HOUSE BILL NO. 485 "An Act amending the State Personnel Act to place in the exempt service pharmacists and physicians employed in the Department of Health and Social Services or in the Department of Corrections and corporate income tax forensic auditors employed by the division of the Department of Revenue principally responsible for the collection and enforcement of state taxes who specialize in apportionment analysis and tax shelters of multistate corporate taxpayers; and providing for an effective date." Co-Chair Meyer noted the seven fiscal notes that would be addressed. JIM DUNCAN, ALASKA STATE EMPLOYEE ASSOCIATION, responded to a question from Co-Chair Meyer, Mr. Duncan commented on a letter sent to the administration. He noted that he had only a brief opportunity to review the administration's response. He related that the April 6 letter by Art Chance, Director, Labor Relations, Department of Administration, complimented his testimony on the bill. Mr. Duncan stated that he did not believe that removing these jobs from the classification system was unconstitutional. He also clarified his understanding that legislators maintained the right to move positions from classified service to exempt service. He maintained, however, that passing a statute during a contract period moving positions from classified to exempt status would impair the contract status. He recalled that positions had been moved in the past. Mr. Duncan questioned the policy reason for moving the positions. He asked if the issue was rate of pay rather than policy. He spoke in support of raising salaries. He suggested that to impair a contract was in conflict with the Alaska Constitution. He suggested that there should be a systematic way of amending a job class. 2:37:30 PM Representative Weyhrauch asked what the legal problem was with this method. Mr. Duncan pointed to the process in the contract, which allows for positions to be moved within a class, but to do the move by statute is prohibited. Representative Weyhrauch followed by asking if the main issue from a management view was to hire positions quickly and if the process was otherwise too cumbersome. Mr. Duncan again asked if the goal was to pay more money. He suggested that there was a process that could be started to reclassify and amend the pay plan. He maintained that the situation was not so critical as to impair the contract process. Representative Weyhrauch asked if it was possible to open one segment to address this issue. Mr. Duncan commented that in discussions with Mr. Chance, he had suggested adding three additional levels of salary and to pay the same amount as in exempt service. 2:40:16 PM Representative Hawker asked if to open a pay plan could be restricted to certain jobs, or if it would set a precedent for others seeking to raise their pay scale. Mr. Duncan responded that the pay plan would only be opened to add three ranges. That would give latitude to reexamine pay scale. He referred to reclassification within job families. He noted that there should be care given to which jobs were compared. Representative Hawker commented on the level of belligerence on the part of the administration, but expressed concern over raising the level of pay scale for all job classes. Mr. Duncan noted that paying a higher rate in exempt service was also possible in classified service, as long as the proper process is followed. Representative Hawker reiterated his offense at the tenor of the letter from the administration, and again expressed concern over opening up a job classification. 2:43:41 PM Representative Kerttula observed that even if the entire job family were raised, jobs still needed to be considered case by case. Mr. Duncan concurred, and added that he did not negotiate ranges, but rather overall percentage increases. He also noted that it would not open the way to moving other positions into Ranges 28, 29,30. 2:45:11 PM Representative Weyhrauch observed that the policy choice was whether to create a new classification range, or to simply move positions into exempt service. He asked if another bill is needed to accomplish the new ranges. Mr. Duncan replied that that is bargainable and a letter of agreement could be signed. Representative Weyhrauch questioned if it was a good public policy decision to bump specialized jobs or high demand positions out of exempt classification. Mr. Duncan agreed that this was the central question, and maintained he had not been satisfied with the argument for creating the exempt status. 2:46:51 PM Representative Hawker asked if anything prevented crafting a law to allow additional salary ranges in only certain job classifications. Mr. Duncan observed that this was the affect of creating exempt positions. He noted that it was not appropriate for the legislature to change the pay plan, as it was subject to collective bargaining. He again cautioned that the policy decision to move the positions to exempt service would set a difficult precedent. 2:48:40 PM Representative Kelly asked for clarification about whether the Attorney General agreed with Mr. Duncan's definition of the contract process, and whether it was within the right of management to change the pay scale. Mr. Duncan stated that he would advocate adding three ranges to the pay scale for all bargaining units. He noted that it would require using the process available to challenge the statute. He stressed that he did not wish to challenge it, but felt clearly compelled by the Constitution as it pertains to contracts. 2:51:20 PM MILA COSGROVE, DIRECTOR, DIVISION OF PERSONNEL, DEPARTMENT OF ADMINISTRATION and ART CHANCE, DIRECT, LABOR RELATIONS, DEPARTMENT OF ADMINISTRATION, testified regarding the bill. Co-Chair Meyer asked whether time was critical in this matter. Mr. Chance responded that public policy decisions were made in the Department of Revenue, and stated that he was not concerned with the time, but the manner of the process. Ms. Cosgrove verified that the Department was not able to recruit the personnel needed within the existing pay plan to accomplish the work forthcoming. 2:53:41 PM Representative Hawker asked whether pharmacists and high- grade accountants, since they shared a high level of independence, could be recruited privately. Ms. Cosgrove stated her understanding that pharmacists must be hired by the Department, although she conceded that they were occasionally hired on a contract basis. She maintained that hiring on a contract basis was not a good business practice in the state. Representative Hawker asked if it was possible as an immediate solution, to hire on a contract basis while bargaining representatives sought a long-term solution. Mr. Chance commented that many disputes resulted in the contracting out of employees. He conceded that it may result in a cost savings, but questioned whether it could be done within correct public policy. He emphasized the need for a public policy decision. 2:57:00 PM Representative Kelly reiterated his question over whether it was a management right to decide and if it could be done immediately. Mr. Chance responded that, in the past, positions had been moved to exempt service, and that there was language allowing for it. He gave the example of a vacancy, and noted that the right existed within a contract to move a position. He admitted that they would oppose moving the positions within a job classification after they had become exempt, since they would become a different body with different legal rights. He noted that this question had not been answered by any court, although there had been disputes in past years. He stated that it was unclear whether a "contract bar" existed to prevent moving positions from classified to exempt. 2:59:52 PM Representative Kelly summarized that a management right existed and that it could occur immediately. Mr. Chance stated that the management right existed with legislators. He conceded that since the positions were vacant, a debate could ensue. 3:00:56 PM Representative Kerttula asked if the wage increase were accomplished, whether it would solve the problem. Ms. Cosgrove noted that the issue was more complicated. She pointed out the need to compete with the private market for these types of positions. She also noted that pharmacists are primarily in the supervisory unit and not represented by Mr. Duncan's union. She pointed out that classified employees are subject to various criterion, and that by applying these criterion to pharmacists, they were currently accurately classified at their salary rate. She noted that to move a position by seven salary ranges creates a precedent problem, rather than seeking other medical professions to create a new precedent for paying a higher salary. She stated that she does not believe this could be accomplished in the classified service. 3:03:29 PM Representative Weyhrauch observed that if these positions were moved to exempt status, many of the same issues would still be in play. Ms. Cosgrove agreed that to some extent that is correct. Ms. Cosgrove spoke to good qualifications and licensing. Representative Weyhrauch said they would not be encumbered by the collective bargaining agreement. Ms. Cosgrove said correct. 3:05:22 PM Representative Joule wondered if exempts run the risk of being left out by a new administration. Mr. Chance addressed the mythology about exempt status. Teachers are exempt because of rights under Title 14. Alaska Marine Highway employees are exempt because they were originally hired out of Seattle. Most exempts are so far removed from ranges 5-30, that they can't be paid without distorting the scale. Addressing the status of being released by a new administration, Mr. Chance reported that almost no "at will" employees exist. Division directors, special assistants, and some partially exempt employees can be dismissed - the rest have to have probable cause. Representative Kelly asked if exempt people could organize. Mr. Chance said they could. Representative Joule asked how many people it takes to organize. Mr. Chance reported that there is no numerical limit. A community of interest must be demonstrated. 3:09:04 PM Co-Chair Meyer addressed the fiscal notes: zero fiscal note #1 by the Department of Commerce, Community and Economic Development, fiscal note #3 by the Department of Corrections, three new indeterminate fiscal notes by the Department of Health and Social Services, and a new indeterminate fiscal note by the Department of Revenue. 3:10:47 PM Co-Chair Chenault commented on the fiscal notes: all are zero for this year, but indeterminate for next year. He pointed out the certainty of costs in the future. Co-Chair Meyer said the bill was set aside in hopes of organizing a collective bargaining process, but that didn't happen. The legislature needs to take action soon on the bill, but it needs additional discussion. 3:13:06 PM Representative Foster MOVED to REPORT HB 485 out of Committee with individual recommendations and the accompanying fiscal notes. Representative Hawker OBJECTED. Representative Hawker maintained that he has heard no solution for this issue and that there would be litigation. He said he is not comfortable with this bill. He suggested that raising classifications could accomplish the same goal without litigation. He said he is not endorsing labor's side, but taking the least risky route. A roll call vote was taken on the motion to REPORT HB 485 out of committee. IN FAVOR: Holm, Kelly, Stoltze, Foster, Chenault, Meyer OPPOSED: Hawker, Joule, Kerttula, Moses, Weyhrauch The MOTION PASSED (6-5). HB 485 was REPORTED out of Committee with a "no recommendation" and with zero fiscal note #1 by the Department of Commerce, Community and Economic Development, fiscal note #3 by the Department of Corrections, three new indeterminate fiscal notes by the Department of Health and Social Services, and a new indeterminate fiscal note by the Department of Revenue. Representative Weyhrauch concurred with Co-Chair Chenault's concerns about future costs related to this bill. 3:17:44 PM