MINUTES  JOINT HOUSE AND  SENATE FINANCE COMMITTEES  THIRD SPECIAL SESSION  May 4, 2000  4:48 PM TAPES SFC-00 3rd SS #1, Side A and Side B 3rd SS #2, Side A and Side B CALL TO ORDER Co-Chair Sean Parnell convened the meeting at approximately 4:48 PM. PRESENT Senate Finance Committee Members Co-Chair John Torgerson Co-Chair Sean Parnell Senator Al Adams Senator Dave Donley Senator Lyda Green Senator Pete Kelly Senator Loren Leman Senator Randy Phillips Senator Gary Wilken House Finance Committee Members Co-Chair Eldon Mulder Co-Chair Gene Therriault Vice-Chair Con Bunde Representative Alan Austerman Representative John Davies Representative Gary Davis Representative Richard Foster Representative Ben Grussendorf Representative Carl Moses Representative Gail Phillips Representative Bill Williams Also Attending: REPRESENTATIVE TOM BRICE; REPRESENTATIVE JOHN COGHILL, JR.; REPRESENTATIVE BETH KERTTULA; REPRESENTATIVE BRIAN PORTER; REPRESENTATIVE HAROLD SMALLEY; ROBERT POE, Commissioner, Department of Administration; ALISON ELGEE, Deputy Commissioner, Department of Administration; WENDY REDMOND, Vice President, University Relations, University of Alaska; Attending via Teleconference: From Fairbanks: MICHAEL HOSTINA, Director of Labor Relations, University of Alaska SUMMARY INFORMATION SB 3001-APPROPRIATION: EMPLOYEE SALARY & BENEFITS SB 3002-NONUNION PUBLIC EMPLOYEE SALARY & BENEFIT HB3001-APPROPRIATION: EMPLOYEE SALARY & BENEFITS HB3002-NONUNION PUBLIC EMPLOYEE SALARY & BENEFIT The Joint House and Senate Finance Committee heard testimony from the Department of Administration and the University of Alaska. No action was taken on any bills. SENATE BILL NO. 3001 "An Act appropriating amounts to cover the fiscal year 2001 monetary terms of the collective bargaining agreements for employees of the University of Alaska and the fiscal year 2001 salary and benefit adjustments for university employees who are not members of a collective bargaining unit; appropriating amounts to cover the fiscal year 2001 monetary terms of all executive branch collective bargaining agreements and the fiscal year 2001 salary and benefit adjustments for elected officials, officers, and employees of the legislative, judicial, and executive branches who are not members of a collective bargaining unit; and providing for an effective date." SENATE BILL NO. 3002 "An Act relating to the compensation of certain public officials, officers, and employees not covered by collective bargaining agreements; and providing for an effective date." HOUSE BILL NO. 3001 "An Act appropriating amounts to cover the fiscal year 2001 monetary terms of the collective bargaining agreements for employees of the University of Alaska and the fiscal year 2001 salary and benefit adjustments for university employees who are not members of a collective bargaining unit; appropriating amounts to cover the fiscal year 2001 monetary terms of all executive branch collective bargaining agreements and the fiscal year 2001 salary and benefit adjustments for elected officials, officers, and employees of the legislative, judicial, and executive branches who are not members of a collective bargaining unit; and providing for an effective date." HOUSE BILL NO. 3002 "An Act relating to the compensation of certain public officials, officers, and employees not covered by collective bargaining agreements; and providing for an effective date." ROBERT POE, Commissioner, Department of Administration gave an overview of how the employee contracts were reached and what they contained. Mr. Poe said that before the department offered any package to the unions, a study of employee compensation by other employers was conducted. He noted that this study did not include any information from the Lower 48 states because it was felt that comparisons to the strong job market in the Continental US would be skewed. Mr. Poe told the Committee this study found that wages for all private sector jobs increased by 4.9 percent between 1996 and 1998, federal wages increased by 16 percent, and state wages increased by an average of .1 percent in average earnings. He emphasized that the figures represent an average. Mr. Poe stated the study found that some positions are paid higher in state employment, which tended to be the lower range positions. As the length of service progressed, he added, the state workers tended to earn less than counterparts in the private sector. Mr. Poe talked about the motivation factors for an employee, such as controlling a project and seeing it through to completion and the opportunity to affect changes in the state. He spoke of the general fulfillment and salary. Vice Chair Bunde asked if the study had taken benefits into consideration. Mr. Poe answered that the study only considered wages saying that private companies were unwilling to talk about benefits in a public setting did not allow the public discussions to consider benefits. He pointed out that the study found that the comparison of benefits was actually lower for state workers than for those in the private sector and some other government positions such as the municipality in Fairbanks. Vice Chair Bunde emphasized the importance of health care benefits. He noted that many people want to work for the state in order to receive those benefits. He talked about many private sector jobs that do not offer health care benefits, saying that these businesses can not afford the cost. He added that job security is another attraction to state employment, saying that people are willing to accept lower pay for secure positions because their private sector job disappeared. He used a carpenter as an analogy, saying that a carpenter is always looking for work because he or she constantly is "working themselves out of a job." Mr. Poe responded that state employees do work themselves out of jobs and do in fact get laid off. He emphasized that the fact that state employees see the legislature in this special session arguing about contracts does not assure much job security. He granted that many private sector jobs do not provide health care, but stated that health care is not an unreasonable expectation. He stressed that the larger companies, which the state competes against for qualified employees, all provide benefits. He added that some companies, such as large oil companies offer benefits packages that far outweigh what the state can offer. Co-Chair Parnell interjected to point out that the study specifically points out that no comparisons are made to individually categorized positions. Therefore, he said there is no statistical basis for either side of this issue. Co-Chair Therriault commented on the statement that state employees were unsure of the stability of their jobs. He disagreed that the same degree of concern was present as in other fields. He noted that there would always be a state government. Mr. Poe acquiesced but qualified that he was simply relaying the comments made by state employees. He told of a situation where a water quality position was eliminated and the impact to the private sector when there was not a qualified employee to perform a service. He stressed that the real issue is how to attract and maintain qualified employees. Mr. Poe stressed that people did not strive to work for the state government. He noted that his predecessor and many others were now earning significantly more in the private sector. He stated there are currently 79 vacant engineering positions in the Department of Transportation and Public Facilities and that the department cannot find anyone willing to accept those positions. He stated that the consequence is road projects that have received funding can not be constructed without competent engineering work. He repeated that the entire increase in all private employment was 4.9 percent and that the state increases were only two percent. Co-Chair Parnell asked the witness to detail the entire contract package rather than focusing on the wage comparison to the private sector. Mr. Poe told of how the department presented the same package to all of the bargaining units, and although the unions were resentful of this approach, agreements were reached quickly and smoothly. He talked about the importance of making employer contributions to health insurance consistent for all employees. Mr. Poe continued and explained the differences between some of the bargaining agreements and the special attention paid to the costs of these programs. Mr. Poe addressed the addition of a "G" step and explained the annual merit increase process. He said that the General Government Unit (GGU) had negotiated for the addition of the G step giving up a portion of the overall salary increases. Co-Chair Parnell asked for the accumulative cost over the three years of the contracts. Mr. Poe clarified that his presentation included the legislature, and the court system, but not the university. Senator Phillips asked for clarification that the package does not include the legislators but only legislative employees. Mr. Poe affirmed. Mr. Poe continued detailing the accumulative costs. He listed the executive branch cost of $68,823,000 for wages and $49,779,000 for health insurance, totaling $118,603,000. Of that amount he noted $36,810,000 wages and $25,536,000 health benefits costs would be paid from the general fund. Co-Chair Parnell clarified that this did not include the matter of the leave cash-in and asked the cost of the leave cash-in. Mr. Poe stated that the anticipated amount of leave cash-in was insignificant and that an appropriation was not even being requested. ALISON ELGEE, Deputy Commissioner, Department of Administration explained that when the leave conversion for the GGU was offered, the administration reviewed the sick leave balances outstanding. She said that 50 percent of that balance qualifies and could be for cashed out. She said the total value of the eligible sick leave is $22 million were the entire amount to be cashed out. However, she said the department estimates that only $4 million total would be cashed in over the course of the current employee's employment. Co-Chair Mulder noted the uniqueness of the situation and asked how the witness could make such an assumption. Ms. Elgee explained the research into past programs that showed no spikes in expenditures. Co-Chair Parnell clarified that of the $22 million of total leave available, the department only anticipated a cash-in of $4 million. Mr. Poe clarified that the administration does not believe the entire $22 million is "exposed" for cash-in, saying this figure is the extreme hypothetical situation. He said that the 75-hour cap prevents the cash-in to reach that amount. Co-Chair Mulder countered that the 75-hour cap is only in place for two years, but that this was a three-year program and therefore in the third year much more leave could be cashed in. Mr. Poe said that in theory that could happen, but that history demonstrated that it would not. Mr. Poe talked about the benefits of reducing sick leave balances for some positions, such as pioneer home staff, where the post must be covered. Co-Chair Parnell directed attention to the proposed merit increases and asked for the cost. Mr. Poe replied that merit increases are addressed annually through the normal budget process and amount to approximately $3 million per year. He stressed that only one-third of state employees receives a merit increase in any given year, due to job changes, longevity or other reasons. He gave examples of some situations relating to merit increases and how the administration allows the managers to make determinations as to how the merit costs are absorbed into the budget. Senator Phillips again stressed upon the fact that the legislators would not be affected by any salary or benefit increases. Mr. Poe agreed. Senator Phillips asked if the Department of Transportation and Public Facilities engineering positions could be contracted out. Mr. Poe answered the work could be contracted out but that the department is having a difficult time with this as well. He emphasized that it is also important for the state to retain knowledge and that contracting out services is not always the best solution. Senator Phillips referred to the packet of information distributed by the Department of Administration and noted the absence of municipal employees in the data. Mr. Poe noted all the data was supplied by the Department of Labor and Workforce Development. He said the earnings were an average of $150 less for municipal employees than state employees between 1997 and 1998. Mr. Poe pointed out percentage increases in employment and earnings by industry 1997-1998. He compared the large increases of private industry to the small increases for government. Senator Phillips wanted a notation on the chart to ensure the comparison of "apples to apples" that includes local public employees. Mr. Poe responded that the matter was now on the record thanks to Senator Phillips's comments. Vice Chair Bunde stressed the importance of remembering that state workers are neighbors and others in the community. He understood the moral boost of the one-time $1200 payout. However, he noted three years later when the contracts are up for another re-negotiation, the absence of $1200 in the salary base would be considered a reduction. Mr. Poe respectfully disagreed noting that the payment would not be considered mandatory in future negotiations. He admitted that the bargaining units may argue for another bonus payout, but was assured that the salary schedule, including the five-percent increase instituted in the second and third year of this contract, would be considered the base. Senator Leman asked the chair which spreadsheet the joint committee was working from. Co-Chair Parnell said the information provided by the Department of Administration was the same as earlier information although it had been updated on May 3, 2000. [Copy on file.] Senator Leman asked about job reclassifications and how the costs of these changes are integrated. Mr. Poe replied that reclassification is done on occasion, and that some positions increase in range and others go down. He explained that those positions that are reduced are grand-fathered for current employees but lowered for any new employees. He continued that in these cases, those employees who are grand-fathered would not receive the $1200 bonus payment. Ms. Elgee added that when the characterization of work a particular employees is performing changes to such a degree that the employee is working "out of class," the administration is required to recognize the situation and compensate the employee according to the work performed. Senator Leman asked for a cost of job reclassification. Mr. Poe responded that the reclassification cost is net zero because managers work within their budget to account for the increased costs for certain positions by holding vacant positions empty or by other means. Co-Chair Therriault argued that the absorbed merit increases actually do cost the state, and that state employees took home $3 million more each year. He asserted that this money is lost to the state. He talked of how the departments approach the legislature saying that their vacancy rate is too high on account of budget restraints. Co-Chair Parnell said there may be some misunderstanding and that he understood that the $3 million is in addition to the amount that was absorbed. Ms. Elgee said the offsetting factor to merit increases is the turnover in staff. She explained that if a employee at an "F" step quits, a new employee is hired at an "A" step and the state is able to use the saved funds to pay for other employees' merit increases. Therefore, she concluded there is no net increase for merit increases. Mr. Poe affirmed and gave further details about the changing composition of the workforce. Co-Chair Therriault clarified that the merit increases are funded by turnover rather than shifting funds, holding vacant positions open, etc. Mr. Poe answered it is a combination of all these factors. He stressed that the managers are responsible for managing personal costs within the budget. Representative Davies attempted to restate the matter by saying that the only way merit increases would have a net increase on the total compensation package is if the average longevity of the workforce continues to rise. Ms. Elgee also pointed out that not every union has merit increases built into their salary schedule. Senator Phillips asked which unions had merit increases and the number of employees that receive annual increases. Ms. Elgee listed those unions that do not have merit increases as Labor Trades and Crafts, the marine units, and three teacher units. It was established that approximately 10,000 employees are eligible to receive merit increases. Senator P. Kelly referred to the comments on absorption and stressed that the balance is maintained because some employees leave but not because employees were laid off or the work is contracted out. Mr. Poe affirmed. Co-Chair Parnell reviewed the cost of wage increases and the cost of health benefit increases that total $118 million over the three year contract. He reiterated that the extreme exposure for leave cash-out is $22 million but that the administration predicts only $4 million would actually be cashed in. He concluded that the merit increases total $3.6 million, come of which would be absorbed into the existing budgets. Co-Chair Parnell asked if any other costs imbedded in the contracts were not reflected in the spreadsheets with the exception of the University of Alaska and non-covered employees. Mr. Poe replied that some unions purchased certain benefits in exchange for other negotiated items. He gave as examples of the Department of Public Safety employees obtaining a geographical cost of living differential for those stationed in smaller communities. He added that the Department of Public Safety took part of the proposed $1200 bonus payment for each employee and applied it to a health trust. He emphasized these are not increased cost, but rather shifts. Tape: SFC - 00 #SS1, Side B 5:35 PM Co-Chair Parnell asked for the cumulative cost of contracts for the University of Alaska for the next three years. MICHAEL HOSTINA, Director of Labor Relations, University of Alaska testified via teleconference from Fairbanks. He broke down the figures by each bargaining unit within the University of Alaska system. He stated that the only new contract under negotiation this year is the ACCFT, which represents two-year faculty, and would cost $2,618,000 over the three years of the contract. He continued that the three-year cost for the United Academics contract is $8,367,000, the Classified Employees Association contract is $995,000, and the United Academics Adjunct is $1,508,000. Co-Chair Parnell asked if there are any non-covered employees at the university. Mr. Hostina said there were some that were not covered by a bargaining unit. WENDY REDMOND, Vice President, University Relations, University of Alaska gave further information on the non- covered employees noting that a three-year accumulative total is not available since there is no contract for these employees. She stated that $3,176,300 is the total general fund cost for one year for the 2,500 non-covered employees. She established this figure could be multiplied to reach an estimate of the cost of wages and benefit increases over three years. Ms. Redmond stated that the total general fund cost of the increases is $5.2 million and includes both covered and non-covered employees. Co-Chair Parnell asked for a cost of the increases for non- covered employees in the Executive Branch. Mr. Poe directed the Committee's attention to the spreadsheet noting the figures were included. He cited the total general fund cost of the $1200 bonus for non-covered employees in the first year is $870,000 and $1,886,000 total funds. He continued that the health care benefits increases cost is $307,600 general funds and $724,800 total funds. The total general fund cost, he summarized is $1,108,000 general funds and $2,611,000 total funds. He noted this includes the courts and legislative employees. Co-Chair Mulder wanted to know the total funds cost for non-covered university employees over three years, beyond just the general fund cost. Ms. Redmond totaled the cost at $4,326,400, of which $3,176,300 is general funds, $875,800 is university receipts, $174,800 is federal funds, and $99,500 is auxiliary. Co-Chair Parnell restated the figures as totaled between the executive, judicial and legislative branches and the university. He calculated the grand total to be over $145 million excluding the leave cash-in provision for the GGU. Co-Chair Parnell and Mr. Poe discussed the details of the sick leave and vacation leave accrual system of the GGU. It was clarified that the contract would allow sick leave to be transferred to annual, or vacation leave. Co-Chair Parnell asked what is the current limit for annual leave cash-in. Ms. Elgee answered that a balance of 75 hours must remain after a leave cash-in. Co-Chair Parnell then proposed if an employee chooses to not participate in the sick leave cash out, their leave balance would continue to accumulate, their salary would continue to increase and the state's exposure would become greater as well. Mr. Poe replied there would be no cap imposed on the amount of sick leave an employee could cash out. Co-Chair Parnell asked if the current exposure is $22 million and the department's data shows that this entire amount would not be cashed out, if the exposure would continue to grow. Co-Chair Mulder felt the exposure would be even greater over time because the leave balance would be cashed out upon termination. Mr. Poe explained that half of the GGU employees have less than 200 hours of sick leave accrued and that those employees would be less likely to cash out because they utilize their sick leave. He stated these employees are most often single mothers and parents who take a day of sick leave when their kids are sick. The other half of the employees, he said never use any sick leave whatsoever and those are the people this provision would apply to. He stated this was to show appreciation to those workers with a strong work ethic. He surmised these employees would not convert a large number of sick leave hours. He noted that this program would increase productive work hours. Co-Chair Mulder stated that the state ultimately must pay out the money for sick leave balances either in leave taken or a cash-out at the end of employment. Mr. Poe explained the process where 50 percent of an employee's sick leave could be converted to vacation leave. He predicted that some of this leave would be cashed out and that the remainder would be used for vacation time. Senator P. Kelly took exception to the classification of these employees as ethical, moral and hardworking, basing this assumption on a system where employees do not have the ability to ethically and morally receive a $40,000 payment. He asserted that this provision creates a system where these employees can receive such a payment and he did not know why they would not participate. Mr. Poe responded these situations would be the exception rather than the rule based on past experience. He also noted there are very few employees that have substantial sick leave balances. Co-Chair Parnell excused himself from the meeting as he had a previous obligation. He turned the meeting over to Co- Chair Mulder. Co-Chair Mulder calculated the total funds over the three- year period equal $145 million. He asked the total general fund costs and total costs for the first year of the contract. Mr. Poe broke down the first year costs by each group. He listed the general fund costs as $11,121,000 executive branch, $5,161,000 University of Alaska, $1,154,000 Alaska Court System, $706,000 legislative employees, plus an additional marine highway bargaining unit. Ms. Elgee spoke to the $980,000 marine highway stabilization fund appropriation noting this represents 60 percent of marine highway employee unit costs. She explained that general funds must be appropriated to the marine highway fund as a subsidy. Mr. Poe cited the total of general funds in the first year at $19,123,100 for covered and non-covered employees. He added the total cost incorporating all fund sources is $32,214,300. Representative Alan Austerman asked for further explanation of the marine highway stabilization fund. Mr. Poe detailed how this fund was established to better account for the revenues and expenditures of the Marine Highway System. Co-Chair Mulder spoke of concerns of Representative Rokeberg and Representative Brice regarding the health care costs and health savings. He wanted to know if the arrangement that 50 percent of the savings went to the employee and 50 percent went to the state was explicitly stated. Mr. Poe referred to an analysis that found leeway in the 50-50 stipulation. He said the administration then returned to the union and obtained a signed letter of agreement to specify the allocation of any realized savings. He stated that he would share the report with the joint Committee. Co-Chair Mulder expressed concern about separating out a large portion of state employees - over 7,000 - from the existing health care system and the bargaining power of the entire state's workforce. He wanted to know what happens to those employees not transferred. Mr. Poe stressed it is important to understand that other unions already have successful health trusts. He detailed the factors used by insurance companies to determine the number of lives insured. He noted that smaller groups were able to obtain good insurance. He spoke of his previous experience in negotiating health care benefits with various union groups. He referred to earlier conversations he had with Representative Rokeberg and his subsequent efforts to talk with insurance experts in the state. Mr. Poe went into further detail about health care benefits and how insurance charges are established. He ascertained that the reason for the large increase in the health care industry in the state is because Alaska is the "last bastion of full indemnity." He stated that health care plans that pay 80 percent of health care costs while the insured pays 20 percent is not longer practiced elsewhere. He explained that managed care providers have replaced the full indemnity method of health care. Mr. Poe continued saying that the intent of encouraging unions to choose health trusts, is because employees are more willing to make tough decisions about their health care coverage than let management make those decisions. He shared that federal employees in Alaska have health care benefits under a preferred provider system managed by Blue Cross. Co-Chair Mulder was certain more discussion on health care coverage would be held. He warned of the consideration needing to be given to the increased health care costs to the state and how they would be paid for over time. He asked if the administration had developed a strategy for paying for the increased costs in the future. Mr. Poe responded that, by law, his job is to negotiate the contracts and that the Office of Management and Budget's responsibility is to address the matter of paying for the costs. He added that operating state government is a multi- billion matter and that employees cost money. Mr. Poe than talked about the importance of state employees to the economy. Co-Chair Mulder asked if it was fair to say that the Department of Administration did not address the funding mechanism necessary to fund the new contracts. Mr. Poe stated that was correct. Co-Chair Mulder asked about a provision in the GGU and other units' contracts stipulating that a strike could occur within ten days if the legislature fails to fund the negotiated contracts. Mr. Poe affirmed such a provision is contained in some of the contracts. Co-Chair Mulder asked if special legislation would be required each year to fund remaining portions of the contracts. Mr. Poe cited that statute and resolutions accomplish such appropriations and that the legislature would have to decide what mechanism to follow. Co-Chair Mulder asked if the increased costs could be included in the overall operating budget in the future, and the legislature would have to take specific action to reject contract increases. Mr. Poe affirmed. Co-Chair Mulder then asked if the legislature were to make reductions to personal services items, but still fully funded the contract obligations, if the administration would honor the contracts rather than shift the funds to cover the other personal services shortfall. Mr. Poe stated the administration would use the funds to pay the contract costs. Vice Chair Bunde addressed communications he and other legislators received from state employees expressing frustrations with the legislature. He reviewed the process where representatives of the unions met with the administration to prepare a contract, then returned to the members for a vote of approval. He asked if the legislature therefore served as the "membership" of the administration and had the ability to accept or reject contracts prepared in these meetings. Mr. Poe assured that rejection by either party is not "unfair labor." Vice Chair Bunde asked if the contracts were fairly negotiated. Mr. Poe expressed that he thought the current agreement was fairly negotiated and he restated the process of ratifying or rejecting the proposed contracts. Vice Chair Bunde understood the value of the employees but asserted it is a matter of whether the state can afford the increased costs. He expressed that while the employees could choose to go on strike, the legislature is not driving them to that position should it not fund the contracts. Mr. Poe commented that the agreements contain increases much lower than what the bargaining units asked for. Co-Chair Mulder addressed a provision that grants paid leave to employees performing court service. He wanted to know if this applies to situations where an employee might be pursuing civil charges against another person or even the state. Mr. Poe replied he would have to research and provide an answer at a later time. Representative Austerman took a different tact noting that on one side, unions are negotiating for state employees and on the other side the governor is negotiating for the legislature. He asked if the unions ever discuss the on- going negotiation process with each other. Mr. Poe answered that the unions do discuss the progress each is making. Representative Austerman asked if a mediator is ever called upon to work with the union and the administration. Mr. Poe stated that a mediator was utilized during this process. Representative Austerman then asked if during this time, there were ever discussions between the administration and the legislature. He asserted that the manner in which the unions worked together is different than how the administration shares information with the legislature. Mr. Poe spoke of his efforts to meet with the Legislative Budget and Audit Committee to discuss the process and receive input. He said he was quoted the law and told that his job is to negotiate and the legislature's job is to approve or reject the contract. Representative Austerman made the point that the unions were cooperating with each other while the legislature is not involved in the process although it has the ultimate authority. Co-Chair Mulder noted a resolution adopted the previous year that clearly stated any new contract could have no net cost to the state. Representative Davies restated that the legislature is on record expressing that it did not intent to fund contracts that include increased costs. Ms. Elgee relayed that the contract provisions stipulate that court leave applies to jury duty and subpoenas to testify. She noted that the employee is paid administrative leave and any compensation paid by the court is returned to the state. Co-Chair Mulder said that issue would be checked because he had received contrary information. Senator Phillips asked if this applied to federal and state court duty. Ms. Elgee affirmed the provision does not differentiate between which court the employee is serving. Co-Chair Mulder commented that if the legislature were to not approve the contracts, the GGU has indicated a willingness to strike. He wanted to know if the administration has identified which positions are critical and those employees who would be required to continue operating state government. Mr. Poe explained the process of classifying employees and identifying those not allowed to strike. He added that the Y2K readiness plan could be applied to a strike situation and that the administration would be prepared. Co-Chair Mulder asked how prepared the administration is for a strike. Ms. Elgee noted if a strike occurred the next day, the administration would not be prepared, but if given some time, would be prepared. She noted the steps required before a strike could begin, including returning to negotiations for ten days before an impasse declaration could be made. Co-Chair Mulder asked the timeline and how soon a strike would begin. Ms. Elgee answered that some unions could move faster than other unions based on the size of their memberships. She speculated a minimum of 30 days would be required. Co-Chair Mulder wanted to know if the administration would be ready in 30 days. Ms. Elgee listed those not able to strike, such as Class 1 employees at the Pioneer Homes and correctional facilities. Class 2 employees, she continued work at the airports and could be called back to work after a period of time. Co-Chair Mulder questioned if Class 1 and Class 2 employees would go to arbitration automatically. Ms. Elgee replied some would go to arbitration. Representative Austerman questioned if the Inland Boatman's union is on a different schedule. Ms. Elgee noted that there are a variety of things that confuse the issue. She noted that contracts have different time lines. She explained that there was a court ruling that was specific to a strike vote by a marine unit and that impasse does not have to be found before a strike vote. She noted the state is appealing the decision and would challenge the action of a strike vote before impasse. Senator Wilken voiced concern of the exposure of the state general fund for sick leave conversions. He reviewed the proposal of converting sick to personal leave. Tape: SFC - 00 #SS - 2, Side A 6:22 PM Senator Wilken and Mr. Poe clarified the actual amount of time the state and employee accrues by the leave conversion. It was established that time converted from sick leave to vacation leave is calculated at 50 percent of the original amount. Mr. Poe stressed that employees have a right to take time from work if that employee is ill. Senator Wilken asked what rules apply to the cash out of converted leave. Mr. Poe explained an employee must utilize all personal leave before using sick leave. He explained the rules pertaining to the use of sick leave that stipulate no more than 75 hours can be cashed in for the first two years and there must be a balance of 37.5 hours. Senator Wilken pointed out that it is the employee's money. Senator Phillips questioned if the general public supports the contracts. Mr. Poe responded that people are fair and that given the facts they will make reasonably fair choices. He felt that many people would not know or care about the contracts. He stressed that the contracts are reasonable. He observed that there have not been letters to the editors decrying the contracts. He emphasized that the increases are fair. Senator Phillips questioned the funding source. Mr. Poe responded that the Office of Management and Budget would have to speak to the funding source. Representative Davies asked when the deadline was for employees to chose to convert their sick leave. Mr. Poe replied that employees would have to choose by December 16, 2000. He expected that only half of the employees would participate, based upon a GGU poll. Senator P. Kelly asked if the 75-hour sick leave cash-in limit is in addition to the existing allowance for vacation leave cash-in. Mr. Poe clarified that if 50 percent of sick leave is converted to annual leave and only 75 hours of the converted hours can be cashed out in any given year. Co-Chair Mulder clarified that 150 hours can be converted, but that only 75 could be cashed out. The other 75 hours could be cashed the next year. Mr. Poe referred to the two-year cap on the sick leave conversion provision. Senator P. Kelly noted that health benefits have become a property right. Representative Foster asked if the Cost of Living Allowance (COLA) would be affected. Mr. Poe clarified that the COLA is already included in the calculations. Representative Foster noted that 99 percent of his constituents do not work for the state and questioned the comparison of retirement packages. Mr. Poe responded that the objection is not to bring state employees down to the level of other compensation packages around the state. The goal, he asserted is to attract and retain employees. Representative Foster reiterated that retirement benefits have not been included. Ms. Elgee pointed out that local government and school districts participate in the same retirement packages. Senator Phillips stressed the need to compare to the private sector. He pointed out that SBS and PERS are valuable benefits. Mr. Poe responded that it is difficult to compare apples to oranges and added that the private sector can offer profit sharing and other benefits. Senator Phillips stressed that job security is an issue in the private sector. Mr. Poe noted that government is market driven. The government is having a hard time getting and keeping employees. He stated that the number of employees not making their probation has gone up as the quality of the candidate has gone down. Mr. Poe stressed that that there are many factors pertaining to the decision to work for government. Senator Phillips emphasized that there are trade-offs. Senator Wilken expressed concern that there would be a $10 to $20 million bill presented to the legislature in the next year. He asked for an estimate of future costs. Co-Chair Torgerson asked for information on the fiscal note. ADJOURNED Co-Chair Mulder adjourned the meeting at 6:40 PM.