23 under PERA. In his view, the law works well. He believes it is not good public policy to have municipalities, every other year, opt in and out of PERA like yo- yos, whether by majority vote or ordinance. Schools would be disrupted and important public services halted. Mr. Sampson asked how many committee members had received calls supporting the legislation and said he suspected it was few, if any. MR. SAMPSON mentioned a rumor that there was a "fight" going on between legislators in the Senate and House and the state's public employees. Mr. Sampson said if that were the case, they asked that it be taken somewhere other than Alaska's schools, cities and boroughs. MR. SAMPSON pointed out that PERA does not say a municipality cannot subcontract out services. For example, the Fairbanks North Star Borough has no limitation on its right to subcontract; they do subcontract out work that is in the best interest of the borough. (Teleconference connection was temporarily lost.) CHAIRMAN GREEN announced to Mr. Sampson and to personnel at the LIOs that there had been power problems. He suggested the committee substitute faxed to the LIO locations may not have reached them because of that. Number 1502 REPRESENTATIVE JAMES explained that the bill has two parts. One is the opt in/opt out provision for municipalities. The other is that for issues which cannot be bargained, it adds the right of the employer to contract out or privatize services or functions previously performed by employees or that could be performed by employees. She recalled a problem in Fairbanks a few years ago when they wanted to contract for janitorial work; as she remembered it, a part of the union agreement did not allow that. MR. SAMPSON suggested that may have been with the city, not the borough. He said if a collective bargaining agreement had language specifically prohibiting the employer from contracting out, they would not be able to do that. However, Mr. Sampson was saying that the right to contract or subcontract under PERA is a mandatory subject of bargaining, and both parties have had a legal right to sit down and bargain over the issue of subcontracting. If some employer, such as a municipality, wants to negotiate language that may limit its rights, for whatever reason, it has the right to do so. Mr. Sampson restated that the Fairbanks North Star Borough can subcontract without any problem and does subcontract services. REPRESENTATIVE JAMES indicated she was speaking about the school district. However, perhaps things had changed since then. Number 1631 REPRESENTATIVE ERIC CROFT requested that Mr. Sampson explain what opt-out provisions are currently in place. He noted that the committee had information that some must opt out through a hearing or through the judicial process. MR. SAMPSON acknowledged it had been a number of years since he had any involvement in the administration of PERA. He believes a governing body can opt out of PERA by either resolution or ordinance, although perhaps only by ordinance. Some municipalities had found themselves in trouble when they attempted to opt out of PERA right when employees had opted to bargain, in effect denying the employees' rights under Title 23. Mr. Sampson restated that a governing body can opt out of PERA, which many have done. REPRESENTATIVE CROFT asked whether Mr. Sampson had the proposed committee substitute. MR. SAMPSON said it had just been handed to him. REPRESENTATIVE CROFT specified they were discussing Section 2. He said his concern is what the change in the law is. MR. SAMPSON responded that his concern is the effect of this type of action. He stated his understanding that under the proposed committee substitute, one could opt out of PERA by ordinance or resolution. The next year, one could opt back in. And a couple of months later, one could reconsider and opt back out again. Mr. Sampson suggested that would turn things upside down. REPRESENTATIVE CROFT pointed out that the operative language is, "at any time". If a body could opt out now, the main change of the bill is that it could be done to avoid a group of employees who were organizing or taking some activity that the body was worried would have some effect on PERA. The body could do what the courts now prohibit, which is "bad faith opting-out." MR. SAMPSON suggested enough cases had been before the supreme court regarding municipalities that had exercised the Koslosky Amendment. He said, "They did it at a time when employees were exerting their concerned activity. They did it when there was an organizing drive occurring, and they did for the purposes of denying their rights under the law. And I think that's what the courts have said here in the last 100 years, in unanimous decisions, that you cannot do that." MR. SAMPSON said he believes the bill is trying to correct a current situation in law that the sponsor does not favor: If a municipality does not opt out of PERA and basically accepts the provisions of Title 23, it would have a legal obligation to bargain with its employees. That obligation would continue throughout the bargaining relationship. Mr. Sampson believed a situation had occurred where the city repeatedly opted in and out to deny people's rights to bargain; that resulted in the supreme court's ruling that once an entity had opted in, it could not opt out. CHAIRMAN GREEN noted that there had been several questions, which the sponsor would address in summation. Number 1835 DON OBERG spoke via teleconference from Kenai, advising members he was present to monitor testimony but opposed the bill as written. ANNE GENTRY testified via teleconference from Kenai. A retired educator, she believes the concept of the bill is badly flawed. She concurred with almost everything said by Ms. Hope and Mr. Sampson. She asked: In terms of teacher contracts, would the government body be the local borough assembly or the school board? MS. GENTRY posed another question: If a union agreement expired in 1997, followed by another contract with a different group of employees in 1998 and so on, must they vote every time a new agreement is being negotiated? For example, negotiations might take place with classified employees one year and with certificated employees another. CHAIRMAN GREEN advised Ms. Gentry that the sponsor would respond during his closing statement. Number 1923 ED FLANNIGAN, Deputy Commissioner, Department of Labor, came forward to testify. He explained that PERA is within the department's statute and that the Alaska Labor Relations Agency, which administers it, is within the department. The department opposes the bill because it conflicts with the department's basic statutory mission to foster and promote the welfare of the wage earners of the state, including public and private employees. MR. FLANNIGAN said the department also believes that essential to that welfare is the right to organize for purposes of collective bargaining. While the department does not promote it, the right should exist for employees, should they choose to do so, to join together to have a collective voice - and the strength in numbers - for dealing with their employers. MR. FLANNIGAN commented that except for the sponsor, he did not recall any proponent of the bill in two hearings. He submitted that instead of leveling the playing field, it obliterates or blows up what is now a level playing field. He said a right, such as the right to collectively bargain or unionize, is meaningless - and not a right - if it can be revoked. He believes this is close to a civil or human right that should not be legislated one year and "unlegislated" the next. MR. FLANNIGAN advised members that there are employees in Alaska in political subdivisions that have lawfully opted out. For example, the Municipality of Anchorage and the City and Borough of Juneau had adopted their own systems. For many political subdivisions, the preferred method of labor relations is "no labor relations, no collective bargaining, no recognition of the employee's rights to any kind of voice in their working conditions." He added, "And these are not uncommon out there." MR. FLANNIGAN recounted how when he worked for a labor organization, he was called to a school district in a small community in the Interior. At that time, noncertificated school district employees had no right to bargain, not even under Title 14. The employees were concerned because the teachers were organized and they were not; they felt they were getting the short end of the stick. Mr. Flannigan had to explain, in this day and age, in Alaska and in this country, that they had no right to form a union. Those employees had worked there for years. When they decided to organize, they were shocked that they had no right to form a union. Mr. Flannigan said such situations would be endemic with the proposed legislation. MR. FLANNIGAN noted that fortunately, a couple of years later the legislature gave the noncertificated employees the right to bargain under Title 14, which was the limited bargaining, "meet and confer." And a couple of years after that, the legislature brought them into PERA with all educational employees. MR. FLANNIGAN said the subcontracting portion of the bill makes for unbalanced or "unreal" negotiations. Many arbitrators and the federal courts have recognized that if an employer can subcontract out part or all of the work of a bargaining unit, the existence of the bargaining unit is threatened; therefore, they should have a right to bargain over subcontracting. Mr. Flannigan pointed out that no federal labor law which PERA or the agency looks at says that any employer has to agree to any single term or any subcontracting language, only that they must bargain over it. MR. FLANNIGAN said as Mr. Valesko mentioned relating to "the state units," most of them merely say that the employer has to conduct a cost study to show that, in fact, it will save money. He said Local 71 has some wage protection in that contract employees should get something akin to what the replaced employees made. MR. FLANNIGAN referred to a book entitled Reinventing Government, which says competition "can be structured that will produce more equitable results than service delivery by a public monopoly. Contractors can be required to provide comparable wages and benefits and to promote affirmative action, for example." Mr. Flannigan said the competition, the contracting out, would not just be done on the backs of the workers. Whether they were state workers, ex-state workers who had moved into the private sector or workers who replaced the state workers, there should be other reasons for it. Mr. Flannigan stated that it is an argument for at least allowing the parties to negotiate. MR. FLANNIGAN referred to earlier comments by Representative James that suggested the good relationship in the Matanuska-Susitna Borough and the school district would continue, that they should not have a problem and would still have the tool of the strike under HB 124. Mr. Flannigan pointed out that the good relationship probably exists because the parties operate "in a balance." He said HB 124 would remove that balance. For example, if the employee union was being totally unreasonable in the eyes of the school district or the local government, the local government could opt out. In that case, the right to strike would be lost because for public employees not under PERA, there can be an injunction to put them back to work; that was common and happened to teachers before they were covered by PERA. Mr. Flannigan restated opposition to HB 124. Number 2167 REPRESENTATIVE JAMES said she tended to agree that the focus ought to be more than just a cost issue. It should include efficiency or generally having better services. She stated, "And I tend to agree with the bargaining part of this issue, except I have a real problem with public employees, as opposed to private. It seems to me like they're bargaining with the wrong payer to get their agreement." REPRESENTATIVE JAMES mentioned the ability to at least discuss contracting out. She recalled earlier days in Fairbanks where there were huge salaries resulting from the oil pipeline days; suddenly, the municipal government had been unable to pay those kinds of salaries, although that had leveled out somewhat over the years. She said when they attempted to contract out, she believes it was because they felt they could get it done for less. REPRESENTATIVE JAMES said she is not necessarily against unions; she believes there is a part for them to play. However, especially for publicly funded entities, the ability of people to pay taxes and the wages people receive should balance. If the bill would not accomplish that, she asked whether there is another way besides "heavy bargaining" that can do that. MR. FLANNIGAN suggested the method already exists. For example, where there is a dramatic decrease in revenues, hard bargaining by the employer is certainly called for; that is where the will of the public is represented. The result of negotiations is subject to legislative approval. In addition, those voting on that contract, or funding it, are subject to the will of the voters. Mr. Flannigan believes it is amply addressed. MR. FLANNIGAN related a personal experience with a group of Fairbanks city employees under PERA, whom he represented in the mid-80s. They had a good contract, but in 1986 things fell apart. The employees he represented had voluntarily delayed two raises, extending the agreement for six years. Mr. Flannigan submitted that the system works. Number 2354 REPRESENTATIVE BRIAN PORTER observed that currently the law allows a municipality to opt out. He asked: If a municipality did so, was there no federal requirement or legal obligation to recognize the right to bargain? MR. FLANNIGAN said that is correct. They would be in limbo as far as collective bargaining unless the municipality, through some other method or ordinance, granted some form of collective bargaining. REPRESENTATIVE PORTER referred to the provision in the contract described by Mr. Valesko that allows contracting out if it could be shown to be cost-effective. He asked whether Mr. Flannigan was aware of such a situation ever being arbitrated or taken to court. MR. FLANNIGAN responded that he knew it had been arbitrated, but he did not know the details. He believed there had been more than one instance. He suggested Mr. McMullen from the Department of Administration might have information on that. He thought it had gone to the state supreme court. REPRESENTATIVE CROFT expressed his understanding that political subdivisions could generally opt out unless there had been substantial organizing activity or they were doing it to prefer one unit over another. MR. FLANNIGAN responded that it is more limited than that. He explained that the Koslosky Amendment was a floor amendment to PERA in 1972; as it came to the floor, PERA had applied to all employees of political subdivisions, as it applies to the state. There was a floor amendment to allow the opt-out; it said it applies to municipalities and political subdivisions unless they elect otherwise. MR. FLANNIGAN said the "genesis through the courts" was that there was a window for existing municipalities to opt out. A newly- created municipality has the opportunity, within a reasonable time, to exercise the opt-out right. Mr. Flannigan believes the court said that time period is one year. TAPE 97-59, SIDE B Number 0006 REPRESENTATIVE CROFT asked whether those grandfathered in could opt out only under limited circumstances. MR. FLANNIGAN said they cannot opt out. Number 0016 REPRESENTATIVE BUNDE commented that a limited number of political subdivisions had the opportunity to opt out. He asked whether under current statutes, subdivisions could no longer opt out. MR. FLANNIGAN said, "That's correct." REPRESENTATIVE BUNDE asked whether a bargaining unit could opt out at will. MR. FLANNIGAN stated, "A bargaining unit can cease to exist if the members vote to de-certify it. That's correct." REPRESENTATIVE BUNDE asked whether those employees would not be covered but PERA would still exist for the rest of the municipality. MR. FLANNIGAN replied, "It could, yes. You have municipalities where there are some unorganized employees and other organized employees." Number 0046 REPRESENTATIVE NORMAN ROKEBERG asked how many municipalities and political subdivisions are in PERA now and how many are not. MR. FLANNIGAN responded that he would be relying on the legislative research done for Representative Vezey (included in committee packets.) He said the Alaska Labor Relations Agency does not keep a list per se. Ballpark figures are 11 of each. REPRESENTATIVE ROKEBERG asked whether anyone could opt in. MR. FLANNIGAN said yes. Two municipalities that had previously opted out had affirmatively opted in: the City of Fairbanks, in approximately 1981 and, he believes, the City of Cordova within the last five years. REPRESENTATIVE ROKEBERG asked why there are no restraints for opting in, whereas there are restraints for opting out. MR. FLANNIGAN said he believes the right to bargain is a human or civil right that, once granted, is meaningless if it can be revoked. There is no parallel in the private sector, where an employer who does not like the way the labor relations system is working cannot say, "I don't want to play anymore." If an employer is under the national labor relations act, that employer is always under it. Although an employer may, through various methods, become non-union, that employer still operates under the law. Mr. Flannigan specified that they were talking about the requirement to recognize a duly-constituted union. Number 0138 CHAIRMAN GREEN asked whether Fairbanks, for example, would also be unable to opt out. MR. FLANNIGAN said that is correct. He stated, "Over the years, I think that's where this legislation has stemmed from, back to '88, the first time it was introduced, City of Fairbanks." He noted that although all the city's bargaining units may decide to dissolve, the law would still exist there. Should some employees in the future decide to form a union, they would do so under PERA. Number 0163 REPRESENTATIVE ETHAN BERKOWITZ asked whether corporations and companies fall under the national labor relations act but municipalities and other political subdivisions do not. MR. FLANNIGAN said that is correct; public employees are specifically excluded from the national labor relations act. REPRESENTATIVE BERKOWITZ asked whether municipalities have greater freedom to deal with their employees than private corporations do. MR. FLANNIGAN replied, "I'd say they have greater freedom to deal with their employees. And concomitant to that, their employees have, without barring PERA, a whole lot less rights than the employees of those corporations do." REPRESENTATIVE BERKOWITZ asked whether, then, there is a greater disparity already in the public employee/employer relationship than in the private employee/employer relationship. MR. FLANNIGAN said for those not under PERA in Alaska, that is definitely true. He added that while PERA does not directly parallel the national labor relations act, it is closely modeled after it, and the case law is utilized by the agency in its decisions. HOLLY SALO ATKINS (ph) came forward to testify, stating that she is in her seventh year of teaching. Currently at Bartlett High School in Anchorage, she expects to go through many more contract negotiations. She discussed a contract recently ratified with the Anchorage School District, which would result in $900 less per month for her and her husband at the end of the contract. In spite of that, she had voted to agree to that contract partly because of the rules that were followed with the bargaining. MS. ATKINS expressed concern about HB 124 because the relationship between school districts and their employees during a bargaining time is usually "cautious and fragile." She assumed that PERA was carefully created to promote fairness in bargaining practices. She said PERA provides an organized system for creating contracts and ironing out bargaining issues. With this bill, it seems that organized system would be jeopardized. MS. ATKINS asked: If a municipality creates an ordinance to end PERA, what is the alternative? And how would her own contract be created? She suggested this bill would disenfranchise tens of thousands of public employees that PERA affects. "We should be working to make efficient change that urges cooperation, rather than seeking contention and dividing public workers," she said. "Working in a proactive, forward-thinking fashion would be more productive." REPRESENTATIVE JAMES asked whether Ms. Atkins knew that the Municipality of Anchorage had opted out of PERA. MS. ATKINS said no. REPRESENTATIVE JAMES asked whether, even though she was not satisfied with the results, Ms. Atkins was satisfied with the bargaining. MS. ATKINS replied, "Well, we bargained with the school district, if that's under the same thing. I do know that the previous contract, I voted to strike because of the way the bargaining was held. I felt like it was very below-board." Number 0355 REPRESENTATIVE PORTER said it had been five years since he was on the municipal assembly. He asked: Are you saying that you will lose a raise that you thought you otherwise would have had? MS. ATKINS explained that when she signed her contract with the district, she was given a salary schedule that told her how much she would be making in her eighth year of teaching if she had 90 credits past her degree. Although she has those credits, she will not be paid that amount. REPRESENTATIVE CROFT commented that PERA seemed to be a balance of rights. He suggested Ms. Atkins' point at the beginning was that she had bargained under a system that guaranteed her right to organize. MS. ATKINS concurred. JOHN CYR, President, NEA-Alaska, came forward to testify. Prior to 1990, school districts bargained under Title 14 but had no right to strike. Nor was there any finality to it; they could meet, confer and be unionized, which they did for a number of years. However, at some point, school districts had the right to refuse further discussion. MR. CYR explained that they had asked for some kind of finality. Their preference would have been binding arbitration. However, although they met with the legislature for years about that, it did not happen. There had been a feeling that it was not a good idea to give decisions regarding final terms and conditions to a third party who may not be from Anchorage, for example. In the final analysis, all parties - including the school boards association and the superintendents association - agreed to move under PERA, which would provide them with basically the same bargaining laws as for other state employees. MR. CYR said with that came the right to strike. That happened in 1990, and there was a two-year sunset provision that gave the state time to see whether it worked to have school districts under PERA. In 1992, the legislature voted to repeal the sunset, which was vetoed by then-Governor Hickel and overridden by the legislature. Thus, they have been firmly under PERA since 1992. MR. CYR indicated NEA-Alaska's perception is that PERA provides a framework where both parties can sit down and bargain not just wages and similar employment issues but also other issues that are part and parcel of how schools work. "That, we believe, worked quite well," he commented. Last year, the legislature passed HB 465, which amended PERA and made the process even more public. It allowed for public bargaining and made proposals from both sides available to the public. When a tentative agreement (TA) is reached, that is available for public comment before there is a vote of the organization and a vote of the school board. MR. CYR emphasized that the law has built in a number of safeguards that lay out a framework for how these are supposed to happen, so that the guidelines are clear. At some future time, a municipality and a teachers association or classified association may be unable to agree. People may be on the streets with picket signs. Mr. Cyr asked, "Does the association want that? Of course not. It takes just an immense amount of time and organizational effort, and we would much rather see things handled, as I'm sure school districts would. But it does happen. And this law ... provides the oversight by the Department of Labor to make sure that it happens in a real, rational manner." MR. CYR pointed out that there are things that cannot be bargained now, including management rights, employment practices of the district, classification of employees, the school calendar, evaluations and the subjects of evaluations. They believe there is truly a balance now. MR. CYR referred to testimony by Lucy Hope about the millions of dollars saved over the last few years through a negotiated agreement. He said Juneau now has a two-tiered salary schedule, which will save the district millions of dollars; Kenai has a two- tiered salary schedule as well. Those were negotiated. MR. CYR stated, "It would be nice to think that somewhere out there that unions have the ability to just impose what they want on school districts and get the kind of settlements that I think they deserve, but we know that isn't true. It's a process. And PERA builds that process in." Number 0709 MR. CYR discussed whether "unionism" in schools benefits students. He referred to a lengthy document entitled, "Are Teachers' Unions Hurting American Education?" The executive summary therein was independent research by the University of Wisconsin. He referred to the third paragraph of that and stated, "The results of this study demonstrate clearly that student performance on the tests - we're speaking of the SATs and NAEPs - is significantly better in states with high levels of unionization. With all other variables held constant, average student scores on the SATs are 43 points higher in states where over 90 percent of teachers are unionized [than] in states where less than 50 percent of the teachers are covered by collective bargaining or `meet and confer.' Furthermore, when collective bargaining is removed from the analysis, scores drop in all states." Mr. Cyr advised members that statistics followed that. MR. CYR said clearly, at least in that study, the idea that school districts and their employees get to sit down and discuss, within a framework, the terms and conditions of employment and the way schools run for students is the better way to go about it. MR. CYR said he agrees with the sponsor of HB 124 that consensus of public sector employees must be addressed for things to work. Mr. Cyr said that is what PERA does. It provides public sector employees a forum where they can come to consensus with their employers. He stated his belief that it should continue. Number 0810 CHAIRMAN GREEN stated, "In that third paragraph, it says that `furthermore, when collective bargaining is removed from the analysis, scores drop." He asked whether that is theoretical. MR. CYR explained that some states that had collective bargaining as part of the law became "right-to-work" states where the right to collective bargaining was withdrawn. In those states, uniformly, student test scores had dropped. CHAIRMAN GREEN asked whether the drop in scores occurred because by removing the union, salaries dropped, resulting in lower-quality teachers. MR. CYR said he did not know. When school districts bargain with employee groups, they bargain more than salaries. They bargain issues like student safety. In some states, they bargain class size and curricular decisions. Although those issues are not written up by the press, they are the heart of many agreements. MR. CYR emphasized the importance of financial considerations but said they also bargain hard for those things that they believe directly affect students. Number 0917 REPRESENTATIVE PORTER inquired about the date of the document. MR. CYR said he had received it this past year. He believes the work was done in the spring of 1996, with publication following that summer or fall. Number 0942 REPRESENTATIVE ROKEBERG asked whether the Anchorage School District is under PERA but the municipality itself is not. MR. CYR replied that all school districts are covered under PERA. In 1990, the Anchorage School District came under PERA. The municipality had removed itself; it has its own separate bargaining guidelines. REPRESENTATIVE ROKEBERG asked whether the school districts' being under PERA was mandated or permissive. MR. CYR specified that the legislature had passed the law placing school districts under PERA. REPRESENTATIVE JAMES asked what this bill does to change that. MR. CYR read portions from Section 2, page 2, beginning at line 5. On line 6, it says, "Except as provided in (b) of this section, the provisions of AS 23.40.070 - 23.40.260 do not apply to municipalities and other political subdivisions." Mr. Cyr stated, "We believe that that sentence stands alone, and it takes all school districts out of PERA. Then, when you read further, it says, `A municipality may, by ordinance, and a political subdivision other than a municipality may, by resolution, choose to accept or reject application of the provisions [of AS 23.40.070 - 23.40.260] at any time.'" MR. CYR said he believes, and their legal counsel has informed them, that if this bill passes, school districts will be out of PERA. And then they may, by ordinance or resolution, go back in. Mr. Cyr said according to the sponsor, they may be in until they opt out. However, Mr. Cyr believes a real argument can be made that school districts will no longer have the right to bargain contracts when those expire unless the municipality or political subdivision institutes an ordinance or resolution, which they could choose not to do should they no longer want to bargain. Number 1073 REPRESENTATIVE CROFT said, "So, under either interpretation, either they're all out and they can opt back in or they can opt out. This would allow school districts, municipalities, to say, `We don't have to recognize your bargaining rights ....'" MR. CYR replied, "We believe that is correct. This would effectively do away with our right to bargain as we know it." Number 1102 MIKE McMULLEN, Personnel Manager, Division of Personnel, Department of Administration, came forward to testify regarding Section 1. He said subsection (5), the new subsection under Section 1, is a completely different kind of topic to be excluded from bargaining. Subsection (1) prohibits negotiation of terms relating to reemployment rights for injured state employees under AS 39.25.158. Subsection (2) regards reemployment rights of state employees who serve in the organized militia and thereby provide a benefit to the state. Both subsections (1) and (2) relate to people who have already been employed by the state, whose rights cannot be "trumped" by a collective bargaining agreement. MR. McMULLEN noted that subsections (3) and (4) were added the previous year under welfare reform. They say that collective bargaining cannot defeat the process regarding temporary employees under the Alaska Temporary Assistance Program or the authority of agencies to employ them. MR. McMULLEN said in contrast, subsection (5) is not a comparative right between two employees but a limitation on the right of all employees to bargain about things that have to do with their own personal security, which is loss of their jobs through contracting out. MR. McMULLEN provided a handout describing six state collective bargaining agreement provisions on contracting. He said Don Valesko's testimony had accurately described provisions of the "labor, trades and craft" contracts. Mr. McMullen stated, "In all cases where it's been an issue to the point of bargaining to a provision - i.e., we have some contracts which don't have provisions about subcontracting, but ... the agreement has been not to have a provision in the agreement about it - but in the six where we have reached agreement, every one of them has a requirement for advance notice to the union, that a feasibility study be done, that the results actually show that there will be a financial savings to the state before you can enter a contract which displaces state employees." MR. McMULLEN said one question would be: If that is not a reasonable approach, what approach would an employer be expected to take? If there were to be provisions about contracting, presumably the cost would be one item. He further asked: If it cannot be done more cheaply, why have someone else do it? He said the handout shows how the state has handled it. He sees no reason why future bargaining would produce different results. MR. McMULLEN referred to an earlier question about supreme court decisions; he was unsure which one was being mentioned. There had been two supreme court decisions of interest regarding collective bargaining. One had to do with "finding, under a provision of PERA, the things which are the fundamental purposes of the employer are not subject to bargaining; and the case that went to the supreme court had to do with the state's classification system." MR. McMULLEN said another supreme court decision had to do with contracting, although it was not a question of PERA but of contracting versus the Merit System. The court found that government's business is to govern, not to employ; it was equally permissible to employ under provisions of the constitution and statutes, as with the Merit System, or to contract for work. That decision makes it a choice so long as either is done according to the laws governing that activity. MR. McMULLEN expressed concern about timing. There was a bill regarding a task force on privatization that would generate reports by November of 1997 and November of 1998. The first year's topic includes contracting. He stated, "We may find, from that task force, an outcome which is an appropriate outcome for collective bargaining contracts. And if it doesn't provide something, of course, this legislature will have next session to deal with the topic anyway." MR. McMULLEN suggested that Section 1 be removed from the bill or amended. Number 1454 REPRESENTATIVE JAMES asked whether Mr. McMullen believes the language in the bill takes this right away from school districts to bargain. MR. McMULLEN replied, "I believe it does. They are a political subdivision of the state. And the language `except as provided below' that says PERA does not apply, ... as I read it, the requirement is to positively opt in or it doesn't apply. And I don't know what that what mean in terms of (indisc.) contracts in place." REPRESENTATIVE JAMES referred to subsection (5) and said although she understood Mr. McMullen's testimony about this being a "different color stripe," she believes that under the title, it fits. She noted that privatization and out-sourcing are current buzz-words nationwide. She asked about Mr. McMullen's testimony regarding restrictions to contracting out. Number 1560 MR. McMULLEN explained under current law, that is a subject of bargaining. If subsection (5) passes, that will be a subject they can no longer bargain about. It is generally called "effects bargaining." If the employer decides to pass work off to the private sector, for example, the employees' rights under the national law - to which the state's law is fairly close - say that the effect on employees is a subject of bargaining. If this bill passes, that can no longer be bargained. The employees will lose their right to have any say about the outcome. Number 1604 REPRESENTATIVE PORTER stated, "Mike, I believe your second reference to the supreme court case found that contracting out was legal, assuming that the law is supported ...." MR. McMULLEN concurred. REPRESENTATIVE PORTER asked whether Mr. McMullen knew of any arbitration ruling or court decision defining the language in the contract Mr. Valesko had described, relating to the ability to contract out if it is determined to be cost-effective. MR. McMULLEN replied, "We've had several arbitrations over the years and several changes in contract language as a result of them. In Mr. Valesko's contract, we've had, in and out over a period of years, a size limitation on the community. It's not in there at the present time, but it was a subject of bargaining, that the `no contracting' provided only the community was of a certain size or something." MR. McMULLEN advised members that a notable case on contracting was when the legislature first decided that certain welfare work would be performed by the regional nonprofit corporations. The legislature had appropriated money to Kawerak, Norton Sound and possibly one other entity. The state said, "Well, the legislature passed some money; that's how we have to spend it," and then wrote those contracts and laid state employees off. MR. McMULLEN explained, "Under a collective bargaining agreement, it said we had to do a feasibility study before we could do that. And we lost that arbitration. We paid, for a period of time, the employees who were not working for us, because we hadn't followed the contractual provision." MR. McMULLEN referred to the handout and noted that each contract contains its own language and each would be interpreted differently as it reaches arbitration. He said the department has current cases relating to contracting out. REPRESENTATIVE PORTER again asked whether Mr. McMullen knew of a decision by an arbitrator or a court that has come close to defining cost-effectiveness in terms of a requirement prior to contracting out. MR. McMULLEN said no. CHAIRMAN GREEN advised members that Kathy Murphy (ph) had called in; she feels this bill will not benefit the schools or the students. He asked Marilyn Pillifant to testify only if she had something to add beyond previous testimony. MARILYN PILLIFANT came forward to testify, asking that the committee proceed with caution and not eliminate employees' rights to conduct meaningful discussions on issues involving them. She said she would submit other comments. CHAIRMAN GREEN asked whether anyone else wished to testify and then closed public testimony. He called on the sponsor to answer the questions posed during the hearing. Number 1862 REPRESENTATIVE VEZEY said he believed that most of the questions had been answered. REPRESENTATIVE VEZEY said he had misspoken earlier in describing the situation of the "status quo." He stated, "The bill provides that PERA doesn't apply to a political subdivision unless the political subdivision follows the process and says, `we're covered,' or it says, `we're not covered.' The effect of what would happen if this went into law was that ... if one of the 17 political subdivisions or one of the 54 school districts that's covered by this PERA didn't change the way they did business, they would go on, without changing the manner they did business. The only difference would be that the provisions of PERA would not be legally enforceable until they took action saying, `We going to bind ourselves to that.'" Number 1940 REPRESENTATIVE BERKOWITZ referred to AS 23.40.070, the declaration of policy for PERA, and read subparagraph (2). It states that these policies are to be effectuated by "requiring public employers to negotiate with and enter into written agreements with employee organizations on matters of wages, hours, and other terms and conditions of employment". REPRESENTATIVE BERKOWITZ suggested if there is a provision to opt out of PERA, there should be an alternative agreement between the public employer and the public employee. REPRESENTATIVE VEZEY replied, "I believe the whole point of this debate is the properness of the state of Alaska mandating on democratically organized societies how they're going to conduct their business. I believe that local government units, organized along the principle of democracy, are capable of ruling themselves. The vast majority of the people in the state of Alaska live in governmental units that are not covered by PERA. Virtually all of them that I'm aware of have some sort of system for relating between their governing body, the management of the municipality or the political subdivision, and the employees. I think they're all different. And I think they kind of look at each other sometimes and say, `Well, you know, we have a problem with our system. Maybe there is something in their system that we could benefit from." REPRESENTATIVE BERKOWITZ said he tends to agree they should let local governments do as they see fit. However, the previous week, they had passed a bill that "told them that they couldn't do things regarding shooting ranges and airports." He suggested when there is a broader state interest involved, such as ensuring that public employees have certain rights and declarations of principle, there should at least be some oversight by the state. Number 2140 REPRESENTATIVE VEZEY restated his belief in the ability of people to govern themselves. He said there was no chaos in the management/labor relationships of the cities of Anchorage or Soldotna. He said he understands that Soldotna has one of the more innovative management/labor relationships in Alaska and explained, "They have an informal relationship. They have bargaining. They take their best proposal, and if they can't reach a compromise between the city managers and the bargaining units, they take the two proposals before the voters. And the voters decide not on a compromise but which is the best offer. And they've never had to take it to a poll yet. So, I mean, there are other systems, and people do work together, because we all have a constructive, mutually beneficial relationship." Number 2206 REPRESENTATIVE BERKOWITZ noted that they had heard no testimony from a school district or political subdivision indicating dissatisfaction with the current arrangement. "And if there is something else out there, I'd be curious to know what it is," he added. REPRESENTATIVE VEZEY stated that a lot of people had told him, "We could do a lot of things much better ... if we weren't bound by this legal structure." He stated, "And they're really not saying they don't want to bargain with their employee. They're not saying that they just want to have totally unilateral employee/employer relationships. They say the constraints of PERA -- and PERA is only one method of collective bargaining out of a thousand different methods that are out there in the world. It's only one." CHAIRMAN GREEN asked whether Representative Vezey believed, then, that if this passed and individually the various school districts opted back in as political subdivisions, that would be all right, as it would be their choice. He asked, "Now, if they were to do that, would it be your feeling that they would be, then, bound by that, as they claim they are now?" REPRESENTATIVE VEZEY replied, "I believe the answer is yes, Mr. Chairman. The difference is now they have no choice. We're telling them how to run their business. And I think many of them would probably make some changes in PERA. Many of them would probably just take it the way it is, because it is a system that does work. It's just there are perhaps better ones out there." CHAIRMAN GREEN called an at-ease at 3:22 p.m. TAPE 97-60, SIDE A Number 0006 CHAIRMAN GREEN called the meeting back to order at 3:37 p.m. Number 0021 REPRESENTATIVE BUNDE asked, "Why the CS and why not a vote of the public, then, rather than just a vote of the political subdivision?" REPRESENTATIVE VEZEY said that is a decision for the committee. He had brought the committee substitute forward but had not made a recommendation. He believed both methods would work. He noted that the Alaska Municipal League had told him they would prefer an ordinance-type of action rather than a ballot referendum. He stated, "I don't see much difference. I do believe in a representative form of democracy. I can support either version." REPRESENTATIVE BUNDE said at the adoption of the proposed committee substitute he had not voiced his objection. However, he much preferred the previous version. REPRESENTATIVE JAMES stated that her motion to accept the committee substitute had been a matter of procedure. She stated, "Based on the testimony that I heard and everything, I think that the vote of the public would be not allowing them to do it so quickly and make it - the opting in and out - a different process. And I would have more respect - and do have more respect - for the voters than I do a legislative body." Number 0173 REPRESENTATIVE PORTER said having been a member of a local body and the legislature, he tries to avoid establishing mandates on local bodies. If they adopted the original version of the bill, they would be saying, "If you want to do this, you can, but you have to go through the costs of an election." He stated, "Other than that, I would support keeping the version that we have on that point. When we get to discuss the bill itself, I've got a couple of other observations." REPRESENTATIVE BERKOWITZ offered Amendment 1, which read: Page 1, line 1 Following "relating", delete "to items not subject to collective bargaining and" Page 1, line 5 through page 2, line 4 delete all material renumber following sections accordingly REPRESENTATIVE BERKOWITZ explained that it deletes subsection (5) from Section 1. CHAIRMAN GREEN noted that it was a suggestion heard during testimony. REPRESENTATIVE JAMES objected for discussion. She said she understood the purpose of the amendment. She noted they had heard testimony saying it is working fine. However, putting "contracting out" and "privatizing" in the same sentence made no sense to her, because she considers them two different issues. If only "contracting out" was in there, she would have no problem with the amendment, but putting in "privatization" changes the whole complexion. REPRESENTATIVE JAMES explained that she understands privatization to be the government's going out of business providing a service and it being picked up by private industry in a "non-monopoly-type manner." It is not so much a cost savings as implementing good services, for example. CHAIRMAN GREEN asked whether the objection was maintained. REPRESENTATIVE JAMES said yes. CHAIRMAN GREEN requested a roll call vote. Voting for Amendment 1 were Representatives Croft and Berkowitz. Voting against it were Representatives Bunde, Porter, James and Green. Representative Rokeberg was absent. Therefore, Amendment 1 failed, 4-2. REPRESENTATIVE BERKOWITZ offered Amendment 2, which read: Page 2, line 4 following "employees", insert "except to insure cost savings to the public employer" REPRESENTATIVE BERKOWITZ noted that Amendment 2 relates to the end of subsection (5). He explained, "It would limit the right to contract out or privatize, except to ensure cost savings to the public employer. And this would preclude, I would think, any sort of bad-faith negotiation, retaliatory or for reasons that don't have to do strictly with saving the political subdivision money." REPRESENTATIVE PORTER objected for purposes of discussion. He asked the sponsor to respond. Number 0594 REPRESENTATIVE VEZEY said he objected and stated, "Obviously, there should be a reason for the actions. It could be something other than cost. But my biggest objection is, it goes back to the old saying that `figures don't lie but liars do figure.' I'm an estimator, and you can say the same thing about estimates." REPRESENTATIVE BERKOWITZ responded, "We're dealing here with a section of the bill that violates another one of those old rules: `If it ain't broke, don't fix it.' And we're already dealing with something that ain't broke. No one's complained about this. And I don't know why we're tinkering with it. So, this would just ensure that if we're tinkering with it, it's done in good faith." Number 0650 REPRESENTATIVE PORTER said he had managed a contract that had a provision that disallowed opting out, period. He indicated that is a problem for someone trying to run an organization. He noted that there had been no testimony about a problem, then said, "I was completely intrigued by the notion that Mr. Valesko testified to, that this kind of a provision was in their contracts. I'm sure that there are situations that could come up that would cause someone to want to consider contracting out for some other purpose, but for the life of me, I can't think of one right now, other than cost savings. And I would have killed to have this provision in my contract." REPRESENTATIVE BERKOWITZ responded that he could think of reasons such as giving one's cousin or brother-in-law a contract. A cost- savings analysis would preclude just giving away a contract. REPRESENTATIVE CROFT noted that they had been talking about mandates. He stated, "This is a provision that does not allow us to contract in this area. It does not allow us to negotiate in this area. I mean, they're still free to make ... whatever agreement they want without this bill, without this provision. They can have it or they cannot. You can be free of it or bound by it. And so, to the extent we're going to further bind what they can negotiate, we should do it for legitimate purposes. And I think this works to ensure that the legitimate purpose of cost savings is the one that is allowed. So, I speak in favor of the amendment." Number 0787 REPRESENTATIVE BUNDE agreed that cost savings seems the most logical reason, and he said it gets pretty far-fetched to think of people doing it for other reasons. "But if there was any danger that someone would do it to just thwart a bargaining position, I guess I wouldn't have problems with putting cost savings in there," he concluded. REPRESENTATIVE JAMES cited an example involving privatization of highway maintenance in British Columbia, about which she had heard testimony. She commented, "It's not something that we could do in this state because we're a totally different configuration." British Columbia's transportation department had "gone out of business" and sold all their equipment. In many cases, the new contractors hired former employees. Although they expected to save money, after a few years, the costs were about equal. However, more people were driving new pick-ups in the various communities, indicating the profit was being spread among the people who had the jobs performing these services. The same cost provided a bigger economic impact on the province. REPRESENTATIVE JAMES concluded that cost is not necessarily the only issue. For that reason, and because it says "privatization," not "out-sourcing," a different issue, she could not support the amendment. Number 0952 REPRESENTATIVE CROFT asked about Representative James's distinction between contracting out and privatizing services. He asked whether to her, contracting out was out-sourcing. REPRESENTATIVE JAMES replied that contracting out and out-sourcing are the same to her. Privatization is when you let the private industry take over the function, without planning on coming back into doing it any time in the future. REPRESENTATIVE CROFT responded, "So, then, the way I read it, this has both contracting out, or out-sourcing, and privatizing services it allows, and this would condition both." REPRESENTATIVE JAMES agreed. CHAIRMAN GREEN asked whether the objection was maintained. REPRESENTATIVE JAMES said yes. CHAIRMAN GREEN requested a roll call vote. Voting for Amendment 2 were Representatives Bunde, Porter, Croft, Berkowitz and Green. Voting against it was Representative James. Representative Rokeberg was absent. Thus, Amendment 2 was adopted, 5-1. Number 1033 REPRESENTATIVE PORTER stated that the bill puts him in a quandary. He likes the idea that a municipality would have the option of selecting what form of relationship it would have with its particular groups of employees. On the other hand, he had once been such an employee, working under a system with no recognition of employees and seeming to get the "leftovers when it came to the city disbursement of available funds." He announced he would vote to move the bill with no recommendation and then examine his conscience. Number 1113 REPRESENTATIVE BUNDE said he was in the same quandary. Because of his own experience, he did not see the problem in Anchorage. If there were places in the state where the problem existed, he was unaware of them. He restated his preference for the original version of the bill. While he would not hold up the bill, he was lukewarm in his enthusiasm. Number 1143 REPRESENTATIVE JAMES said she had no particular love or hate for this piece of legislation. Although happy to move it out of committee, she would make no further commitment. REPRESENTATIVE CROFT commented that it had been a good, far-sighted idea 25 years ago to give public employees the right to bargain; it was a poor idea to take that away from them. "We end up with better relations, employees doing a better job, a better standard of living for them, and there's some evidence that they end up doing a better job in the schools as well when this happens," he said. "I don't think this is a good idea. I'll be voting not to move the bill and, if it does reach the floor, against it." REPRESENTATIVE PORTER made a motion to move the proposed committee substitute, 0-LS0540\B, Cramer, 4/21/97, as amended, from committee with individual recommendations and attached fiscal notes. REPRESENTATIVE CROFT objected. Number 1238 CHAIRMAN GREEN requested a roll call vote. Voting to move it from committee were Representatives Bunde, Porter, James and Green. Voting against it were Representatives Croft and Berkowitz. Representative Rokeberg was absent. Thus, CSHB 124(JUD) moved from the House Judiciary Standing Committee. HJR 25 CONST. AM: PERM. FUND INCOME & DIVIDEND CHAIRMAN GREEN announced the next item of business was House Joint Resolution No. 25, proposing amendments to the Constitution of the State of Alaska to guarantee the permanent fund dividend, to provide for inflation-proofing, and to require a vote of the people before spending undistributed income from the earnings reserve of the permanent fund; and relating to the permanent fund. Before the committee was CSHJR 25(STA), version 0-LS0659\H. REPRESENTATIVE ALAN AUSTERMAN, sponsor, explained that HJR 25 came about following much discussion during his last two campaigns "in reference to the apparent misunderstanding and also phobia out there in reference to what the permanent fund dividend program really is." He said every time he got into a discussion during the campaign or during the interim in reference to the permanent fund itself, he was cut short by people saying, "Don't touch my dividend." REPRESENTATIVE AUSTERMAN noted that the legislature, with approval of the governor, could eliminate the dividend program. However, most of the populace believes it is already protected by the constitution. REPRESENTATIVE AUSTERMAN explained that HJR 25 places the dividend and inflation-proofing in the state constitution so they cannot be removed from the permanent fund program without a vote of the people. The third aspect is interest earnings from the undistributed earnings of the permanent fund itself. REPRESENTATIVE AUSTERMAN discussed the difference between his resolution and the one presented to the Senate; his version allows the undistributed income to be appropriated by the legislature as it is now. In contrast, the Senate resolution puts that undistributed income in the constitution; it can only be spent by a vote of the people or it can go back into the principal of the permanent fund, as has been done the past few years. He stated, "As most of you know, the last two years we put $1.8 billion back into the principal of the permanent fund. REPRESENTATIVE AUSTERMAN expressed concern that with the public perception that all the money must go back into the principal of the permanent fund, they will never use that third part, the interest earnings, to help balance the budget or for anything other than putting it back into the principal. REPRESENTATIVE AUSTERMAN acknowledged concern about changing the current set-up; he was willing to discuss that. Part of the reason for introducing the resolution was to begin an educational process for legislators and the public about what the permanent fund does and is being used for. Number 1495 CHAIRMAN GREEN, noting that this indicates 25 percent will go back into the corpus, asked whether that had not been changed to 50 percent several years ago. He then asked whether this was an amendment to bring it back to 25 percent. REPRESENTATIVE CROFT stated, "It says `at least,' and I thought the current one said `at least' and we changed it by law to 50." CHAIRMAN GREEN said that was what he was asking about. REPRESENTATIVE AUSTERMAN indicated he would check on that. Number 1525 REPRESENTATIVE ROKEBERG stated, "Right now, the statute is 50 percent of fuels that were discovered after `x' date, which is circa about 1982 or '81 or something around in there. For the committee's information, I had some legal research done on this, and right now we're only garnering about $19 million per annum because of the differential. However, this is interesting because with the new string-of-pearl-type fuels that are being developed, the so-called `satellite fuels' and so forth, ... the gross amount of dollars will be going up. And as a result, the percentage of income from the newer fuels will be increasing in the coming years. So, it's a great concern I have right now. But that is a statutory thing and ... not in the constitution." Number 1568 CHAIRMAN GREEN agreed and said this would apply to all fuels, as he understood it. REPRESENTATIVE AUSTERMAN said he would provide an answer. He believed part is covered in statute and part by the constitution. CHAIRMAN GREEN said the 25 percent is constitutional. REPRESENTATIVE AUSTERMAN stated that this is a constitutional amendment that they are asking for. CHAIRMAN GREEN said the question comes back to whether that takes precedent over the statutes that raised it to 50 percent. REPRESENTATIVE AUSTERMAN emphasized that says, "at least." REPRESENTATIVE CROFT asked: Why not constitutionalize the dividend structure as well? He referred to page 2, lines 5 through 7, which says, "an amount of income shall be transferred from the earnings reserve account for distribution as dividends to State residents as provided by law." He noted that the legislature could cut it in half or down to a dollar. Number 1632 REPRESENTATIVE AUSTERMAN explained that the original bill defined how that was to be broken down. After discussing it with the "permanent fund people," they felt that by leaving the formula in statute, it could be adjusted, depending on the world market. Otherwise, there may be a drop in the market, for example, resulting in insufficient money available for dividends or inflation-proofing. "With statute, it could be changed on a rapid basis," he concluded. REPRESENTATIVE CROFT asked: So we really constitutionalize the right to the dividend and the principle of inflation-proofing at an appropriate amount for inflation-proofing but not necessarily the exact formula? REPRESENTATIVE AUSTERMAN agreed that is the objective with the committee substitute. REPRESENTATIVE CROFT referred to a memorandum in committee packets from Ron Lorensen, legal counsel for the Alaska Permanent Fund Corporation, which raises questions about possible tax consequences and potentially having to defend this at some point against a challenge by the Internal Revenue Service (IRS). Representative Croft asked whether Representative Austerman had that document. REPRESENTATIVE AUSTERMAN answered that he had not seen it. Number 1717 REPRESENTATIVE BUNDE said he had similar concerns about the public's perception of the "permanent dividend fund." Specifically, he is concerned that the public confuses the corpus with the dividend. Representative Austerman's description caused him less concern than the Senate version, which he understands to put the amount of dividend in the constitution. He asked: In your discussions with people, if we were to do that, did they understand that that guaranteed they would then be paying taxes in the not- too-distant future? He noted that the state has two sources of revenue: taxes and earnings of the permanent fund. Number 1764 REPRESENTATIVE AUSTERMAN replied that discussions with constituents indicated they would rather receive dividends and pay taxes than to abolish the dividend program. He said whether that is short- sighted on their part is another question. He stated, "I, personally, from my perspective, in talking to my constituents, ... I don't have a problem with re-instituting an income tax." REPRESENTATIVE BUNDE said he was not advocating an income tax. He understood that under the resolution, the principal of the dividend is enshrined but not the amount. Therefore, people could choose to receive $1,000 from the government and then pay it back in taxes, should a tax be imposed, to provide services they feel are appropriate. He mentioned the cost of paying for the bureaucracy to collect a tax and suggested there was no net gain there. REPRESENTATIVE BUNDE said he is less concerned about the resolution if there is that flexibility than if it enshrines procedure and amounts. He requested that the sponsor research the tax question, noting that a guaranteed amount may be viewed differently by the IRS and the state may have to pay taxes on the earnings. Number 1860 CHAIRMAN GREEN referred to the language, "at least 25 percent." He asked whether designations of various fields would be made by the Department of Natural Resources as to what amounts applied to what fields. REPRESENTATIVE AUSTERMAN replied that that is a highly technical question and said he had no idea what future legislators would want to do in statute. He noted that the 50 percent is currently in statute, as he understands it. Number 1930 REPRESENTATIVE ROKEBERG said one of the many concerns he had about the amendment is the calculation of inflation-proofing. He noted there is controversy in the world of economics right now involving numbers used by the bureau of labor statistics to calculate the national Consumer Price Index (CPI) or cost-of-living index. He said there is certainly a debate over which index to use when talking about inflation. He cited examples. He believes at least a slim majority of economists concede that the CPI index is overstated now by as much as 50 percent because of "the lack of the market basket of goods to fully reflect the increases in productivity, the impact of technology, particularly computers, on the workplace, [and] the various other arguments." REPRESENTATIVE ROKEBERG said recommendations have been made to the federal government and the Department of Labor, bureau of labor statistics, to reformulate the cost-of-living index. He noted that as a legislature, they annually appropriate, using that index, a substantial amount of dollars, in the hundreds of millions of dollars. He submitted that they are probably overpaying in "so- called inflation-proofing" right now by $200 to $300 million a year. He said he would be very, very concerned at this point about putting into constitutional language something so controversial and unsettled. REPRESENTATIVE AUSTERMAN agreed. He said that was one reason they had not specified, in the committee substitute, how inflation- proofing is to be calculated. That would be left up to the legislature to do through statute. Even with the current way it is calculated, the statute can be changed to fix whatever problems are perceived to exist. Number 2069 REPRESENTATIVE CROFT referred to the tax question mentioned in Mr. Lorensen's memorandum and stated his understanding that normally, corporations have double taxation; they are taxed, and then dividends come out of the "post-tax." However, a public corporation is not taxed that way. At some level on the continuum, if the permanent fund just generates what corporate law understands as dividends, with no other public function, the IRS will say, "You're a private corporation with the citizens of the state of Alaska as your shareholders, and we're going to double-tax you." REPRESENTATIVE CROFT said he did not know the likelihood of that happening. He proposed that the committee hear testimony in executive session, if necessary because of the legal impact of this, to figure out for themselves how real that concern is. CHAIRMAN GREEN asked whether there was merit in hearing it in a joint executive session with the House Finance Committee. REPRESENTATIVE CROFT said there might well be. REPRESENTATIVE AUSTERMAN said he could not remember all of the discussion in reference to the tax issue, but it had arisen on several occasions. He stated that the original concept of the bill brought up that discussion in reference to taxes. He said, "The CS that we passed, we passed on March 21. This memo is dated March 10. So, if I remember correctly, part of the tax question was eliminated when we took out all the formulas ... and just put in the fact that it's a dividend program. But I'll research it again just to make sure that that's the right answer." Number 2164 REPRESENTATIVE PORTER stated, "Notwithstanding that, I would appreciate a briefing from the Department of Revenue, at least, on this point. And I concur that it should be an executive session because it probably could have one of the bigger effects on the state's finances that we could imagine." REPRESENTATIVE PORTER said considering what the House Finance Committee was currently up against, it perhaps would not be duplicative for this committee to obtain information and then share it individually with those members. REPRESENTATIVE AUSTERMAN suggested it may turn out an executive session is unnecessary "because they may say that it has no bearing at all anymore." However, he would check that to make sure. REPRESENTATIVE ROKEBERG cautioned about rocking the boat. REPRESENTATIVE CROFT, noting that Mr. Lorensen is from a Juneau law firm, suggested it would be relatively easy for him to appear before the committee. CHAIRMAN GREEN advised the sponsor that the committee would await information from him. (HJR 25 was held over.) SB 19 am - REPEAL FED ENFORCEMENT DUTIES/F&G COMSNR CHAIRMAN GREEN announced they would briefly hear Senate Bill No. 19 am, "An Act relating to enforcement of federal laws relating to fish and game; and repealing the power and duty of the commissioner of fish and game to assist in the enforcement of federal laws relating to fish and game." Before the committee was HCS SB 19(RES), version 0-LS0173\E. JOSEPHINE HARDY, Legislative Secretary to Senator Bert Sharp, presented the sponsor statement. She said, "Senate Bill 19 repeals the present statutory mandate that the state of Alaska will assist the federal government agencies in the enforcement of federal laws and regulations as they apply to fish and game resources in Alaska. In light of aggressive federal actions to assume management of fish and game over large areas of our state, in violation of our statehood compact, Senator Sharp believes repeal of this statute is prudent and in the best interests of the citizens of Alaska." CHAIRMAN GREEN noted that it repeals just one section. MS. HARDY agreed that it repeals Section 1. CHAIRMAN GREEN advised members that he had heard the bill in the House Resources Committee. He asked whether there were questions of Ms. Hardy; there were none. (SB 19 was held over.) ADJOURNMENT Number 2305 CHAIRMAN GREEN adjourned the House Judiciary Standing Committee meeting at 4:11 p.m.