SB 152-APPROP: COST-OF-LIVING SURVEY    CHAIR THERRIAULT announced the first order of business to be SB 152.   3:37:02 PM AMY SEITZ, Staff to Senator Thomas Wagoner, explained that SB 152 would make an appropriation to the Division of Personnel to authorize a cost of living study covered in AS 39.27.030. It deals with pay schedules of state employees not covered under collective bargaining agreements. The most recent study was conducted in 1985 yet statute calls for such a survey to be undertaken at least once every five years. The sponsor feels it's time to look at the cost of living around the state and update the numbers. Statute provides an adjustment to salary schedules for exempt and partially exempt employees based on where they work and reside. Classified employees receive similar adjustments based on collective bargaining negotiations every three years. It's in the best interest of the state that similarly situated public employees are paid at the same rate as those who are classified. Conducting a cost of living study based on current costs around the state would level the playing field. 3:39:11 PM SENATOR WAGONER reflected on the difficulty associated with having two different funding sources when he worked at the Kenai Community College. One funding source was the borough school district and the other was the University of Alaska. It's important to treat state employees fairly and equitably and that's what this study intends to do, he said. CHAIR THERRIAULT said he remembers the study from 20 years ago and it was "hard fought and painful." SENATOR KIM ELTON asked how it was determined that the study would cost $500,000. Also he questioned whether there shouldn't be a deadline established for completing the survey. SENATOR WAGONER said the amount was best guess estimate. He didn't favor a deadline because you couldn't tell when the study might be awarded. 3:42:10 PM CHAIR THERRIAULT opened public testimony. MICHAEL GARDNER, a state employee from Kodiak, reported that he has worked in Anchorage, Bristol Bay and Kodiak over the course of more than 20 years and can therefore provide a unique perspective on the serious impact that a high cost of living can impose on a state family. He raised three children in Bristol Bay and if he bought milk and bread locally it cost up to four times as much as in Anchorage. His other option was to use a catalog service and pay the Anchorage price plus airfreight. Housing options were limited and cost twice as much as in Anchorage. Currently he lives in Kodiak where the cost of food is more reasonable but still far in excess of Anchorage prices. He said he lives off the road system and transportation to Anchorage can cost nearly $300 per person. "Geographical pay differential is a critical benefit to state employees serving in rural Alaska. In some instances state employees would be living in substandard conditions without it," he said. 3:45:06 PM CHAIR THERRIAULT drew attention to the sheet titled "Geographic Pay Differential Comparisons" and asked Mr. Chance for an explanation of the numbers listed as "Outside Anchorage." ART CHANCE, Director of Labor Relations, Department Of Administration, reviewed the chart and said he understands "Outside Anchorage" to be outside the Anchorage base in Alaska. Anchorage and Juneau are considered the Alaska and have a zero percent differential. For purposes of the Public Employment Relations Act the law requires that any state salary schedule must reflect the cost of living difference between Seattle and Alaska. The Alaska definition is normally the Anchorage/Juneau base. CHAIR THERRIAULT asked if had any information on what such a study might cost. MR. CHANCE said $500,000 is realistic and offered the opinion that using the greater Puget Sound area is a more reliable base for comparison than Seattle proper. Implementation brings another set of cost factors, he said. CHAIR THERRIAULT asked whether the last study was fully implemented. MR. CHANCE answered no and elaborated on difficulties associated with previous studies. SENATOR ELTON asked if there should be a second section in SB 152 to provide for adopting some standard other than Seattle proper. If you do an RFP would your contractor have to use Seattle, he questioned. MR. CHANCE replied he isn't compelled to do so. He suggested that either the Division of Personnel be given authority to design the target area or the Legislature should use its discretion because, "It is my belief that Seattle Washington per se ... is going to give you a very skewed comparative," he said. SENATOR ELTON said given what's happened to the economy in Seattle the committee ought to consider a change that would allow the study to give a base other than Seattle. CHAIR THERRIAULT asked if the purpose is to have equal salaries compared to the target or to come up with a target then compare all the different geographic areas of the state to it. MR. CHANCE replied he doesn't have a lot of first hand knowledge regarding when the legislation was implemented about that, but he has read the record of the early 1980s Blue Ribbon Committee reports that the PERA changes that led to this were based on. The language in PERA clearly says there will be cost of living and wage differentials between Seattle and Alaska for Alaska Marine Highway System employees. However, it was applied to everyone subject to collective bargaining. Some state employees work outside of Alaska and it becomes fairly important to have to have wage adjustments downward for those employees. The other use of establishing a certain base is to understand how we relate to our market and whether or not we're appropriately paying our own employees. We need to know how to translate Alaska salaries to salaries somewhere in the Lower 48. Seattle is no longer a realistic comparative. 3:55:06 PM CHAIR THERRIAULT noted AS 39.27.030 was modified in 1996 and also in 2000 and he was curious what those modifications were. MR. CHANCE said the 1996 modification was made as a result of a suit. A judge ruled that the state had to conduct the study and the state's response was to repeal the statute. CHAIR THERRIAULT announced he would set SB 152 aside.