Legislature(2021 - 2022)SENATE FINANCE 532
03/29/2022 01:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Hiring Bonuses and Retention Incentives by Office of Management and Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 29, 2022
1:02 p.m.
1:02:02 PM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 1:02 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor; Kate Sheehan, Director, Division of
Personnel and Labor Relations; Megan Wallace, Director,
Division of Legislative Legal.
PRESENT VIA TELECONFERENCE
Kevin Dilg, Assistant Attorney General, Department of Law,
Juneau.
SUMMARY
^PRESENTATION: HIRING BONUSES and RETENTION INCENTIVES BY
OFFICE OF MANAGEMENT and BUDGET
1:03:03 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR,
KATE SHEEHAN, DIRECTOR, DIVISION OF PERSONNEL AND LABOR
RELATIONS, discussed the document titled, "Bargaining Unit
Letters of Agreement for Recruitment and Retention
Incentives" (copy on file). She explained that collective
bargaining is tasked to the Commissioner of the Department
of Administration, who has delegated the authority to her.
She said that collective bargaining agreements were
generally for three-year periods, never longer, and were
submitted to the legislature for approval per the Public
Employment Relations Act. She stated that due to the length
of the contracts, Letters of Agreement (LOA) were
established and incorporated into the bargaining agreement.
She said that most of the agreements were monetary; she had
signed 250 LOAs in the last fiscal year. She described the
various reasons an LOA might be drafted. She said that the
reasons for the LOAs currently under discussion were
related to public safety and health. She relayed that the
LOAs were signed by her and amended and incorporated into
the collective bargaining agreement. She stated that most
LOAs had an expiration date, either specifically by date or
the expiration of a contract. She noted that the LOAs were
negotiated with the representative union who provided
approval and signatures.
1:06:07 PM
Co-Chair Stedman asked for background about the problem and
issue currently before the committee.
1:06:25 PM
Mr. Steininger replied that when the administration crafted
the budget for state agencies, particularly for personal
services, the budget was based on the planned need for
positions. The need was determined by considering the level
of workload anticipated by the agency, the number of
positions to achieve the workload, and the vacancy factor
or the rough approximation of the savings due to turnover.
He shared that most agencies operated with a 5 percent
vacancy rate. He said that the areas utilizing recruitment
and retention incentives were areas of critical need to the
operations of state agencies, where difficulty in
recruitment or high vacancy factors had been experienced.
He said that as a result, LOAs had been drafted to create
incentives to address the recruitment and retention needs,
mainly in health and public safety fields. He said that the
16 LOAs the administration had entered were done so on a
budget neutral basis. He noted that similar recruitment
incentives could be found for the Office of Childrens
Services in the FY 23 budget proposal, which would require
additional funding. Those LOAs had not yet been entered as
there was no funding, but the request had been made to the
legislature.
1:10:29 PM
KEVIN DILG, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
JUNEAU (via teleconference), explained that the department
believed that the reallocation of funds within an
appropriation was authorized by statute if the initial
appropriation for wages had been established. He said that
departments would have flexibility to face budgetary and
employment realities, he noted the increased need some
departments may have faced due to Covid-19. He said that
the LOAs were amended and incorporated into the various
collective bargaining agreements, which were annually
ratified by the legislature. He believed the LOAs were good
tools to fill positions in high priority areas. He said
that if the incentives did not exceed the appropriation
originally granted by the legislature, the allocation would
be acceptable.
1:13:39 PM
MEGAN WALLACE, DIRECTOR, DIVISION OF LEGISLATIVE LEGAL,
testified that the division had been asked to review the
issue upon learning that the LOAs had been entered into
between the administration and different union
organizations. She said that the understanding was that the
administration had never previously advised the legislature
that the bonuses were being paid with funds appropriated by
the legislature. She read from the legal opinion drafted by
the division on the matter (copy on file):
The Public Employment Relations Act (PERA) governs
collective Bargaining agreements between public
employees and public employers in Alaska. Alaska
Stature 23.40.215(a) specifically provides that [t]he
monetary terms of any agreement entered into under
[PERA] are subject to funding through legislative
appropriation.
Ms. Wallace furthered that the Alaska Supreme Court had
stated that a new monetary agreement entered under PERA was
ineffective without specific legislative appropriation for
the new monetary term. She relayed that, based on specific
Alaska Supreme Court precedent, an agreement to pay bonuses
to union employees created a new monetary term - regardless
of whether the administration intended to use existing
funds to pay for the bonuses. She furthered that because
the terms had never been presented to the legislature for
consideration, the LOAs were legally ineffective. She
asserted that the Alaska Supered Court had held that,
regardless of the department's ability to pay for, or
reallocate resources, to pay collective bargaining
agreements, the terms must be brought before the
legislature for specific appropriation and inclusion in the
operating budget. She posed the question of whether the
legislature could authorize bonuses through its
appropriation power for union bonuses or bonuses for other
potential partially exempt employees. She shared that the
division advised that the option with the least legal risk
under statute was to pass substantive legislation that was
a companion to a budget that funded the appropriations. She
stated that payment or authorization to allow departments
to continue implementing hiring bonuses or incentive was a
policy decision that needed to be made by the legislature.
She advised that the best practice would be for the budget
and the supporting budget documents to include details on
the bonuses or hiring incentives. She understood that until
recently the legislature had not been provided with
information on bonuses or hiring incentives, which made it
difficult to concluded that the legislature had
historically ratified the agreements through the
appropriation process as the legislature had not been
presented anything to ratify. She believed that there were
tools that the legislature had in terms of language that
could be included in the operating budget to allow the
incentives to continue to be offered and paid; includeing
specific information as part of the appropriation process
as well as crafting language like the language already used
in the budget to expressly approve collective bargaining
agreements, language could be drafted to authorize the
terms of the LOAs. She said that the language could be as
narrow or as broad as the legislature deemed fit. She
recognized that her division had differing opinions than
the Department of Law (LAW) in terms of whether the current
practice met prior Alaska Supreme Court precedent on the
issue; it was her understanding that the bonuses would
continue to be paid regardless of whether the legislature
too specific action. She related that her division thought
that a lawsuit related to the issue was a possibility; the
risk was that if the legislature did not act it would
continue to be left in the dark in terms of how the money
it appropriated was being spent, which was counter to the
legislative power of appropriation.
1:21:12 PM
Senator Wielechowski spoke of an earlier presentation from
the Department of Public Safety (DPS), which had informed
of the reallocation of a series of funds totaling $1
million to pay for increases in trooper wages. He wondered
whether the reallocation was allowed under statute.
1:21:44 PM
Ms. Wallace replied that the Executive Budget Act allowed
for departments to reallocate money amongst allocations.
She added that the issue with respect to the bonuses, or
hiring incentives, for union employees was that there are
other statutory provisions that cover collective bargaining
agreements and require that new monetary terms be submitted
to the legislature. She was not concerned about transfers
amongst allocations as it related to non-union items.
1:22:30 PM
Senator Wielechowski thought that the troopers were members
of a union.
1:22:40 PM
Ms. Wallace agreed and explained that the if the
reallocation included retention bonuses or incentives, they
would face the same legal issues as the other departments
under discussion. She said that the general idea of money
being transferred for other purposes not related to
monetary terms of a bargaining agreement was permissible
under the Executive Budget Act.
1:23:18 PM
Senator Hoffman believed that the issue with DPS was one of
cost differentials; it was more expensive to live in rural
Alaska, which required higher pay for those relocating to
rural areas. He thought that the problem was when the LOAs
were entered into when hiring someone above the step range
allowable under the salary structure. He said that the
budget was set on a specific salary structure and there had
been several instances where the guidelines were not
followed, which limited the legislatures appropriation
power and opened the door to potential abuse throughout the
system. He referred to the table, "Bargaining Unit Letters
of Agreement for Recruitment and Retention Incentives and
wondered whether item 9, Bonus Step indicate payment
above the salary structure.
1:25:05 PM
Ms. Wallace stated that the bonus step, regardless of how
substantial the increase to the collective bargaining
agreement, would likely be considered a new monetary term.
She said that stature could allow for a deminimis
exception, without substantial financial impact, but
without any differential or a budget request with
accompanying documents that detailed small increments and
larger increments, item 9 would be considered a new
monetary term.
1:26:55 PM
Senator Wielechowski was curious about the boundaries for
reallocation and discussed the various way that
reallocations occurred within departments. He queried the
different when it came to reallocation of funds for wages.
1:27:42 PM
Ms. Wallace agreed that money was shuffled around after
appropriation and that the Executive Branch should be given
the tools to manage funds as they deemed necessary. She
countered that the Alaska Supreme Court had investigated
union issues and had weighed in on when the legislature
needed to approve collective bargaining agreements or
monetary terms. She contended that the Alaska Supreme Court
had ruled that a state agency could not circumvent
legislative approval by reallocating its existing
resources.
1:28:53 PM
Co-Chair Bishop asked about the wage openers in the
bargaining agreements.
Ms. Sheehan responded that there were reopeners within the
contracts, not necessarily for wages.
1:29:18 PM
Co-Chair Bishop surmised that wages could be considered
under the reopeners.
1:29:25 PM
Ms. Sheehan replied that the reopeners were generally for
something in the collective bargaining agreement that
conflicted with state or federal law or regulation. She
said that most things would be changed through a LOA.
Co-Chair Bishop noted that the issue was before the
committee because the state had a problem with recruitment
and retention.
Ms. Sheehan agreed.
1:29:56 PM
Co-Chair Bishop wondered whether the administration was
working in conjunction with the bargaining units to
alleviate the problem. He thought that the problem could be
solved during contract negotiations.
1:30:16 PM
Ms. Sheehan shared that the administration was looking for
permanent contract additions to assist with retention and
recruitment. She added that the bonuses and incentives were
a tool that had initially been used in the nursing field
during the Covid-19 pandemic.
1:30:53 PM
Senator Olson recognized the problem with recruitment and
retention. He wondered whether there were possible
solutions to the issue that would avoid litigation.
1:31:41 PM
Ms. Wallace replied that once solution the legislature
could consider would be inserting language into the budget
that recognized that appropriations to departments could
include appropriations necessary to carry out the terms of
LOAs.
1:32:00 PM
Senator Olson asked whether the language would withstand a
court challenge.
1:32:02 PM
Ms. Wallace replied in the affirmative.
1:32:09 PM
Senator Wielechowski asked whether it was possible that the
legislative practice of allowing the executive branch to
reallocate resources was in violation of the constitution.
1:32:39 PM
Ms. Wallace replied that she would need to consider the
question before taking a position on the record.
1:33:03 PM
Senator Wielechowski felt that the court did not
differentiate between bonuses to employees and other
reallocations.
1:34:14 PM
Mr. Dilg replied that specificity on the use of incentives
in the budget could be helpful. He felt that the LOAs under
discussion were small enough and were still being spent on
staff wages with was in line with statute.
1:37:01 PM
Senator Hoffman asked how long the bonus and incentive
process had been going on.
1:37:11 PM
Ms. Sheehan replied approximately 15 years. She said that
LOAs of this nature had not historically been sent to the
legislature for approval.
1:37:40 PM
Senator Hoffman asked whether the administration had ever
received confirmation of the practice of issuing such LOAs
from LAW.
1:37:50 PM
Ms. Sheehan replied that she had not know of such
confirmation during her tenure.
1:37:57 PM
Senator Hoffman wondered whether she had ever reached out
to LAW for confirmation of the legality of the LOAs not
coming before the legislature.
1:38:02 PM
Ms. Sheehan replied in the negative.
Co-Chair Stedman asked whether LAW had issued an opinion on
the matter.
1:38:28 PM
Mr. Dilg related that this was the first time the issue had
come before him. He believed that there was an informal
opinion from the attorney general cited in the Legislative
Legal memo that spoke broadly to the definition of monetary
terms. He was unaware of any specific guidance from LAW.
1:39:26 PM
Senator Hoffman wondered whether there would be changes
regarding LOAs because of the Legislative Legal memo.
1:39:46 PM
Ms. Sheehan replied that she had been in discussion with
OMB and LAW on the matter.
Senator Hoffman queried the validity of the agreements
currently before the committee.
Ms. Sheehan asked him to restate the question.
1:40:23 PM
Senator Hoffman wondered whether the LOAs were legal. He
probed how the administration planned proceed in honoring
the LOAs.
1:40:45 PM
Ms. Sheehan deferred to Mr. Steininger.
1:40:48 PM
Mr. Steininger said that the LOAs that had ben signed by
the administration would be honored. He noted that LAW had
determined that the agreements were entered into legally
and they would be honored.
1:41:25 PM
Senator Hoffman asked whether the administration planned to
approach the legislature to have the LOAs ratified.
1:41:39 PM
Mr. Steininger replied that that member of the executive,
and legislative branches, had been in discussion
surrounding the LOAs and how they would be best addressed.
He said that a formal amendment had not been issued because
the position of LAW was that the agreements had been
entered into legally and within the current budgetary
authority. He stated that the only recruitment incentive
before the legislature as an official request was the item
for OCS, where additional authority was needed. He relayed
that the administration was open to including language in
the budget that would clearly state the allowability of the
items. He reiterated that the administration would honor
the agreements made with state employees. He spoke of
similar language in the budget that could serve as the
model for the new language. He thought a balance could be
struck between the legislature's appropriation authority
and the executive branchs ability to deliver state
services.
1:43:45 PM
Senator Wielechowski asked about other types of LOAs that
did not require legislative approval. He guessed that they
were regarding terms of particular agreements like payment
for holidays, which would be terms under the collective
bargaining agreement.
1:44:29 PM
Ms. Sheehan agreed. She said that the state was agreeing to
pay the contract but amending it slightly.
Senator Wielechowski understood that the difference with
the LOAs under discussion was that they included wholly new
terms, that adding bonuses was not something negotiated
during collective bargaining. He wondered what sort of
damages the state would be exposed to if the executive
branch agreed to pay the bonuses.
1:45:41 PM
Ms. Wallace doubted that a court would rule that an
employee would have to pay back a bonus that the state and
the union had agreed to pay. She thought that the risk to
the state was a court, relying on prior holdings, would
reaffirm that the legislature would need to include the
terms in an appropriation.
1:46:44 PM
Senator Hoffman hoped that any solutions that the
administration could be considering would be brought before
the committee. He argued that the administration should not
have the ability to spend as they please for the benefit of
a specific individuals salary. He thought that the salary,
including the legislatively approved bonus, should be
advertised to attract higher quality candidates.
Co-Chair Stedman agreed.
1:48:43 PM
AT EASE
1:49:00 PM
RECONVENED
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
1:50:14 PM
The meeting was adjourned at 1:50 p.m.
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