HB 1-MUNICIPAL COLLECTIVE BARGAINING CONTRACTS Number 0006 CO-CHAIRMAN HALCRO announced that the only order of business before the committee was HOUSE BILL NO. 1, "An Act relating to collective bargaining agreements and arbitration awards of class (a)(1) municipal employees." [Due to a tape malfunction, a few seconds of the meeting was not recorded.] REPRESENTATIVE KOOKESH moved to adopt the proposed CS, Version LS0020\H, Cramer, 3/10/99, as the working document before the committee. There being no objection, it was so ordered. Number 0070 BONNIE CARROLL, Legislative Secretary for Representative Brice, Alaska State Legislature, informed the committee that Representative Brice supported the proposed CS. The proposed CS changes the language from Class (a)(1) employees to refer to only police and fire employees. She mentioned that Mark Drygas from the Fairbanks Firefighters Association and Matt Soden of the Fairbanks Police Department Employees Association were present to testify. GAVIN CHARRIER, Firefighter, Ketchikan International Airport, testified via teleconference from Ketchikan. He expressed concern with getting to arbitration for Class(a)(1) employees although that has not been achieved because his contract included Class 1, 2, and 3 employees. If the point is reached where the employee and the employer cannot agree on wages and Class(a)(1) employees do not have the right to strike, then the deciding factor should be the arbitrator's decision. Mr. Charrier felt that Class(a)(1) and Class 2 employees should have the right to strike if the arbitrator's decision does not have any weight. Number 0376 JERRY CLEWORTH, Member, Fairbanks City Council, testified via teleconference from Fairbanks. He informed the committee that he had been a city councilmen for the last 11 years. Mr. Cleworth opposed HB 1. The committee should have received a resolution from the Fairbanks City Council which states unanimous opposition to HB 1. CO-CHAIRMAN HALCRO noted that the Fairbanks City Council's resolution is in the committee packet. MR. CLEWORTH said that there is another side to this story. Back in the early 1980s, the City of Fairbanks received a lot of oil money and not much effort was placed in labor contracts. The city did not really do its job negotiating and the city joined the Public Employees Relations Act (PERA) under which the Class(a)(1) employees exchanged the right to strike for binding arbitration. In the late 1980s when the oil money ran low, the city was left scrambling to meet its budget. The community became upset with the Class(a)(1) employees and instituted a tax cap on the city. Therefore, the council tried to regain some fiscal credibility by producing a more palatable package for the community. The city negotiated with the Class(a)(1) employees and asked for reductions in the benefits and some wages while the union wanted cost of living increases. At the impasse, an arbitrator would come to town. Mr. Cleworth commented that he had never known an arbitrator to roll back anything. The city is left to pay whatever the arbitrator decides which leaves the council to determine how to pay such when there is a tax cap. The council reviewed cutting staff in the police and fire departments. The unions then took the city to court demanding minimum staffing levels with which the judge agreed. Mr. Cleworth summarized that the judge was determining the staffing, an arbitrator determining the wage, and the taxpayers speaking through the tax cap. The only option was to take from other city departments to pay for Class(a)(1) employees which created animosity within the city. A few years later, it was discovered that the city council did not have to fund an arbitrator's award. "Now this bill doesn't give us a tool to roll back salaries and wages, but it did give us a tool to hold status quo." Number 0670 MR. CLEWORTH informed the committee that in 1997 the average cost of a police department employee, including all benefits, is $95,053 and for a fire department employee it is $94,907. Mr. Cleworth said that was the highest in the nation from the research. The average salary in the North Star Borough including government employees is only $29,196 while the average base salary in the City of Fairbanks is $52,768. Mr. Cleworth stated that the benefits are extremely high and the city council is attempting to control medical costs now. MR. CLEWORTH expressed the hope that HB 1 would be defeated and provide municipalities the right to leave PERA. He emphasized that every city manager and mayor he had worked with had gone to Juneau requesting a change in the law allowing municipalities to have their own personnel code and leave PERA. Mr. Cleworth requested that the Public Employees Retirement System(PERS) be investigated. Mr. Cleworth said, "This is a killer for us, is that when the overtime is pumped in on base time to compute retirement pay we really get hammered with Class[(a)](1) employees because there is a lot of overtime in those departments. And the contracts set up a situation for that overtime to be created, that we don't have the tools to change." Mr. Cleworth requested that the committee contact Representative Whitaker, a former city councilman, regarding this issue. Further, Mr. Cleworth informed the committee that the starting fireman recruit earns a wage of $11.69 which is increased to $12.90 after six months, increased to $14.18 after 18 months, and after three years longevity pay begins at three percent and one percent every year thereafter. Number 0907 CO-CHAIRMAN HALCRO understood that there was a window of opportunity for cities to opt out of PERA; when was that? MR. CLEWORTH said that he understood the window was within a year or so of the institution of PERA. At that time, the council did not opt out. The wall was not hit until the late 1980s. CO-CHAIRMAN HALCRO asked if the statements, at the February 25, 1999 meeting, that the Fairbanks Police Department had not received a pay increase for six years was correct. MR. CLEWORTH reiterated that those employees would receive longevity in the amount of three percent after three years and one percent each year thereafter up to 10 years. He stated, "The long- timers that have been there have been at the salary levels that that they are at. But as I testified before you earlier, they are hardly poverty wages." Mr. Cleworth said that these wages, in his comparisons, are the highest wages to be found in the nation. CO-CHAIRMAN HALCRO asked if the City of Fairbanks could opt out of PERA would it still embrace binding arbitration for police and fire employees. MR. CLEWORTH said binding arbitration was used for Class (2) and Class (3) in the past. The council wants the option of whether to approve or disapprove a contract. The only time an arbitrator should be utilized is when both parties feel that would be in their best interest. CO-CHAIRMAN HALCRO asked if the city would continue to offer binding arbitration for police and fire employees. MR. CLEWORTH explained that the city would have its own personnel code. He indicated that the right to strike would probably be available. The Class(a)(1) employees should have the right to strike and the city should have the right not to use binding arbitration. Mr. Cleworth said that the city would return to its personnel code that was utilized until the city joined PERA. Number 1119 DAVE MAITLEN, Police Officer, Fairbanks Police Department, testified via teleconference from Fairbanks. He informed the committee that he had been a police officer in Fairbanks for 18 years. Mr. Maitlen supported HB 1. Collective bargaining means to negotiate in good faith, then mediate if an agreement cannot be obtained, and finally use arbitration as a last resort. In the 18 years Mr. Maitlen has worked for the Fairbanks Police Department, only three times has the police union went to contract arbitration. On two of those occasions, the arbitrator ruled in favor the police union and on one occasion the arbitrator ruled in the city's favor. The rulings in favor of the police department were regarding wages; the ruling in 1990 allowed for a cost of living raise over a two year period after a wage freeze the first year. Prior to that, the police union gave back 10 percent of their salary in order to avoid lay offs, in the early 1980s, and when the city did not have the money for wages, in the mid 1980s. The second ruling in 1995 was not funded by the Fairbanks City Council and the starting salary of a police officer was not increased. A two-year officer gained four cents an hour, a three-year officer gained four cents an hour, a four-year officer gained 48 cents an hour, and a five-year officer gained nine cents an hour. Two pay steps were added to the top end of this contract, keeping salaries for starting officers low. Mr. Maitlen did not believe that sounded like a massive pay increase. The rulings in the city's favor have been not to incur additional costs, keep starting wages at the status quo. Mr. Maitlen informed the committee that all the provisions, except the wage provision of the 1995 contract, have been tentatively agreed to by the city and the union. When the city failed to fund the arbitrated wage scale, the time and money spent in collective bargaining was wasted. The police officers were left without a new contract because one provision was not funded. The subsequent lawsuit cost even more. MR. MAITLEN acknowledged that the City of Fairbanks does have a tax cap, but pointed out that the framers of the tax cap allow six exceptions. One of those exceptions, allows the city to raise taxes to fund court judgements and arbitrators' awards. No one wants to go to arbitration during a labor dispute, but on occasion an impartial expert needs to hear all the facts and make a determination. Class(a)(1) employees are told that they are essential employees who cannot strike, but have binding arbitration. If the city does not have fund a binding award, binding arbitration does not truly exist which would be corrected with HB 1. Mr. Maitlen asked for the committee's support of HB 1. Number 1380 MARK DRYGAS, Business Agent, Fairbanks Firefighters Association and Captain, Fairbanks Fire Department. Mr. Drygas supported HB 1. He said that he wanted to address some of Mr. Cleworth's comments. During the time before PERA under the personnel code which allowed the right to strike, the Fairbanks firefighters did strike in the late 1970s. A court injunction required the firefighters to return to work. Mr. Drygas believed the court injunction would be a tool the city would use in order to protect the public. He said that binding arbitration is available in order to avoid the interruption in service and is beneficial with the relationship between the employees and the city. Binding arbitration was intended to be a manner in which to solve an impasse in bargaining. Mr. Drygas said that binding arbitration makes both parties want to agree to a contract and brings finality to bargaining. Without binding arbitration there is no way to have finality. MR. DRYGAS said that this issue will effect other communities. In the situation in Fairbanks, the firefighters contract expired in 1995 and negotiations have occurred for the last three-and-a-half years. If binding arbitration were binding on both parties, good faith bargaining would take place. Under PERA, the firefighters do not have the right to strike to which Mr. Drygas agreed. Further, PERA called for binding arbitration. Therefore, the firefighters are subject by law to binding arbitration and the arbitrator's decision. Mr. Drygas noted that the arguments in Mr. Cleworth's testimony such as the tax cap, the socioeconomic view of the city, and comparable wages could all be brought before the arbitrator. Although the firefighters are bound by the arbitrator's decision, the city has an option since the decision is subject to legislative approval. Both sides should be playing by the same rules. In conclusion, Mr. Drygas mentioned that the Fairbanks firefighters have not received a wage increase in nine years and the Fairbanks police officers have not received a wage increase in six years. Number 1660 REPRESENTATIVE DYSON asked if the firefighters union is involved in local elections and has the union raised and contributed money to municipal candidates. MR. DRYGAS replied yes. REPRESENTATIVE DYSON asked Mr. Drygas if Mr. Cleworth's figures for the wages and benefits of Fairbanks' firefighters was accurate. MR. DRYGAS was not sure what figures Mr. Cleworth was using, but pointed out that Mr. Cleworth's figures included overtime. If the fire department was staffed properly much of the overtime would be eliminated. Mr. Drygas said that he would not dispute Mr. Cleworth's figures, but without the overtime the figures would be considerably less. REPRESENTATIVE DYSON said that at one point he could say the Anchorage Police Department was the highest paid police department in the world. Are there any fire departments that have a better package than the Fairbanks Fire Department? MR. DRYGAS informed the committee that a recent study places the Anchorage Fire Department as number four in the nation and the Fairbanks Fire Department is below Anchorage. Mr. Drygas reiterated that these are arguments that can be brought out during the arbitration proceedings. REPRESENTATIVE DYSON asked if Fairbanks has had difficulties in attracting qualified people. MR. DRYGAS replied no, but noted that there have been recent problems in retaining employees. For example, in Mr. Drygas' department of 36 firefighters, six members are either on hiring lists or seeking employment elsewhere. In further response to Representative Dyson, Mr. Drygas said those employees were not approaching early retirement age. Mr. Drygas clarified that the employees that are being lost are those that have been employed by the fire department for less than six years. Number 1841 REPRESENTATIVE KOOKESH requested Mr. Drygas' interpretation of HB 1 since he does not see anything in the bill regarding the right to strike. MR. DRYGAS pointed out that Alaska is the only state that does not allow Class(a)(1) employees to strike and binding arbitration is not binding. Binding arbitration and not having the right to strike go hand-in-hand. Mr. Drygas noted that Mr. Cleworth had indicated he would prefer the city to be under its old rules and allow Class(a)(1) employees the right to strike and not have binding arbitration. Mr. Drygas reiterated the situation when the Fairbanks firefighters did have the right to strike and did strike; a court injunction required them to return to work which he felt would be the case again. He also felt it unfair to place the firefighters in a position that would allow them to strike; it would be a tough decision personally. REPRESENTATIVE KOOKESH interpreted HB 1 as merely making binding arbitration truly binding. The legislation does not have anything to do with salaries, wage increases, or striking. MR. DRYGAS agreed with Representative Kookesh. By law, binding arbitration is an option. By law, the bargaining units are bound by the arbitrator's decision while due to the law the municipality is not bound by the arbitrator's decision. REPRESENTATIVE KOOKESH said, "My interpretation would be then, if we can't make binding arbitration binding, then at least give us the right to strike." MR. DRYGAS agreed and reiterated placing public safety providers in that position would be unfair. Further, allowing the right to strike would be unfair to the public. Number 2029 MR. DRYGAS, in response to Co-Chairman Halcro, informed the committee that he had been with the Fairbanks Fire Department for eight years. CO-CHAIRMAN HALCRO inquired as to the reason behind the court injunction during the Fairbanks firefighters' strike before PERA. MR. DRYGAS noted that strike was before his time. However, in discussions regarding that strike Mr. Drygas had determined the court injunction was due to the public safety issue. CO-CHAIRMAN HALCRO surmised then that before PERA in Fairbanks, the courts recognized that the fire department is a life, safety department and the city cannot afford for those employees to strike. MR. DRYGAS agreed. In further response to Co-Chairman Halcro, Mr. Drygas offered the following explanation of how an arbitrator is chosen. The fire department would write to the Federal Mediation and Conciliation Service which would provide a list of seven registered arbitrators and their biographies. The department and the city would then do research on these arbitrators. Then a coin would be flipped and whoever loses the flip would strike a name from the list first and then the other party would strike a name from the list and so on until only one name is left. CO-CHAIRMAN HALCRO echoed Representative Kookesh's statement that this is not about the wages, but rather the basic premise of the law. The law takes away the right to strike and offers binding arbitration in lieu of that and the binding arbitration should be binding. Number 2151 KEVIN RITCHIE, Alaska Municipal League, thanked the committee for allowing time to discuss the issue with the legislative committee and others. There was a meeting of the Educational Government Committee which discussed this issue at great length on March 5th during which the committee voted to oppose HB 1. The primary reason for the opposition is because there are two separate processes at hand one being labor negotiations and the other is the appropriation powers of a legislative body. The process must stop at the state or local level regarding what the community will fund. The power to appropriate is very basic to the legislative process. MR. RITCHIE said that binding arbitration is similar to a judicial proceeding in terms of making a decision that is binding. However, all court decisions have an appeal process to higher courts. If one views binding arbitration as an appeal process, "...you've got the binding arbitrator's decision, which I think both sides, labor and management, would agree is not a perfect solution, you know, it's a solution that was chosen. There's an appeal really to the legislative body for that decision and then ultimately the decision has to lay with the voters." MR. RITCHIE, in response to Co-Chairman Halcro's earlier question, believed that the PERA window closed in 1976. Juneau is a community that opted out of PERA. During Mr. Ritchie's time as a city manager in Juneau, Juneau had good relationships with the police and fire unions under the locally developed ordinance. The Alaska Municipal League does support, as a policy matter, allowing municipalities to opt out of PERA. Number 2315 MR. RITCHIE informed the committee that there have been discussions regarding how to reduce the number of times that a city council reaches the point where it feels it must not fund a decision of a labor arbitrator or a portion of that decision by improving the process. From his discussions with the attorney general's office and recollections of the processes in general, Mr. Ritchie believed that Alaska does not have strong standards for what labor arbitrators do. There is not a state statute or standard that specifies what the arbitrator has to consider. Certainly, local financial conditions are very important to the public. Mr. Ritchie said it would be a good avenue to work on through the state, municipal governments, and labor organizations in order to strengthen the language in that statute. REPRESENTATIVE KOOKESH was not surprised with Mr. Ritchie's position. He asked Mr. Ritchie if he believed that binding arbitration is currently binding in Alaska. MR. RITCHIE replied no. REPRESENTATIVE KOOKESH inquired as to how binding arbitration could be fixed. MR. RITCHIE recognized that binding arbitration does attempt to arrive at a goal. When going through the court the court's decision is expected to be binding, but there are appeal processes. Very few things are ultimately binding. Mr. Ritchie acknowledged the importance of finality, but pointed out such finality conflicts with the constitutional and practical duty of the assembly or council to be the place where the money stops regarding taxes, services, etcetera. Number 2454 REPRESENTATIVE KOOKESH stated that binding arbitration should be binding and if Mr. Ritchie does not have another solution, HB 1 is the solution before the committee. Representative Kookesh was uncomfortable with comparing binding arbitration to a court case with an appeal process. Even within the courts, there is a U.S. Supreme Court where there is a final appeal. If binding arbitration is not truly binding, Representative Kookesh would be more comfortable with the Alaska Municipal League recognizing the problem and offering a solution. CO-CHAIRMAN HALCRO asked when Juneau opted out of PERA, did the city give fire and police employees the right to strike. MR. RITCHIE did not recall. Mr. Ritchie did not know of any binding arbitration taking place in the City and Borough of Juneau. In further response to Co-Chairman Halcro, Mr. Ritchie recalled that municipalities were in PERA unless action was taken to opt out. CO-CHAIRMAN HALCRO noted that Mr. Ritchie's letter identified some constitutional questions regarding the ability to tax out regarding Section 1, Taxing Power, and Section 9, Local Debt. He asked if Mr. Ritchie had received a legal opinion on those. MR. RITCHIE said he had talked with the attorney general's office. The Fairbanks issue and the police and fire issue in Anchorage went to court. Although those questions were raised during the suits, the court did not rule on those issues. The courts did not reach those decisions. Mr. Ritchie thought that the attorney general's office felt that it was an issue that could be decided. Number 2602 CO-CHAIRMAN HALCRO expressed concern with Mr. Cleworth's testimony regarding the city's preference to opt out of PERA and develop its own rules. The concept of binding arbitration is that in exchange for giving up the right to strike, mediation with a third party will occur taking into consideration local economies. Police and fire employees are expected to protect citizens every day. Just as the court ruled 20 years ago in Fairbanks, firefighters cannot be striking. Co-Chairman Halcro understood the fiscal concerns of the Alaska Municipal League, but there was a window to opt out of PERA. Why has it taken so long to reach this point? MR. RITCHIE stated that conditions were different during the time to opt out of PERA. Mr. Ritchie indicated that a number of communities might take the initiative to create a local ordinance, if the ability to opt out of PERA was available. The question of how to weigh an employee's wage with what a taxpayer can pay or the level of service desired is a question that local communities and legislative bodies are designed to handle. This is a difficult decision that is made community by community. Funding a contract can result in a reduction in service, especially when there is a tax cap. Both decisions are terrible decisions. Number 2764 DON ETHERIDGE, Alaska State District Council of Laborers, Lobbyist for the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), informed the committee that recently there was a conference at which Representative Porter spoke highly of HB 1. Mr. Etheridge pointed out that many areas of arbitration are negotiable, rules for the arbitrator can be established. He mentioned that the Juneau Fire Department does not have the right to strike, and he did not recall the Juneau Fire Department ever going to binding arbitration. This issue has not come before the city personnel board. He reviewed the various duties of fire and police employees. Mr. Etheridge believed that everyone in the community believes that fire and police employees should be treated fairly. REPRESENTATIVE DYSON inquired of Co-Chairman Halcro's intention with HB 1. CO-CHAIRMAN HALCRO noted that the next committee of referral is the House Labor & Commerce Committee. Co-Chairman Halcro said that he intended to move HB 1 out of committee today. REPRESENTATIVE DYSON directed the committee's attention to the letter from Tim Rogers with the Municipality of Anchorage. Representative Dyson informed the committee that he had spent six years on the Municipal Assembly in Anchorage. There are some hidden issues. He identified binding arbitration as a politician's dream because the politician is taken out of the position of making the hard decision. Representative Dyson said that when the arbitrator's decisions and the subsequent court decisions took away some of the local legislative bodies' ability to make decisions about taxing and appropriations, many of the local governments began waking up to the situation. REPRESENTATIVE DYSON pointed out that Anchorage has had a long- standing love affair with its police and fire departments. He would argue that Anchorage not only has amongst the highest paid police and fire employees, but also the highest quality in the world. There have been virtually no cases of police brutality, cops on the take, and firefighters are cross trained. Those employees do not want the ability to strike because they do no want to end the love affair with the citizens of Anchorage. This bill, HB 1, would take away the legislative body's authority to appropriate. TAPE 99-14, SIDE B Number 3000 REPRESENTATIVE DYSON discussed the situation in Anchorage where overtime is assigned on the basis of seniority. The highest paid employees in the city and probably the state are the senior officers who receive the first cut at overtime which feeds into their retirement rates. Representative Dyson said, "And it's 20 years and out, and the retirement benefits that accumulate." Representative Dyson stated that he would not vote in favor of moving HB 1 out of the House Community & Regional Affairs Committee. Further, he said he would strenuously argue against HB 1 because of what the legislation does to the constitutional responsibilities of the elected representative. When an arbitration takes place there is someone missing from the table, the people of the area are not present. There is no accountability between the arbitrator and the people of the area whose the decision would feel the effect of the arbitrator's decision in their taxes, lives and services. A fundamental principle of our government is aggregated because it is close to appropriation without representation and arguably taxation without representation. Representative Dyson said that the system does work. Police officers and firefighters in Fairbanks and Anchorage are not receiving welfare which was the case 20 to 25 years ago in Anchorage. Therefore, police officers and firefighters are not underpaid and the rate of applications received illustrates that the remuneration package appears to be attractive. Representative Dyson encouraged the committee to not take away the constitutional powers of the local governments to make appropriations for local services. CO-CHAIRMAN HALCRO understood Representative Dyson's comments regarding binding arbitration being a politician's dream, but the people elect the politicians. Throughout history, bad decisions of prior administrations have had to be lived with. In Anchorage, one such example is the Performing Arts Center. Co-Chairman Halcro asked why does binding arbitration exist. Number 2811 REPRESENTATIVE DYSON explained that part of the original deal was if the right to strike was given up, then arbitration is provided. Subsequent tactics and financial conditions exposed weaknesses in arbitration. Furthermore, the court decisions which said, "When you have greatly diminishing--or significantly diminishing income due to recession and a tax cap, then the money goes down and you have to live by the arbitrator's decision and you do not have the option of reducing the number employees. Therefore, you've taken away a portion of the local legislative body's authority and responsibility to make appropriations. So, then you're going to take the money away from something else." That was when people began to have reservations about the arbitration process. He guessed that people had learned through the process. He reminded everyone that public employees have been very active in local elections and have as good or better opportunity than most citizens to elect local assembly members sympathetic to the arbitration process. REPRESENTATIVE KOOKESH said that the question is not regarding salaries of police officers and firemen, but whether Class(a)(1) employees are given the right to strike or arbitration. This bill, HB 1, does not address the right to strike; HB 1 merely makes binding arbitration binding. This legislation does not speak to municipal rights. He believed that the House Labor & Commerce Committee will have a more in depth review of HB 1. Representative Kookesh said HB 1 should move to the next committee of referral. Representative Kookesh supported HB 1 because it provided teeth to binding arbitration which is currently lacking. Number 2632 REPRESENTATIVE KOOKESH moved that HB 1 be reported to the next committee of referral with attached fiscal notes and individual recommendations. REPRESENTATIVE DYSON objected. Upon a roll call vote, Representatives Kookesh, Morgan and Co- Chairman Halcro voted in favor of reporting HB 1 out of committee. Representative Dyson voted in opposition to reporting HB 1 out of committee. REPRESENTATIVE KOOKESH clarified that he was referring CSHB 1, Version LS0020\H, Cramer, 3/10/99. Therefore, CSHB 1(CRA), Version LS0020\H, Cramer, 3/10/99, was reported out of the House Community & Regional Affairs Standing Committee.