Legislature(2015 - 2016)SENATE FINANCE 532

02/24/2016 09:00 AM Senate FINANCE

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09:08:07 AM Start
09:09:01 AM Sheldon Fisher, Commissioner, Department of Administration: Contracts
10:40:05 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Sheldon Fisher, Commissioner, Department of TELECONFERENCED
Administration Contracts
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 24, 2016                                                                                          
                         9:08 a.m.                                                                                              
                                                                                                                                
9:08:07 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair MacKinnon called the Senate Finance Committee                                                                          
meeting to order at 9:08 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Sheldon Fisher, Commissioner, Department of Administration;                                                                     
Kate Sheehan, Director, Division of Personnel and Labor                                                                         
Relations.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^SHELDON     FISHER,     COMMISSIONER,     DEPARTMENT     OF                                                                  
ADMINISTRATION: CONTRACTS                                                                                                     
                                                                                                                                
9:09:01 AM                                                                                                                    
                                                                                                                                
SHELDON FISHER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,                                                                     
discussed the PowerPoint, "Understanding Labor Contracts"                                                                       
(copy on file).                                                                                                                 
                                                                                                                                
Commissioner Fisher addressed slide 2, "Bargaining 101":                                                                        
                                                                                                                                
     •Negotiations are mandated by the Public Employment                                                                        
     Relations Act (PERA) AS 23.40.070-23.40.250.                                                                               
                                                                                                                                
     •The  State  begins   bargaining  successor  agreements                                                                    
     between  October  and  December;   start  date  may  be                                                                    
     accelerated if both parties agree.                                                                                         
                                                                                                                                
     •Wages,  hours  and  other   terms  and  conditions  of                                                                    
     employment are mandatory subjects of bargaining.                                                                           
                                                                                                                                
     •The  State  may, but  is  not  required to,  negotiate                                                                    
     permissive subjects of bargaining.                                                                                         
                                                                                                                                
          -Classification, retiree  benefits, representation                                                                    
          of non-permanent employees                                                                                            
                                                                                                                                
     •Monetary terms must be approved by the Legislature.                                                                       
                                                                                                                                
          -Provided  that monetary  terms of  agreements are                                                                    
          submitted  to the  Legislature  by  the 60th  day,                                                                    
          PERA  requires  legislative session  consideration                                                                    
          during that calendar year.                                                                                            
                                                                                                                                
          -If rejected by the Legislature,  then it is as if                                                                    
          there   is   no   agreement.  The   parties   must                                                                    
          renegotiate to impasse or agreement.                                                                                  
                                                                                                                                
     •If  negotiations   do  not   lead  to   agreement  and                                                                    
     mediation fails, employees have the right to strike.                                                                       
                                                                                                                                
          -Exception:  protective service  personnel do  not                                                                    
          have the  right to  strike but must  enter binding                                                                    
          arbitration after impasse.                                                                                            
                                                                                                                                
     •Employees who are  on strike do not get  paid, but may                                                                    
     not  be  terminated  because they  choose  to  lawfully                                                                    
     strike.                                                                                                                    
                                                                                                                                
     •Striking   employees   may   be  replaced   -   either                                                                    
     temporarily  for   the  duration  of  the   strike,  or                                                                    
     permanently under certain circumstances.                                                                                   
                                                                                                                                
Co-Chair MacKinnon handed the gavel to Co-Chair Kelly.                                                                          
                                                                                                                                
Commissioner Fisher highlighted slide 3, "Monetary Terms":                                                                      
                                                                                                                                
     Marine Units (IBU, MEBA, MMP)                                                                                              
          •Cost of living differential (COLD)                                                                                   
          •Travel pay                                                                                                           
          •Training funding                                                                                                     
          •Pass privileges                                                                                                      
          •Non-watch pay                                                                                                        
     Correctional Officers                                                                                                      
          •Uniform allowance                                                                                                    
          •Duty station incentive pay (Spring Creek)                                                                            
          •Education incentive pay                                                                                              
         •Prisoner transportation officer cert pay                                                                              
          •CDL Cert pay                                                                                                         
     Public Safety                                                                                                              
          •Uniform allowance                                                                                                    
          •State provided medical exams                                                                                         
          •Pilot, diver, and canine pay                                                                                         
     Mt. Edgecumbe Teachers                                                                                                     
          •Family night pay                                                                                                     
          •Activities and extracurricular pay                                                                                   
     General Government Unit                                                                                                    
          •Sea duty pay                                                                                                         
          •Uniform provision                                                                                                    
          •Life, Travel, and Accident insurance                                                                                 
          •Travel and per diem                                                                                                  
     Labor Trades and Crafts                                                                                                    
          •First Aid training                                                                                                   
          •Subsistence pay                                                                                                      
          •Tool allowance                                                                                                       
          •Bunkhouse and housing rentals                                                                                        
     Supervisory Union                                                                                                          
          •Hazard pay                                                                                                           
          •Supervisory differential                                                                                             
          •Sea duty pay                                                                                                         
          •Physicals                                                                                                            
     Alaska Vocational Technical Center Teachers                                                                                
          •Initial Teacher Placement and Step Advancement                                                                       
          •Department Head Pay                                                                                                  
          •Sabbatical Leave                                                                                                     
                                                                                                                                
9:13:39 AM                                                                                                                    
                                                                                                                                
Commissioner Fisher discussed slide 4, "Range of Options to                                                                     
Reach Resolution":                                                                                                              
                                                                                                                                
     Impasse and Implement                                                                                                      
                                                                                                                                
          •Sometimes described as the "nuclear option."                                                                         
                                                                                                                                
     Arbitrate                                                                                                                  
                                                                                                                                
          •Arbitrator will determine.                                                                                           
                                                                                                                                
               -Interest Arbitration: "split-the-baby" and                                                                      
               give each side something.                                                                                        
               -Baseball Arbitration: Must choose one                                                                           
               proposal                                                                                                         
                                                                                                                                
     Negotiate - Settle                                                                                                         
                                                                                                                                
          •Both sides get something out of negotiations.                                                                        
                                                                                                                                
9:16:43 AM                                                                                                                    
                                                                                                                                
Commissioner  Fisher highlighted  slide 5,  "Bargaining Unit                                                                    
(BU)  Detail." The  slide showed  the bargaining  units; the                                                                    
number  of  employees;  and  the  negotiation  schedule.  He                                                                    
stated that,  currently, there  were negotiations  with five                                                                    
of  the   bargaining  units.   He  shared   that  LTC-Public                                                                    
Employees, Local  71 had been  negotiating for over  a year.                                                                    
He remarked  that the  five bargaining  units plus  the non-                                                                    
covered  employees that  follow the  terms of  the bargained                                                                    
agreement, then  87 percent of  the employees  were impacted                                                                    
by the current round of negotiations.                                                                                           
                                                                                                                                
Vice-Chair Micciche  queried when the costs  associated with                                                                    
the   2015-2016  negotiations   impact  the   state  budget.                                                                    
Commissioner Fisher replied that  the five BUs were intended                                                                    
for the FY 16 budget.                                                                                                           
                                                                                                                                
Vice-Chair  Micciche  wondered  whether the  five  would  be                                                                    
completed   by  the   end  of   the  current   fiscal  year.                                                                    
Commissioner  Fisher   replied  that   there  was   a  slide                                                                    
pertaining to that  question. He stated were  two more units                                                                    
that he believed would be  completed by the sixtieth day. He                                                                    
stated that the APEA would  not be completed by the sixtieth                                                                    
day. He  was optimistic that negotiations  would be complete                                                                    
by the end of the legislative session.                                                                                          
                                                                                                                                
Co-Chair MacKinnon  wondered what unit had  not closed their                                                                    
contract negotiations. Commissioner  Fisher replied that LTC                                                                    
[Labor,  Trades,  and Crafts]  Local  71  had not  completed                                                                    
their negotiations. He furthered  that there was progress in                                                                    
the  negotiations,  and  was optimistic  that  it  would  be                                                                    
complete by the sixtieth day of session.                                                                                        
                                                                                                                                
Vice-Chair  Micciche  wondered  whether the  Marine  Highway                                                                    
System  union was  completed, but  not yet  ratified by  the                                                                    
member.  Commissioner Fisher  responded  in the  affirmative                                                                    
and explained that  a negotiation was reached  in the summer                                                                    
of 2014. The negotiation was  approved by the legislature in                                                                    
the previous session, but it  had not yet been submitted for                                                                    
ratification. He  explained that  it was currently  stuck in                                                                    
mediation, and  was ongoing. He  shared that the  status quo                                                                    
continued,  and was,  in some  respects, more  favorable for                                                                    
the state. He explained that  the status quo was less costly                                                                    
to  the state,  than the  approved negotiation.  He remarked                                                                    
that  he  was  confused  why  the  union  would  resist  the                                                                    
approved negotiation.                                                                                                           
                                                                                                                                
9:21:18 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon  wondered if there  was a cost  of living                                                                    
allowance (COLA)  in the group. Commissioner  Fisher replied                                                                    
in the affirmative  and explained that the COLA  was zero in                                                                    
the first year. The contract was  now in the second year, at                                                                    
a  time   for  an  agreed   1  percent  COLA.   Without  the                                                                    
ratification, the state was not paying the COLA.                                                                                
                                                                                                                                
Co-Chair MacKinnon noted that there  was a bill to remove or                                                                    
reduce COLA.  She wondered whether the  legislation referred                                                                    
to the terms  in the contract. She explained  that there was                                                                    
a state statute with some COLA.                                                                                                 
                                                                                                                                
Senator Dunleavy  shared that the legislation  was about the                                                                    
geographic differential.                                                                                                        
                                                                                                                                
Co-Chair  MacKinnon wondered  whether  the group  benefitted                                                                    
from  the   geographic  differential.   Commissioner  Fisher                                                                    
replied that it depended on different terms.                                                                                    
                                                                                                                                
Co-Chair Kelly asked for a restatement.                                                                                         
                                                                                                                                
Commissioner  Fisher explained  that  the group  had both  a                                                                    
COLA  and  geographic  differential  provision.  There  were                                                                    
other terms, which were sometimes  used, such as subsistence                                                                    
pay  to address  geographic  cost differential.  He was  not                                                                    
aware of  the legislation, and  whether it would  impact the                                                                    
group.                                                                                                                          
                                                                                                                                
Senator Dunleavy  surmised that  the group had  not received                                                                    
the  one percent  COLA. He  remarked that  often, the  final                                                                    
settlement, would  retroactively pay  the COLA.  He wondered                                                                    
if that  was part of  the plan. Commissioner  Fisher replied                                                                    
that he  had not  planned for  retroactive pay.  He stressed                                                                    
that the  COLA would  be distributed, as  long as  the units                                                                    
were agreed on schedule.                                                                                                        
                                                                                                                                
Co-Chair Kelly queried the timeframe  on ratification of the                                                                    
negotiation. He wondered if there was a statutory limit.                                                                        
                                                                                                                                
9:24:20 AM                                                                                                                    
                                                                                                                                
KATE  SHEEHAN, DIRECTOR,  DIVISION  OF  PERSONNEL AND  LABOR                                                                    
RELATIONS,  replied   that  there   was  no   timeframe  for                                                                    
ratification  in neither  statute nor  collective bargaining                                                                    
agreement.                                                                                                                      
                                                                                                                                
Co-Chair  Kelly  queried  provisions   in  the  contract  or                                                                    
statute,   which  protected   the   state   from  paying   a                                                                    
retroactive lump  sum. Ms. Sheehan responded  that there was                                                                    
no retroactive payment requirement.                                                                                             
                                                                                                                                
Senator Dunleavy surmised that  the situation existed in the                                                                    
current contract. Commissioner Fisher agreed.                                                                                   
                                                                                                                                
Senator  Dunleavy announced  that retroactive  payments only                                                                    
occurred upon approval. Commissioner Fisher agreed.                                                                             
                                                                                                                                
Senator Dunleavy  wondered whether  the imposition  of terms                                                                    
and   conditions  was   considered   in  the   negotiations.                                                                    
Commissioner   Fisher   replied   that   he   assumed   that                                                                    
negotiating impasse and implementing the best finals.                                                                           
                                                                                                                                
Senator Dunleavy agreed.                                                                                                        
                                                                                                                                
Co-Chair Kelly for a restatement of the question.                                                                               
                                                                                                                                
Senator Dunleavy  explained that there was  a concept called                                                                    
"imposition  of  terms  and  conditions"  when  reaching  an                                                                    
impasse  in negotiations.  He wondered  whether  that was  a                                                                    
tool in the  process. He asked if that  concept was excluded                                                                    
from  the  process.  Commissioner   Fisher  replied  in  the                                                                    
negative.                                                                                                                       
                                                                                                                                
Co-Chair  Kelly   encouraged  the  commissioner   to  resist                                                                    
retroactive  COLA payments.  He  felt  that the  legislature                                                                    
would look unfavorably on a retroactive payment.                                                                                
                                                                                                                                
Vice-Chair Micciche  wondered whether  there was a  sense of                                                                    
willingness  of flexibility  in negotiations  with the  five                                                                    
units. Commissioner  Fisher replied  in the  affirmative. He                                                                    
remarked that  the bargaining units were  different from one                                                                    
another. He  shared that  the two  bargaining units  who had                                                                    
been given terms included GGU,  who had recognized that they                                                                    
needed  to make  concessions. He  shared that  the employees                                                                    
could  not  solve  the  fiscal   crisis,  but  there  was  a                                                                    
recognition of the budget problem.                                                                                              
                                                                                                                                
Co-Chair   MacKinnon  noted   that   the  Marine   Engineers                                                                    
Beneficial  Association  (MEBA)   had  103  bargaining  unit                                                                    
members  with an  overtime cost  exceeding  $1 million.  She                                                                    
assumed  that  it  was an  average  of  approximately  $9800                                                                    
overtime paid  to each individual. She  wondered how someone                                                                    
can reside in a separate  port than they worked. Ms. Sheehan                                                                    
surmised  that  Co-Chair  MacKinnon was  wondering  how  one                                                                    
person could be  paid from a different port  than their home                                                                    
port.                                                                                                                           
                                                                                                                                
9:29:42 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon replied  in  the  affirmative, and  also                                                                    
queried the reason  for high overtime for  MEBA. Ms. Sheehan                                                                    
deferred  to  the Alaska  Marine  Highway  on overtime.  She                                                                    
announced  that  there  were different  provisions  for  the                                                                    
different  vessel assignments:  home port  and home  vessel.                                                                    
She remarked that, depending on  the quarterly schedule, one                                                                    
may be  assigned to a vessel  outside of the home  port. She                                                                    
agreed to provide more information.                                                                                             
                                                                                                                                
Co-Chair MacKinnon  wondered if the employees  were on four-                                                                    
hour  cycles on  board ship.  Ms. Sheehan  replied that  she                                                                    
believed  that  marine  engineers on  the  Southwest  system                                                                    
worked 8.4  hours on some  vessels. She furthered  that some                                                                    
worked 12 hour days on  the Southeast system, with two weeks                                                                    
on and two weeks off.                                                                                                           
                                                                                                                                
Co-Chair  MacKinnon queried  more information  about $10,000                                                                    
of overtime  per individual annually. She  felt the overtime                                                                    
could be better managed.                                                                                                        
                                                                                                                                
Commissioner Fisher completed discussing slide 5.                                                                               
                                                                                                                                
Commissioner   Fisher   displayed  slide   6,   "Negotiating                                                                    
Framework: Cash Compensation":                                                                                                  
                                                                                                                                
     •Cash Component of Compensation                                                                                            
                                                                                                                                
          -Below Market                                                                                                         
                                                                                                                                
               •High income professional employees tend to                                                                      
               be below market                                                                                                  
                                                                                                                                
               •New employees tend to be below market                                                                           
                                                                                                                                
          -Above Market                                                                                                         
                                                                                                                                
               •Low income employees tend to be at or above                                                                     
               market                                                                                                           
                                                                                                                                
               •More tenured employees tend to be above                                                                         
               market                                                                                                           
                                                                                                                                
Vice-Chair  Micciche  requested  a  full-burden  comparison.                                                                    
Commissioner Fisher agreed to provide that information.                                                                         
                                                                                                                                
Co-Chair MacKinnon  surmised that in 2014  the combined COLA                                                                    
and  merit increases  in the  10-year cycles  was nearly  62                                                                    
percent. Commissioner Fisher agreed.                                                                                            
                                                                                                                                
Co-Chair MacKinnon  queried the  classification of  the "low                                                                    
income" workforce. Commissioner  Fisher replied that "lower"                                                                    
may be  a better term.  He shared that those  employees were                                                                    
generally class  15 and below.  Their compensation  would be                                                                    
between $40,000 to $45,000 and less.                                                                                            
                                                                                                                                
Senator Bishop requested  a slide that showed  the number of                                                                    
employees by range.                                                                                                             
                                                                                                                                
Co-Chair  MacKinnon stated  that  there was  an average  pay                                                                    
scenario. She  wanted to  see how  each unit  was populated,                                                                    
and  the salaries  that the  employees were  moving through.                                                                    
Commissioner Fisher agreed to provide that information.                                                                         
                                                                                                                                
9:36:48 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:38:28 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly  asked about the  merit system,  and wondered                                                                    
if  the   commissioner  had  explored  the   possibility  of                                                                    
switching to every two years  for new employees. He remarked                                                                    
that it  could possibly  save the state  $19 million  in two                                                                    
years.  He   queried  the  pitfalls  of   that  possibility.                                                                    
Commissioner Fisher  replied that he had  also analyzed that                                                                    
possibility.  He  explained  that  the  presentation  showed                                                                    
that,  given  that  overall   cash  compensation  was  below                                                                    
market,  and  benefits  were above  market.  Therefore,  the                                                                    
negotiations focused on attempting  to bring the benefits in                                                                    
line.  The  cash  compensation  was   not  a  focus  of  the                                                                    
negotiations.                                                                                                                   
                                                                                                                                
Co-Chair  Kelly interjected  that there  could be  a statute                                                                    
change for new  employees. He wondered if  that change would                                                                    
affect the  negotiations. Commissioner Fisher  believed that                                                                    
the change would be negotiated in the bargaining unit.                                                                          
                                                                                                                                
Ms.  Sheehan  echoed  Commissioner  Fisher's  response,  and                                                                    
explained  that it  would be  negotiated for  the classified                                                                    
employees.                                                                                                                      
                                                                                                                                
9:40:28 AM                                                                                                                    
                                                                                                                                
Senator Dunleavy asked about the  spread between the red and                                                                    
green lines on  the graph. He wondered why the  red line was                                                                    
assigned 44  percent, when  it appeared to  be above  the 60                                                                    
percent  mark. Commissioner  Fisher  replied  that he  would                                                                    
need to  confirm those numbers.  He explained that  the blue                                                                    
line represented the COLA.                                                                                                      
                                                                                                                                
Senator  Dunleavy queried  the actual  percent. He  wondered                                                                    
what was causing the spread,  or whether the spread actually                                                                    
existed.  He  noted  that  after  2004  the  lines  did  not                                                                    
converge.  Commissioner  Fisher  explained  that  the  lines                                                                    
represented a brand new employee  from 2004. He stated that,                                                                    
by  definition,  everything  started  at a  zero  point.  He                                                                    
remarked  that  the lines  represented  the  COLA and  merit                                                                    
increments.                                                                                                                     
                                                                                                                                
Senator Dunleavy asked  about the green line  as compared to                                                                    
the  red line,  and wondered  why  there was  such a  spread                                                                    
between the  two. Commissioner Fisher  stated that  the COLA                                                                    
increases  were roughly  comparable  to the  CPI. The  merit                                                                    
increases drove  the additional growth.  He referred  to the                                                                    
salary schedule that the state had created.                                                                                     
                                                                                                                                
Senator  Dunleavy noted  that the  state created  the salary                                                                    
schedule. He  wondered if  it was  a negotiation  process or                                                                    
another framework.  Commissioner Fisher replied that  it was                                                                    
a combination of the two.                                                                                                       
                                                                                                                                
                                                                                                                                
Senator  Dunleavy stressed  that the  framework was  created                                                                    
within  the negotiations.  He wondered  if the  requirements                                                                    
were  in  statute  or by  negotiation.  Commissioner  Fisher                                                                    
responded that  it was  not required  by statute.  He stated                                                                    
that  it  was  either   through  negotiation  or  through  a                                                                    
unilateral  decision to  add  increases  in an  un-bargained                                                                    
sense. He stressed that any changes must be bargained.                                                                          
                                                                                                                                
Senator  Bishop  queried the  benefits  of  above and  below                                                                    
market,   and  which   benefit  was   the  biggest   driver.                                                                    
Commissioner Fisher replied with slide 7.                                                                                       
                                                                                                                                
9:46:25 AM                                                                                                                    
                                                                                                                                
Co-Chair  Kelly felt  uncomfortable with  the notion  of the                                                                    
state  recruiting  the best  people.  He  stressed that  the                                                                    
private sector was  in competition with the  state, and felt                                                                    
it was difficult for the private  sector to keep up with the                                                                    
state. He  remarked that he  did not see people  moving from                                                                    
state  government  to the  private  sector,  rather he  sees                                                                    
people moving  from the private sector  to state government.                                                                    
He  shared  that  many  businesses   had  a  difficult  time                                                                    
retaining personnel,  because most employees wanted  a state                                                                    
job. He  preferred that  the best  engineer was  working for                                                                    
the company  building the  bridge, rather  than the  one who                                                                    
was making the regulation.                                                                                                      
                                                                                                                                
Senator Bishop  queried the level retention  and recruitment                                                                    
of state  employees. Commissioner  Fisher responded  that he                                                                    
did not have  numbers for the tier 4  employees. He surmised                                                                    
that  the  retention  was  probably  below  average  for  an                                                                    
employer. He  stated that  there was  early turnover  in the                                                                    
life  cycle  of  an  employee, which  was  not  unusual  and                                                                    
supported the  hypothesis that  the employees  entered below                                                                    
market. He felt that there  was a struggle to find qualified                                                                    
employees for the higher skilled positions.                                                                                     
                                                                                                                                
Co-Chair  Kelly  observed  that  many  university  employees                                                                    
moved to other agencies, rather than to the private sector.                                                                     
                                                                                                                                
Vice-Chair    Micciche    expressed    respect    for    the                                                                    
commissioner's experience  in the private sector.  He shared                                                                    
the comparisons  of actual cash  calls across the  state. He                                                                    
remarked  that  it was  difficult  to  determine the  actual                                                                    
salary    increases,   including    COLA   and    geographic                                                                    
differential.  He shared  that there  were some  departments                                                                    
that had difficulty retaining employees.  He felt that there                                                                    
was  enough Department  of Labor  and Workforce  Development                                                                    
(DOLFD)  to evaluate  the  average  private sector  increase                                                                    
from 2004  to 2014.  He requested  that information.  He did                                                                    
not want  an increase  that seemed  higher than  the private                                                                    
sector. Commissioner Fisher responded  that he would provide                                                                    
specifics.  He  agreed  that  the  growth  was  higher  than                                                                    
traditions in the marketplace.                                                                                                  
                                                                                                                                
9:52:49 AM                                                                                                                    
                                                                                                                                
Vice-Chair Micciche  remarked that  there could be  the same                                                                    
comparison  at  an  entry  level  position  in  the  private                                                                    
sector. He queried  further information. Commissioner Fisher                                                                    
agreed to provide some of the requested information.                                                                            
                                                                                                                                
Vice-Chair Micciche  restated that his request  may give the                                                                    
public a  more realistic view.  He did not believe  that the                                                                    
public employees were dramatically overcompensated.                                                                             
                                                                                                                                
Co-Chair  Kelly shared  that  he had  been  in a  previously                                                                    
legislature  that provided  a study  showing that  the lower                                                                    
level employees  were overcompensated, and the  higher level                                                                    
employees  were  undercompensated.  He  stressed  that  many                                                                    
employees  believed  that  the   state  was  a  more  secure                                                                    
environment  than and  oil company.  He shared  that BP  had                                                                    
expressed that they wanted similar support to the state.                                                                        
                                                                                                                                
Senator  Bishop requested  a 10-year  analysis  of how  many                                                                    
employees had left state service.                                                                                               
                                                                                                                                
9:55:49 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon asked  that all  state contributions  be                                                                    
examined. She  remarked that she  wanted to look at  SBS and                                                                    
the viability of  social security. She noted  that the state                                                                    
currently  faced an  unfunded  pension  liability. She  felt                                                                    
that  a  ten  year  examination  would  help  to  understand                                                                    
whether the  employees were undervalue entering  the system,                                                                    
the cost  to carry  forward, and  how quickly  the employees                                                                    
meet  their   peers  in  the   private  sector   or  federal                                                                    
government.  She remarked  that the  federal government  was                                                                    
often taking  the state employees than  the private sectors,                                                                    
specifically in the natural  resources section. She wondered                                                                    
if the Court  System was a 15-year  retirement. She stressed                                                                    
that there were fixed numbers with long-term implications.                                                                      
                                                                                                                                
Co-Chair Kelly remarked that he would like to continue with                                                                     
the presentation.                                                                                                               
                                                                                                                                
9:59:53 AM                                                                                                                    
                                                                                                                                
Commissioner Fisher addressed slide 7, "Negotiating                                                                             
Framework: Benefits":                                                                                                           
                                                                                                                                
    Employee Benefits: Overall tend to be above market.                                                                         
                                                                                                                                
          •Health Benefit:                                                                                                      
                                                                                                                                
               •Economy Plan - zero employee premiums                                                                           
               •Low deductible options across plans                                                                             
               •Flat rate for dependents                                                                                        
               •Retiree health insurance with 10 years of                                                                       
               service                                                                                                          
               •Retiree premium percentage lowers with                                                                          
               longer term of service                                                                                           
                                                                                                                                
          •Pension:  Alaska  Public  Employees'  (PERS)  and                                                                    
          Teachers'  Retirement  (TRS)  Systems  are  hybrid                                                                    
          defined  benefit  and defined  contribution  plans                                                                    
          providing:                                                                                                            
                                                                                                                                
               •Contribution amounts structured to reach                                                                        
               retirement goals                                                                                                 
                                                                                                                                
                    •PERS: 8 percent employee + 5 percent                                                                       
                    employer + 12.26 percent SBS totaling:                                                                      
                    25.26 percent                                                                                               
                    •TRS: 8 percent employee + 7 percent                                                                        
                    employer +12.26 percent SBS totaling:                                                                       
                    27.26 percent                                                                                               
                    •Most private plans offer employer                                                                          
                   match of 3-4 percent                                                                                         
                                                                                                                                
          •Leave accrual (even with negotiated caps)                                                                            
                                                                                                                                
               •Accrue 270 hours per year (36 days)                                                                             
                                                                                                                                
                    •After 10 years, if hired before 7/1/13                                                                     
                    •After 15 years, if hired on or after                                                                       
                    7/1/13                                                                                                      
                                                                                                                                
          •Job Flexibility                                                                                                      
                                                                                                                                
               •Alternative work weeks                                                                                          
                                                                                                                                
          •Hours worked: 37.5 hours                                                                                             
                                                                                                                                
10:05:47 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon requested the total liability of                                                                             
outstanding accrued leave. Commissioner Fisher agreed to                                                                        
provide that information.                                                                                                       
                                                                                                                                
Commissioner Fisher looked at slide 8, "Negotiating                                                                             
Framework: State and National Trends":                                                                                          
                                                                                                                                
     National:                                                                                                                  
                                                                                                                                
         •2007-2015 saw little to no pay increases                                                                              
                                                                                                                                
          •Current    trends    include    pay    increases,                                                                    
          elimination of furloughs                                                                                              
                                                                                                                                
     State:                                                                                                                     
                                                                                                                                
          •Municipality of Anchorage: 1.5 percent COLA per                                                                      
          year for 3 years                                                                                                      
                                                                                                                                
          •Anchorage School District: 1 percent COLA +                                                                          
          $1,000 bonus through 2017                                                                                             
                                                                                                                                
          •Juneau School District: 2 percent COLA, 1 year                                                                       
          agreement                                                                                                             
                                                                                                                                
Commissioner Fisher highlighted slide 9, "Bargaining                                                                            
Priorities":                                                                                                                    
                                                                                                                                
     Cash Component:                                                                                                            
                                                                                                                                
          -Overall below market                                                                                                 
                                                                                                                                
          -Current    Fiscal    climate   requires    modest                                                                    
          reductions                                                                                                            
                                                                                                                                
               -0-0-0 percent                                                                                                   
                                                                                                                                
               -15 hours of furlough per employee per                                                                           
               fiscal year                                                                                                      
                                                                                                                                
               -Modest  changes to  other monetary  terms of                                                                    
               the CBAs                                                                                                         
     •Benefits:                                                                                                                 
                                                                                                                                
          -Overall above Market                                                                                                 
                                                                                                                                
          -Healthcare costs are growing at a multiple of                                                                        
          inflation making cost containment a critical                                                                          
          objective of these negotiations                                                                                       
                                                                                                                                
               -Ask Employees to  accept plan design changes                                                                    
               and   contribute  to   monthly  health   care                                                                    
               premiums in order to  control costs and align                                                                    
               interests    in   minimizing    future   cost                                                                    
               increases.                                                                                                       
                                                                                                                                
               -For   employees  that   are   not  part   of                                                                    
               AlaskaCare,  we  want  to  right-size  health                                                                    
               trust reserves                                                                                                   
                                                                                                                                
     •Other Priorities                                                                                                          
                                                                                                                                
          -Performance Evaluations: Create a meaningful                                                                         
          performance view system                                                                                               
                                                                                                                                
          -Consistency                                                                                                          
                                                                                                                                
               -Create consistency in our contracts                                                                             
                                                                                                                                
               -For  example: Leave,  administrative manual,                                                                    
               travel rules, pay procedures                                                                                     
                                                                                                                                
          -Flexibility                                                                                                          
                                                                                                                                
               -Create flexibility in our contracts.                                                                            
                                                                                                                                
               -For  example:  contracting out,  promotional                                                                    
               rules                                                                                                            
                                                                                                                                
          -Leave Terms - continue the progress of prior                                                                         
          negotiations to address leave accruals                                                                                
                                                                                                                                
10:10:47 AM                                                                                                                   
                                                                                                                                
Commissioner Fisher discussed slide 10, "Status of                                                                              
Contracts Before the Legislature":                                                                                              
                                                                                                                                
     TEAME (27 Employees)                                                                                                       
                                                                                                                                
          •Contract expired June 30, 2015                                                                                       
          •Agreement reached December 2015, ratified by                                                                         
          members                                                                                                               
          •Contract pending Legislative approval                                                                                
                                                                                                                                
          Terms Include:                                                                                                        
                                                                                                                                
               •0-0-0                                                                                                           
               •Addition of coordinators  to improve student                                                                    
               activity sponsorship                                                                                             
               •Improvements   and  clarifications   to  the                                                                    
               grievance process                                                                                                
               •Additional time  for management  to complete                                                                    
               annual evaluations                                                                                               
               •Contract  language   improvements  regarding                                                                    
               leave use, cash-in, and donation                                                                                 
                                                                                                                                
     ASEA (GGU, 8,795 Employees)                                                                                                
                                                                                                                                
          •Contract expires June 30, 2016                                                                                       
          •Agreement   reached    February   2016,   pending                                                                    
          ratification by members                                                                                               
          •Contract pending Legislative approval.                                                                               
                                                                                                                                
          Terms Include:                                                                                                        
                                                                                                                                
               •0-0-0                                                                                                           
               •Reduced  health  care contribution  rate  in                                                                    
               FY17                                                                                                             
               •Furloughs                                                                                                       
               •Improvements to the  grievance and complaint                                                                    
               process                                                                                                          
               •Performance  tied geographic  limitation for                                                                    
               layoffs                                                                                                          
               •Contract  language improvements  for finance                                                                    
               and payroll processing                                                                                           
               •Transition   fully  to   the  Administrative                                                                    
              Manual for Travel and Per Diem                                                                                    
                                                                                                                                
Co-Chair MacKinnon  noted a contentious closeout  during the                                                                    
previous  session.  She  valued   all  state  employees  and                                                                    
appreciated the terms and concessions  for both parties; and                                                                    
the willingness to work together.  She thanked the committee                                                                    
members  who  reached  out to  the  individuals  that  would                                                                    
benefit from the agreement.                                                                                                     
                                                                                                                                
Commissioner Fisher addressed slide 11, "FY 2017 Savings":                                                                      
                                                                                                                                
     •Healthcare contribution: Reduced payment in FY 17,                                                                        
     growing in FY 19.                                                                                                          
                                                                                                                                
     •Furlough Savings                                                                                                          
                                                                                                                                
          -$3.3m Gross Employee Savings                                                                                         
                                                                                                                                
               •Forecasted 2.6m will be cashed in by                                                                            
               Employees                                                                                                        
                                                                                                                                
          -$763k Employer Savings                                                                                               
                                                                                                                                
               •22 percent Pension Contribution                                                                                 
               •1.15 percent Term Leave Rate                                                                                    
                                                                                                                                
10:17:07 AM                                                                                                                   
                                                                                                                                
Co-Chair   Kelly   queried   the  number   on   the   graph.                                                                    
Commissioner  Fisher  replied that  the  number  was in  the                                                                    
lower right hand column of the upper chart.                                                                                     
                                                                                                                                
Vice-Chair   Micciche  queried   the  process   for  valuing                                                                    
accrual.   Commissioner  Fisher   agreed  to   provide  that                                                                    
information.  He  stressed  that the  state  had  previously                                                                    
negotiated  changes  and  caps  to  the  accrual  rates.  He                                                                    
stressed that the state was  above market, and he hoped that                                                                    
the  BUs would  become in  line with  the other  BUs in  the                                                                    
private sector and the market.                                                                                                  
                                                                                                                                
Commissioner  Fisher discussed  slide 12,  "Update on  Other                                                                    
Negotiations":                                                                                                                  
                                                                                                                                
     •Labor Trades and Crafts (LTC) - 1,772 Employees                                                                           
          -On-going                                                                                                             
          -Likelihood of reaching agreement by sixtieth Day                                                                     
     •Supervisor's Union(SU) - 2,317 Employees                                                                                  
          -On-going                                                                                                             
          -Challenging negotiations                                                                                             
          -Possibility of not reaching agreement by                                                                             
          sixtieth Day                                                                                                          
     •Confidential Employees Association - 204 Empl.                                                                            
          -On-going                                                                                                             
          -Likelihood of reaching agreement by sixtieth Day                                                                     
     •Marine Engineers' Beneficial Association (MEBA) - 103                                                                     
     Employees                                                                                                                  
          -Tentative  agreement  July  2014  (0  percent-  1                                                                    
          percent-   2    percent).   Legislature   approved                                                                    
          contract in  2015. MEBA has  yet to  send contract                                                                    
          for a vote. Mediation pending                                                                                         
                                                                                                                                
10:20:47 AM                                                                                                                   
                                                                                                                                
Senator   Dunleavy  noted   that  there   was  a   tentative                                                                    
agreement, but the  members would not send  the contract for                                                                    
a vote.  Commissioner Fisher agreed. He  explained that MEBA                                                                    
had felt  that there  was a  misunderstanding of  the terms.                                                                    
The administration was negotiating a resolution.                                                                                
                                                                                                                                
Co-Chair  MacKinnon  wondered  if   the  MEBA  contract  was                                                                    
currently   zero.  Commissioner   Fisher   replied  in   the                                                                    
negative.                                                                                                                       
                                                                                                                                
Co-Chair    MacKinnon    surmised    that   MEBA    saw    a                                                                    
misunderstanding.  Commissioner  Fisher replied  that  there                                                                    
were good faith negotiations,  and any deviation would imply                                                                    
that there would be an examination of new terms.                                                                                
                                                                                                                                
Senator Dunleavy  wondered if  the misunderstood  items were                                                                    
the  only  reevaluated  items. Commissioner  Fisher  replied                                                                    
that  MEBA wanted  the administration  to accept  terms that                                                                    
would increase  cost. He stated that  the administration was                                                                    
pushing  back on  that request,  which caused  all items  to                                                                    
blend together.                                                                                                                 
                                                                                                                                
Senator  Hoffman wondered  if DOA  must reach  terms by  the                                                                    
sixtieth day  of session.  Commissioner Fisher  replied that                                                                    
DOA would  not bring the contract  for legislative approval,                                                                    
if MEBA agreed to the terms.                                                                                                    
                                                                                                                                
Senator Hoffman  asked if the  complete package would  be up                                                                    
for  approval   by  the  legislature.   Commissioner  Fisher                                                                    
replied in the affirmative.                                                                                                     
                                                                                                                                
Senator Hoffman  asked if  the timeframe was  in the  60 day                                                                    
rule. Commissioner Fisher replied in the affirmative.                                                                           
                                                                                                                                
Senator Hoffman  wondered if the legislature  could withdraw                                                                    
the  terms of  the  agreement.  Commissioner Fisher  replied                                                                    
that there was no progress with  MEBA, so he did not believe                                                                    
that the  agreement would  be made by  the sixtieth  day. He                                                                    
deferred to Ms. Sheehan.                                                                                                        
                                                                                                                                
Ms. Sheehan  deferred to a legal  position regarding whether                                                                    
the legislature could withdraw the terms of the agreement.                                                                      
                                                                                                                                
10:26:47 AM                                                                                                                   
                                                                                                                                
Senator Olson queried any plans  to continue with the Marine                                                                    
Highway  System, should  a strike  take place.  Commissioner                                                                    
Fisher  responded  that both  parties  had  filed an  unfair                                                                    
labor practice claim against the  other. He explained that a                                                                    
strike was not entitled during that claim.                                                                                      
                                                                                                                                
Senator Olson queried the  administration's plan to continue                                                                    
service.   Commissioner  Fisher   deferred  to   the  marine                                                                    
highway.                                                                                                                        
                                                                                                                                
Commissioner Fisher addressed slide 13, "Next Steps"                                                                            
                                                                                                                                
     •The Legislature decides whether to fund the monetary                                                                      
     terms.                                                                                                                     
                                                                                                                                
          -The  monetary terms  of  a collective  bargaining                                                                    
          agreement  are subject  to funding  by legislative                                                                    
          appropriation. (AS 23.40.21)                                                                                          
                                                                                                                                
          -If  the Legislature  fails to  fund the  monetary                                                                    
          terms  of an  agreement,  the next  steps vary  by                                                                    
          bargaining unit  and may be affected  by whether a                                                                    
          tentative  agreement was  reached with  sufficient                                                                    
          time to  permit submittal  by the sixtieth  day of                                                                    
          session.                                                                                                              
                                                                                                                                
     •A contract submitted to the Legislature after the                                                                         
     sixtieth day does not prevent the Legislature from                                                                         
     either considering or funding the contract.                                                                                
                                                                                                                                
     •If a union fails to ratify the agreement, then the                                                                        
     funding is reduced proportionately, and we operate                                                                         
     under status quo and return to negotiations.                                                                               
                                                                                                                                
Commissioner  Fisher  looked  at  slide  14,  "Rejection  of                                                                    
Monetary Terms: CBA Terms":                                                                                                     
                                                                                                                                
     If the monetary terms of an agreement are rejected the                                                                     
     following contractual provisions apply:                                                                                    
                                                                                                                                
          ASEA:  Re-enter negotiations  for 10  days; if  no                                                                    
          agreement, Class 2 and Class  3 employees may take                                                                    
          a strike vote                                                                                                         
                                                                                                                                
          APEA: Not required  to enter negotiations; impasse                                                                    
          exists and members may call for a strike vote                                                                         
                                                                                                                                
          CEA:  Must re-enter  negotiations  upon demand  by                                                                    
          either party;  negotiations last  for 10  days but                                                                    
          may  be  extended  by   mutual  agreement;  if  no                                                                    
          agreement,  impasse exists  and  members may  call                                                                    
          for a strike vote                                                                                                     
                                                                                                                                
          IBU: Must re-enter negotiations within five days                                                                      
                                                                                                                                
          MEBA: Must re-enter negotiations immediately                                                                          
                                                                                                                                
          MMP: Must re-enter negotiations immediately                                                                           
                                                                                                                                
          PSEA: Upon written  request, immediately negotiate                                                                    
          a mutually satisfactory supplemental agreement                                                                        
                                                                                                                                
          ACOA: Must re-enter negotiations immediately                                                                          
                                                                                                                                
          LTC: Impasse  exists and  parties agree  to pursue                                                                    
          reasonable   efforts   to    obtain   a   mutually                                                                    
          satisfactory resolution                                                                                               
                                                                                                                                
          AVTECTA: Must re-enter negotiations                                                                                   
                                                                                                                                
          TEAME: Must re-enter negotiations immediately                                                                         
                                                                                                                                
     *Note: No definition of "immediately" is provided for                                                                      
     in the collective bargaining agreements.                                                                                   
                                                                                                                                
10:30:28 AM                                                                                                                   
                                                                                                                                
Senator  Dunleavy noted  that there  had  been increases  in                                                                    
pay, but there was  still difficulty in retaining personnel.                                                                    
He  wondered  whether  the   state  could  make  nonmonetary                                                                    
efforts  to  retain personnel.  He  felt  that there  was  a                                                                    
similar  situation   with  teachers  in  rural   Alaska.  He                                                                    
remarked  that the  pay  was decent,  but  there were  other                                                                    
factors  that pushed  those teachers  away  such as  working                                                                    
conditions. Commissioner Fisher responded  that there was an                                                                    
attempt to maintain a constructive  and balanced approach to                                                                    
the negotiations.                                                                                                               
                                                                                                                                
Senator   Dunleavy   requested   some   legislative   remedy                                                                    
suggestions  that  could  enhance  the  tools.  Commissioner                                                                    
Fisher agreed to provide that information.                                                                                      
                                                                                                                                
Co-Chair MacKinnon  expressed appreciation for  the appendix                                                                    
document.  She queried  the  administration's management  of                                                                    
overtime.  She stressed  that  there  were extreme  overtime                                                                    
costs   to  the   state  in   the  marine   highway  system.                                                                    
Commissioner Fisher  agreed to provide that  information. He                                                                    
stated that overtime was managed at the department level.                                                                       
                                                                                                                                
10:36:38 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon felt that there  were some issues related                                                                    
to the equal furlough  across the board. Commissioner Fisher                                                                    
replied that there was work  to ensure that there was equity                                                                    
in the furlough participation.                                                                                                  
                                                                                                                                
Senator  Bishop  felt  that overtime  must  be  examined  by                                                                    
bargaining  unit. He  remarked  that  there were  situations                                                                    
that caused the overtime.                                                                                                       
                                                                                                                                
Senator Hoffman looked at slide  19, and queried the details                                                                    
about the  hiring levels. He  requested details  about those                                                                    
hired above the exemption rule.                                                                                                 
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:40:05 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:40 a.m.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
022416 Updated DOA-SFIN_Labor_Contracts_2 24 16 FINAL.pdf SFIN 2/24/2016 9:00:00 AM
Presentation: Labor Contracts