Legislature(1997 - 1998)

04/21/1997 01:48 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
 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                                                                
 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                                                           
 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
 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                 
 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                    
 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                     
 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               
 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                 
 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                  
 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                    
 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                   
 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                        
 MR. FLANNIGAN replied, "It could, yes.  You have municipalities               
 where there are some unorganized employees and other organized                
 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                   
 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               
 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                 
 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                 
 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               
 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              
 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           
 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            
 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             
 Number 1454                                                                   
 REPRESENTATIVE JAMES asked whether Mr. McMullen believes the                  
 language in the bill takes this right away from school districts to           
 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             
 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             
 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              
 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                        
 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            
 REPRESENTATIVE BERKOWITZ offered Amendment 1, which read:                     
      Page 1, line 1                                                           
           Following "relating",                                               
           delete "to items not subject to collective bargaining               
      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                    
 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                   
 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               
 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           
 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              
 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              
 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                  
 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                    
 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                  
 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            
 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           
 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.)                                                        
 Number 2305                                                                   
 CHAIRMAN GREEN adjourned the House Judiciary Standing Committee               
 meeting at 4:11 p.m.                                                          

Document Name Date/Time Subjects