CONTRACT LABOR AGREEMENTS & COMPENSATION INCREASES: Masters Mates and Pilots (MMP) Inland Boatman's Union (IBU) Labor Trades and Crafts (LTC) General Government (GGU) MARK BOYER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION, provided an overview of the contract bargaining process resulting in a union compromise. Bargaining parameters, goals and directions were established in the Public 1 Employment Relations Act in 1972. He observed that the concept of joint decision making is important to modern government's effectiveness. Commissioner Boyer noted that the Department of Administration (DOA) embraces the contract negotiations and will be used for addressing disputes and work stoppages. Contract negotiations promote harmonious relations between government and employees. He added these negotiations attempt to protect public interest in the operations of State government. Commissioner Boyer informed members that most of the proposed contracts indicated wages which have had no adjustments other than those relating to merit or longevity, since 1992. He emphasized that there have been no adjustments to the Consumer Price Index (CPI) or cost-of- living since 1992. The span of the wage comparison contract would extend from 1992 through 1999. The maximum increased monetary exposure to the State of Alaska would be 4.5%. Commissioner Boyer warned that stagnation in wage growth creates low morale and frustration among employees. Commissioner Boyer indicated that the Governor's intent was to move public employee wages to the "middle of the pack" by using information from 100 private sector employers to establish the guidelines. He agreed that work force wages and benefits must reflect those within the private sector. Commissioner Boyer advised that the contract agreement action will regain trust and confidence of the public. Public ownership of government is important and currently lacking. The public needs to be reassured that our government is living within the State's means, and will provide for the best interest of the people of Alaska. Those goals are reflected in the contracts. Commissioner Boyer continued, the plan for monetary terms would be one-half of the CPI, capped at 1.5%, maximum exposure of 4.5% for a four year venue. Area cost differential will also affect correct management by the Department. Legislation currently has been proposed to address concerns with non-union employees. That legislation could trigger a new bargaining agreement, thus saving revenue in cost avoidance. An additional bargaining provision will provide for capping area wide differentials at $30 thousand dollars. Commissioner Boyer added, reclassification review would provide for a non-contract and non-legislative provision implemented by the Department. Currently, the Department reviews classification of work performed, guaranteeing an internal alignment of "like pay for like work". The external alignment would occur through management reviewing 2 of the private sector market place. He added that contracts must be fair and equitable. Area wide cost differential legislation must be passed to provide a tool for reducing the overall cost to State government. The process of classification review should be continued to guarantee that the State is paying the correct amount for work done. Commissioner Boyer stated that the contracts are fair. He spoke to the CPI increase, pointing out that the Department has bargained contracts down to a fraction of the local and state government requests. The Department is measured by contracts which have been replaced. He pointed out that the Legislature failed to approve at least three contracts last year. Significant savings resulted from last year's bargains, demonstrating that public employees recognize the fiscal climate of the State and are also willing to "hold the line" on spending. Commissioner Boyer acknowledged that a point exists when public employees can no longer "keep up". He emphasized that the terms of the monetary contracts are fair. Commissioner Boyer informed members that the Department of Labor in 1995 published a document, indicating that U.S. worker's wages rose by 2.7%. He pointed out that this was the lowest national rise ever and that at the same time in Alaska, state employees received no increase. He informed Committee members that all the contract venues have the same monetary cap of 1.5%. He added that each situation includes a "free" period where the status quo on monetary terms should be "in place". The contracts all have different ending points. All contracts are capped at 1.5% and none of the contracts contain retroactive clauses. Overtime payment was addressed. He noted calculations from "in pay" status to "at work" status. Overtime compensation would be paid after 40 hours of actual work time. Health insurance payments would bring all unions benefits in-line. At this time, the premium is $423.50 per month. The Department has negotiated that if the premium escalates, the employer would pay up to a maximum of 50% of each state employee's share. Commissioner Boyer added, that in some contracts, there will be an elimination of certain holidays and capping of future unknown holidays. Employee's birthday holidays have been eliminated. MASTER, MATES AND PILOTS (MMP) UNION Commissioner Boyer noted that the current contract with MMP Union would run through June 30, 1996. The current 3 agreement became effective April 1, 1994, and includes a lump sum payment of $950 dollars payable no later than July 15, 1996. The monetary terms have been submitted for legislative approval. There is a second agreement which would commence July 1, 1996, through June 30, 1999, and includes a salary schedule adjustment equal to one half of the CPI, not to exceed 1.5% for each year of the contract. A 4.5% increase would be guaranteed if the CPI should exceed 9% over the term of the agreement. CAPTAIN GEORGE BRERETON, ALASKA MARINE HIGHWAYS, MASTERS, MATES AND PILOTS (MMP) UNION, noted that the union has done their best to maintain a leadership role with the Marine Highways and the State of Alaska. He noted that the contract was negotiated in "good faith". Currently, manning is at a minimum level necessary for the safe operation of vessels. MMP has taken no raises for several years even though cost-of-living continues to rise. The three year contract will allow the State to provide continuity of service at an affordable rate. Union members are not in a merit step increase system. He concluded that pilotage services would cost more if transferred to the private sector. Co-Chair Hanley requested additional testimony delineating differences between state and private sector salaries for similar work done. Captain Brereton added that MMP offers an area wide differential. Co-Chair Hanley questioned clauses within the contract which encourage or prohibit privatization. Captain Brereton noted that concern had not been addressed in the contract negotiations. (Tape Change, HFC 96 - 58, Side 2). MILA DOYLE, LABOR RELATIONS, OFFICE OF THE COMMISSIONER, DEPARTMENT OF ADMINISTRATION, responded that all State employees receive a cost-of-living differential or a geographic differential. The Alaska Marine Highway contract with the licensed engineers and masters, mates and pilots functions differently. The differential is paid as a lump sum payment, differentiated from the base wage. The negotiated wage increase will not affect or increase the differential. Captain Brereton added, MMP has agreed to one half of the CPI increase applied to 80% of the total wage package for an Alaska resident worker. Representative Brown commented on historic discrimination of the female dominated classes. She noted that a study provided in the 1980's, indicated that these classes are paid lower than the male dominated classes. She asked if 4 that concern was being addressed in the reclassification study. Commissioner Boyer thought the only way to address that concern would be through a reclassification negotiation process. INLAND BOATMAN'S UNION (IBU) Commissioner Boyer commented that monetary terms for IBU had been rejected last year by the Legislature, nearly resulting in work stoppage. The Union agreed to rebargin their assessment. The current agreement includes a lump sum payment of $950 dollars payable no later than July 15, 1996. The monetary terms have been submitted to the Legislature. The tentative agreement would be effective June 1, 1996, through May 31, 1999, which would include salary schedule adjustment equal to one half of the increase indicated in the Anchorage Consumer Price Index (CPI-U) not to exceed 1.5% for each year of the contracts. A 4.5% increase is guaranteed if the CPI should exceed 9% over the term of the agreement. Monetary terms have been submitted for legislative approval. Ms. Doyle added that IBU does not receive merit increases. Any increases to the general wage structure are a result of promotions within the system. There has not been a general wage increase since 1992. She stressed that the contract package was fair. ROBERT PROVOST, REGIONAL DIRECTOR, INLAND BOATMAN'S UNION (IBU), JUNEAU, echoed that the Union does not receive automatic increases. The IBU for the last ten years has been cooperative with the State. He emphasized that members have lost 17% purchasing power to the cost-of-living over the past ten years. Co-Chair Hanley asked if IBU had a geographic differential established. Mr. Provost explained the differences from other unions and that two different wage scales had been established in 1983. At that time, the difference between Seattle based/Alaska based wages was 22.5%. Over the years, increases have been negotiated for residents living in Alaska. At this time, some employees in the Washington State Ferry System receive higher wages than employees working for Alaska State Marine Highway Transportation. Ms. Doyle offered to provide information to the Committee regarding the pay schedule of the Washington State Ferry System employees. Mr. Provost clarified that he was speaking of wage comparisons and not the benefit packages. Ms. Doyle pointed out the differences between the systems. Washington State 5 Ferries are day boats, whereas, Alaska ferries are a twenty- four hour operation. Co-Chair Hanley commented that the benefit package should be considered in those comparisons and that they should be negotiated. He asked if an evaluation process existed addressing the employees work performance. Mr. Provost replied that annually, all employees are evaluated on the basis of work performance. He pointed out that there are no pay increases tied to that evaluation, although, they are submitted to the personnel file of that employee. Ms. Doyle explained that the law required that the CPI be determined by cost differences in Seattle and Alaska. The cost-of-living differential implemented in Alaska measures those costs, using Anchorage as the center point. Regardless of where an Alaska Marine Highway employee lives within the State, the cost-of-living allowance would only be 22.5%. Co-Chair Hanley asked if there were privatization provisions within the current contract. Mr. Provost responded, IBU represented all Alaska Marine Highway employees on board the vessels except the MMP Union employees. Ms. Doyle noted that there has been a collective bargaining agreement with the IBU for over 30 years. LABOR, TRADES AND CRAFTS UNION (LTC) Commissioner Boyer pointed out that the LTC contract had been rejected by the Legislature last year. The current agreement includes the conversion to a system of personal leave. The contract also includes 50% of sick leave converted to personal leave with the remainder retained as sick leave. Contracting out provisions are changed to require a cost efficiency study in all classes. The tentative agreement would be effective July 1, 1996, through June 30, 1999. It would include a wage schedule adjustment equal to one-half of the increase in the Anchorage Consumer Price Index (CPI-U), not to exceed 1.5% for each year of the contract. A 4.5% increase was guaranteed in the CPI which should not exceed 9% over the term of the agreement. Tool allowance will increase by ten dollars per month. The State's monthly contribution to the Local 71 Health and Welfare Trust may increase up to $26 dollars a month, and be matched by an employee payroll deduction. Current employees will receive a one-time addition of two days to personal leave. Holidays proclaimed by the President will no longer be observed. LEE POWELSON, LABOR RELATIONS, OFFICE OF THE COMMISSIONER, DEPARTMENT OF ADMINISTRATION, noted that the tool allowance 6 would be given to a limited classification of employees. Commissioner Boyer advised that this union was covered by the Health and Welfare Trust. The State agreed to match up to $26 dollars per month for a health plan increase. Co- Chair Hanley disclosed for the record that he had been a member of this union. DON ETHERIDGE, BUSINESS AGENT, ALASKA STATE DISTRICT COUNCIL OF LABORERS, LABOR TRADES AND CRAFTS UNION (LTC), testified that the union included all highway maintenance, construction, airport maintenance and ferry facilities, Pioneer Home workers, and those employees who cook for the correctional industries. He noted that the Union's membership was not pleased with the last year's legislative rejection for a pay increase. He noted that a new contract has been negotiated including a compromise on the part of both the union membership and the State. Labor management committees were established to help negotiate regulations of the contracts. Mr. Etheridge added that morale has been an important concern for the Local 71 Union. Pay raises have been sacrificed in order to obtain health coverage. There are no merit increases in this Union. Discussion followed regarding the personal leave situation. Mr. Powelson commented on the geographic differential condition of the contract, noting that it was based on a fixed amount. Co-Chair Hanley pointed out that in 1993, the State provided $500 dollars per person per month to that union to address their own health care benefit. He asked how increases would be determined. Mr. Powelson commented that an increase would be based on a plan experience or by the trust. After one year in operation, the plan would be provided to the State for an actuarial evaluation. The State has the authority to review the plan with private consultants, and then it could be negotiated or arbitrated. Commissioner Usera settled with the Union at a $24 dollar per month increase. Under the proposed terms, July 1, 1997, would be the first date possible for an increase to the State's contribution. (Tape Change, HFC 96-59, Side 1). Co-Chair Hanley questioned the trust cost per individual. Commissioner Boyer replied that the groups differ considerably. The rate for this union is higher due to the fact that they are blue collar workers who are exposed to more work-place accidents. Co-Chair Hanley indicated that 7 the State currently pays $100 dollars a month more in health care benefits to this Union, amounting to $2 million dollars per year. Co-Chair Hanley questioned the privatization of the Union. Commissioner Boyer commented that there are a number of jobs which originally were handled by Local 71, which are now contracted out. Mr. Etheridge explained that a large cut in membership has occurred. All custodial work in the State operated buildings has been contracted out to private firms. Representative Parnell asked the Union's funding source. Commissioner Boyer advised that the Union also receives federal receipts, through employee's being employed through the Department of Transportation and Public Facilities (DOTPF). Co-Chair Hanley noted legislative frustration observing the number of supervisors in relationship to the number of workers within the Union which creates top-heavy management. He requested a documented justification of the number of workers and supervisors. Commissioner Boyer reiterated that "stagnation" of State employee wages are a concern for the Department. He referenced the profits indicated by the soaring Permanent Fund and increased business tax base. Co-Chair Hanley countered that there has been compensation in merit pay and benefit level increased packages. He thought that benefit level increases should be done in lieu of wage increases. Co-Chair Hanley emphasized that all increased considerations are important. GENERAL GOVERNMENT UNION (GGU) Commissioner Boyer spoke to the current agreement which extends the terms of the prior contract with no change in monetary terms. The tentative agreement would be effective July 1, 1996, through June 30, 1999. It would include a salary schedule adjustment equal to one-half of the increase Anchorage Consumer Price Index (CPI-U), not to exceed 1.5% for each year of the contract. The State's monthly health insurance contribution may increase up to $50 dollars for each eligible employee per month, with future increases matched by employee payroll deduction. Martin Luther King, Jr. Day will be observed by Class One employees. As of January 1, 1997, the employees birthday will no longer be observed and as of February, 1999, Lincoln's Birthday will no longer be observed. Correctional Officers will convert to a system of personal 8 leave, with a 60% conversion of sick leave to personal leave. Overtime after 37.5 hours of work in a work week versus the 37.5 hours in pay status. He added that these monetary terms would be submitted for Legislative approval. RICHARD SEWARD, BUSINESS AGENT, ALASKA STATE EMPLOYEE ASSOCIATION (ASEA), GENERAL GOVERNMENT UNION (GGU), explained the membership of GGU consists of 8,600 members, 50% being female. GGU represents the professional work force of the State. He pointed out that there has been no cost-of-living increase for three years. The Union does receive merit increases and longevity bonuses. A merit increase requires proving that the employee is of "progressively greater value" to the State of Alaska. He elaborated that only 60% of the union members ratified the contract. The controversial issues regarded health insurance payments. Through the bargaining process, the Union dropped from the old coverage of 90%, to an 80% coverage plan. He noted that would place GGU in line with health insurance plans nationally and statewide. Mr. Seward noted that the employees need to be recognized for their good work performed and could receive that recognition with the 1.5% increase pay rate. He sensed that within the State employee work force there is "high stress". The work force needs the recognition by the Legislature. As staff has been cut, employees are working hard to keep up. They are willing to take half a cost-of-living raise. Mr. Seward remarked that the State is paying comparable wages to the private sector. A geographic differential exists. To encourage employees to move to those more remote areas, requires incentive addressed through the geographic differential. GGU believes that the current geographical differential around the State is fair. Representative Brown asked what percentage of employees eligible for merit increases received them. Mr. Seward replied in excess of 90%. He noted that the State is better at terminating employees than denying them merit increases. Co-Chair Hanley read from back-up material, comments from Commissioner Boyer on the merit system: "Of the employees eligible for consideration, over 99% are awarded. A high percentage would be expected, based on the competitive recruitment, 9 examining and selection processes, the probation period and the constructive and progressive discipline to deal with performance deficiencies of permanent employees." Co-Chair Hanley continued that Commissioner Boyer estimated that only 20 employees per year are denied a merit increase when eligible for consideration. Co-Chair Hanley stressed that what currently exists is an automatic guarantee, not a merit increase. Compensation continues to rise.