SENATE CONCURRENT RESOLUTION NO. 29 Relating to urging the Governor to institute a hiring freeze on state government. This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Kelly opined that when requesting a hiring freeze, there are complexities to the issue that are not immediately apparent. Therefore, he requested the Division of Legal and Research Services and the Division of Personnel to comment on the matter. SKIFF LOBAUGH, Human Resource Manager, Personnel Office, Legislative Administrative Services, Legislative Affairs Agency, testified that it is common for managers to assist with the duties of other positions during a temporary hiring freeze. He told of a disadvantage in that if this practice continued over a length of time, managerial positions could change. He spoke of Fair Labor Standards and job classifications and the percentage of time spent performing clerical duties, which could make a manager employee eligible for overtime compensation. Co-Chair Kelly asked the specific percentage of time spent on clerical duties whereby the position is no longer considered professional and exempt from Fair Labor Standards. BARBARA CRAVER, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, testified the amount is established in case law and is between 20 and 50 percent. She stressed the issue is that an employee's job duties regularly involve nonprofessional duties, the status as a profession could be lost and the position could subsequently become subject to overtime compensation. Co-Chair Kelly commented that becoming liable for overtime compensation for managers could defeat the cost saving purpose of a hiring freeze. Co-Chair Kelly pointed out that if this resolution were passed, the Executive Branch is not required to implement it because of the Separation of Powers. He referenced another Senate resolution relating to a constitutional amendment to allow the Legislature to enact a hiring freeze, which is currently in the Senate State Affairs Committee. Ms. Craver replied that if the Administration decided to institute a hiring freeze, a number of statutory changes would be necessary, although these could be temporary. Senator Wilken referenced page 1, line 8 and 9 of the resolution, which reads as follows. WHEREAS the proposed fiscal year 2003 budget contains an increase of 858 full-time positions from the current fiscal year, at a cost of $115,000,000; and Senator Wilken asked if these positions are funded with general funds. Co-Chair Kelly stated that not all the positions would be funded with general funds. Senator Wilken suggested the funding sources of the positions should be clarified. Senator Austerman asked if those positions funded from other sources require general funds for medical and retirement benefits packages and whether this cost is reflected in the $1.5 million. Co-Chair Kelly stressed this resolution is not intended to "beat up on the Governor". He noted that the increased number of positions is partially because of legislative action. She requested Ms. McConnell address Senator Wilken's and Senator Austerman's questions in her testimony. ANNALEE MCCONNELL, Director, Office of Management and Budget, Office of the Governor, spoke to the purpose of a hiring freeze at this time. She surmised that some feel that before additional revenue sources could be considered, it must be demonstrated to the public that existing resources are utilized wisely. She referenced the hiring freeze instituted in Alaska in 1999 because of a significant reduction in oil prices, and hiring freezes instituted in other states experiencing "emergency situations" caused by "a sudden precipitous drop in their revenues." By contrast, she stated the situation currently in Alaska has been known for some time, which is the need to address the fiscal gap with both budget cuts and revenue measures. Ms. McConnell said the question is whether a hiring freeze would provide "good cost control" and also whether it would provide assurance to the public. Ms. McConnell addressed the cost control issue, saying there is not a surplus of state employees who are not performing any work or important work. She stated that five years of budget reductions and a past hiring freeze has "concentrated the effort quite significantly" and forced many agencies to determine how to perform necessary functions with fewer people. Co-Chair Donley asked how many state employees were released "non- voluntarily" i.e. were fired. Ms. McConnell did not have that information. Co-Chair Donley requested examples of how the Administration is attaining efficiency, whether through job reassignments, etc. Ms. McConnell replied there have been several consolidations within departments, such as the Tax Division, which performs with fewer managers and the Department of Labor and Workforce Development, which has instituted cross training of inspectors. Ms. McConnell asserted a hiring freeze does not guarantee budget reductions in specific areas. She noted this resolution exempts those positions related to health and safety. She commented it must then be determined what constitutes health and safety. She listed Alaska State Troopers and the necessary administrative support in the crime lab, investigations and payroll. Co-Chair Kelly asked if there have been lay-offs. Co-Chair Donley said the case has been argued that efficiencies have been made that that the state needs every person currently employed. He asked the number of employees dismissed over the past year to "maximize the productivity of the workforce". Ms. McConnell spoke to difficulties due to position vacancies, which she said she would address later in her testimony. Ms. McConnell informed that paying overtime to existing employees is more expensive then hiring new employees. She told of the 55 correctional officer vacancies in the Department of Corrections, the 15 percent vacancy rate in probation officers, 17 medical positions and five percent vacancy rate for administrative positions. She stressed that the administrative staff "has not kept pace" with the overall growth of the number of prisoners. The Department of Law, she continued, has had a 39 percent turnover rate in the Criminal Division since January 1, 2000. She emphasized that a hiring freeze would impact the Department's ability to hire graduates in the fall, when most are hired. She also reminded of difficulties in hiring and retaining nurses. In addition, she noted the Legislature approved funding for a new hearing officer position in the Department of Labor and Workforce Development to address the backlog of Workers Compensation Claims. However, she informed that another hiring officer position has been vacated and a hiring freeze instituted at this time would negate the effect of the additional position. She also pointed out that new employees require a period of time before they are able to fully complete their duties and that the impact of a hiring freeze would be realized in future delivery of services as well as in the short term. Ms. McConnell spoke to the complex matter of general fund positions. She told of a general funded position in the Labor Market Information Section of the Department of Labor and Workforce Development, which generates over $550,000,000 federal funds. Ms. McConnell next addressed public perception and the difficulties experienced during the past hiring freeze when non-general funded positions continued to be advertised. She stated it is also a misperception as to the importance of general funded positions. Ms. McConnell asserted Alaska has instituted budget reduction measures before many of the states that are currently instituting hiring freezes. She suggested the Legislature could identify functions and modify statutes to reduce the level of certain services. Ms. McConnell reminded of the FY 02 budget Conference Committee intent that although funds would be approved for various increases, the total position count would not be adjusted. She said this decision required the additional positions to be accounted in the FY 03 Governor's budget. Ms. McConnell referenced a handout: Understanding the FY 2003 Budget, Analysis of Position Changes [copy on file], which she said addresses the questions raised by Senator Wilken and Senator Austerman. She pointed out that the aforementioned figure of 858 new positions is inaccurate because it "disregarded" many positions although funds had been approved by the Legislature. She informed that of the 536 new positions included the Governor's proposed budget, 116 are either federally funded or self-supporting. Another 75 of those positions, she said, were previously part time positions; 12 new positions are for programs or facilities previously approved by the Legislature; and 29 new positions in the Governor's Oil Safety and Development Initiative are to address the aging pipeline and other oil and gas facilities and to streamline the permitting process. She continued that 11 new positions proposed for the Department of Corrections are intended to meet the increase probation officer and child protection caseloads. Ms. McConnell remarked that the Administration continues to recognize that there is a need to assure the public that funds are spent wisely. However, she asserted that the "primary issue right now is addressing the revenue side of the equation." Co-Chair Kelly referenced a conversation held in Committee a week prior relating to the specifics of the budget and the difficulties for the Legislature at finding efficiencies. He commented that the same applies to a hiring freeze. He stated he would not presume to tell the Governor the best method to implement a hiring freeze. However, he hoped to enter a dialog on the matter. Co-Chair Kelly stressed the number of positions has increased by 1,200 since 1995. He qualified he did not dispute the importance of many of these positions and noted that some of these positions are the result of legislative action. Regardless, he surmised that a hiring freeze is a common sense response to a growing government in times of a fiscal gap. He wanted to reach an agreement with the Administration as to how a hiring freeze could best be implemented. Ms. McConnell reiterated there is a disagreement about whether a hiring freeze is the best solution. She talked about the unfairness of requiring employees funded with general funds to perform the work of one and one-half positions while other employees working in non-general funded positions are not. She noted employee contracts prohibit this practice and that it would be unfair to the public as well as to employees. Co-Chair Kelly did not disagree and requested assistance in crafting a hiring freeze to avoid the problems Ms. McConnell mentioned. Ms. McConnell asked the purpose. Co-Chair Kelly responded the purpose would be to slow the growth of government in light of a $1.3 billion fiscal gap. He asserted that a hiring freeze is a reasonable response of management in times of a budget shortfall. He pointed out the Governor has proposed increased spending every year except one, when there has been a revenue shortfall. Ms. McConnell stressed the Legislature has approved each of those budgets. She expressed that if the Legislature wants the Administration to stop certain functions, the statutes establishing those services should be amended. Co-Chair Kelly responded, "Act like an executive," and "take hold of this problem and begin to do something about it rather than just passing out money like it's Christmastime." Ms. McConnell pointed out many vacant positions could not be filled because pay scales and compensation packages are not commensurate with the federal government and the private sector, or because or a short supply in trained workers for certain jobs. She stressed that a hiring freeze prohibiting the Administration from recruiting for these positions would compound the problem. Co-Chair Kelly noted this resolution is "fairly general" and does not restrict recruitment. Ms. McConnell gave an example of accounting clerk positions, which the Legislature could determine to not be health and safety related. She warned the system could not function without basic administrative support. Senator Ward asked the number of new positions added since 1996. Ms. McConnell did not have that information. Senator Ward wanted to know the number of new positions requested since the 1999-hiring freeze. Ms. McConnell responded a position analysis has been prepared each of the last three or four fiscal years. She noted some positions are a result of federal transportation funding and other non- general fund sources. Senator Ward asked if since 1999 any non-essential positions have been added. If not, he suggested this resolution is unnecessary. Ms. McConnell remarked the question is what positions are necessary, listing correctional officers and crime lab staff. She emphasized the Legislature and the Executive Branch reached the decisions regarding specific additional positions, jointly. She maintained that the addition of social workers, and other such positions are necessary. Senator Ward did not disagree, but questioned the addition of managerial positions. Senator Hoffman compared Alaska's approximately one billion dollar fiscal gap to the $1.6 billion fiscal gap of the State of Washington, noting that although a hiring freeze is being considered for Washington, additional revenue sources are under consideration as well. He commented that the deficit in Alaska of is more significant due to the lower population. Senator Hoffman indicated a hiring freeze, delayed pay raises and other proposals are reactions to the budget problem. He remarked he would be more supportive of the proposed measures if he were able to "see the light at the end of the tunnel." He explained this must include consideration of new revenues, rather than only a spending limit. Senator Hoffman referenced a survey published in the Juneau Empire on Monday February 25, 2002, which indicated broad support of addressing the fiscal gap. SFC 02 # 17, Side B 10:04 AM Senator Hoffman warned. "We don't have the time, Mr. Chairman, to be sitting around and hoping that something big is going to happen out of the blue. We need to be a little bit more active in the concerns of the economy of the state and the services that we are obligated to provide to the citizens of the state." Ms McConnell added that between 1990 and 1997, the Washington state general fund budget increased 33 percent, whereas the general fund budget for Alaska was reduced .6 percent during the same time period. She suggested that a hiring freeze might be reasonable in Washington due to this growth. She noted that because another state is implementing a hiring freeze it is not necessarily advisable for Alaska to do likewise. Co-Chair Kelly agreed this was not a valid reason to implement a hiring freeze, but noted it is not uncommon to address budget shortfalls with a hiring freeze. He asked if the witness considered the 1999-hiring freeze successful. Ms. McConnell responded it reduced the growth in the number of employees. However, she stated the state is currently having difficulties in filling existing vacancies. She reiterated the issue regarding non-general fund positions that continued to be advertised. Co-Chair Kelly suggested that showing that the 1999 hiring freeze was unsuccessful would be an effective argument against this resolution. Ms. McConnell asked which positions the Legislature could recommend should be vacant. Co-Chair Kelly remarked the issue relates to cooperation between the Legislature and the Executive Branch in making budget decisions. Senator Austerman addressed the 75 positions changing from part time to full time and asked if the positions were originally created through federal funding. Ms. McConnell answered that in some cases three part time positions would be converted into one or two full time positions; other changes are the result of increased workloads. She pointed out the data does not report the deletion of part time positions. Co-Chair Donley remarked the per capita spending argument is an "excuse" of the Executive Branch to "do nothing". He informed the per capita spending of Alaska is approximately $9,000, compared to the state of Hawaii with the next highest per capita spending of approximately $5,000. He partially attributed this to significant oil revenues generated in the 1980s. Co-Chair Kelly noted the Alaska Constitution requires this state to provide more services than other states. Co-Chair Donley agreed but stressed Alaska spends more per capita on education then any state. Senator Wilken commented that "stealing" from "working people" and small businesses as the first step to solving the state's fiscal problem, is actually an oncoming train at the end of the tunnel. Senator Wilken asked for reconciliation between the 18,300 positions listed by the Division of Legislative Finance as approved by the Legislature for FY 02, and 19,339 positions cited by the Office of the Governor. Ms. McConnell explained that although the Conference Committee authorized funding for new positions, the position count was not increased. Co-Chair Donley again spoke to the comparison of per capita spending in the State of Washington and the State of Alaska. Ms. McConnell noted Alaska's expenditures are higher because of constitutional requirements. She stated Alaska spends more for education then most states. She also pointed out the unified court system requires more state funds. Ms. McConnell compared current per capita spending in Alaska to the amount spent in 1979 informing that, adjusted for inflation, the state spends $1,100 less. She agreed there were spending increases in the 1980s but stressed decreases have been made since then and spending has not "kept pace" with population increases. She emphasized the question is "what is right for us today". Co-Chair Kelly ordered the bill HELD in Committee to await a constitutional amendment resolution on the same subject.