Legislature(2017 - 2018)GRUENBERG 120

01/31/2017 03:00 PM STATE AFFAIRS

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= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          HB 71-NO ST. EMPLOYEE PAY INCREASE FOR 2 YRS                                                                      
3:05:24 PM                                                                                                                    
CHAIR KREISS-TOMKINS  announced that the first  order of business                                                               
would be  HOUSE BILL  NO. 71, "An  Act relating  to compensation,                                                               
merit   increases,  and   pay  increments   for  certain   public                                                               
officials,  officers, and  employees  not  covered by  collective                                                               
bargaining agreements; and providing for an effective date."                                                                    
3:06:30 PM                                                                                                                    
SHELDON  FISHER,   Commissioner,  Department   of  Administration                                                               
(DOA),  presented HB  71 on  behalf of  the House  Rules Standing                                                               
Committee, sponsor, by request of  the governor.  Mr. Fisher used                                                               
a  PowerPoint presentation,  titled "Salary  Freeze for  Nonunion                                                               
Employees,"  for  his presentation.    He  referred to  Slide  1,                                                               
titled "What Does  the Bill do?" and relayed  that the governor's                                                               
budget  included  a  pay  freeze for  employees  not  covered  by                                                               
collective  bargaining agreements.   He  noted that  the governor                                                               
also  requested   the  Department  of  Administration   (DOA)  to                                                               
negotiate  similar  language [as  in  HB  71]  with each  of  the                                                               
bargaining  units, as  agreements come  up for  negotiation.   He                                                               
maintained HB 71 was introduced  to respond to the state's fiscal                                                               
challenges.   He stated that  the governor expressed that  it was                                                               
appropriate  to freeze  the automatic  employee salary  increases                                                               
for a  period of time, considering  he has asked citizens  of the                                                               
state  to accept  a  reduced permanent  fund  distribution.   The                                                               
proposed legislation freezes the  Cost of Living Allowance (COLA)                                                               
for the nonunion employee group, and  he added that no COLAs have                                                               
been  given   in  the  current  administration.     The  proposed                                                               
legislation also  freezes merit  increase pay increments  and any                                                               
bonuses.   He  stated  that  HB 71  would  reduce the  governor's                                                               
salary by one-third.   He explained that the  governor could gift                                                               
a portion  of his  salary back  to the  state treasury  but would                                                               
have  to pay  taxes  on the  full  salary.   Through  HB 71,  the                                                               
governor would  avoid paying  taxes on the  amount he  returns to                                                               
the treasury.                                                                                                                   
3:08:51 PM                                                                                                                    
MR.  FISHER, in  response  to Representative  Wool's request  for                                                               
clarification,  reiterated  that  the governor  would  receive  a                                                               
reduced salary  and would only  pay taxes on the  reduced amount.                                                               
He  said that  absent  HB 71,  the governor  would  be forced  to                                                               
receive  and pay  taxes  on  the full  amount,  then return  some                                                               
REPRESENTATIVE JOHNSON asked if the "net" would be the same.                                                                    
MR. FISHER  responded, "The net  could be orchestrated to  be the                                                               
same," but the  governor wished to reduce his salary  by a third,                                                               
and if he wants  his take-home pay to be the  same, it would have                                                               
to  be "something  less than  a third,"  and he  doesn't feel  he                                                               
should be paying  the federal government taxes on  some amount of                                                               
money that he is not receiving.                                                                                                 
REPRESENTATIVE TUCK asked, "What is the governor's salary?"                                                                     
MR. FISHER answered he believed it to be $150,000 per year.                                                                     
REPRESENTATIVE  BIRCH   asked  if  HB  71   would  affect  future                                                               
MR.  FISHER responded  that  HB  71 would  sunset  in two  years;                                                               
therefore,  it  would not  last  beyond  the governor's  term  of                                                               
MR. FISHER continued  his presentation with Slide  2, titled "Who                                                               
Does the  Bill Include?"  He  said HB 71 would  include employees                                                               
not  covered  by  a  collective   bargaining  agreements  in  the                                                               
executive  branch,  and  employees of  boards,  commissions,  and                                                               
authorities.   He added  that it would  include employees  in the                                                               
legislative  branch, employees  at the  University of  Alaska not                                                               
covered  by  collective   bargaining  agreements,  the  governor,                                                               
lieutenant  governor,  department  heads, and  legislators.    He                                                               
stated that  it would  not include the  court system,  citing the                                                               
separation of powers as the reason.                                                                                             
MR. FISHER  turned to Slide 3,  titled "Why is the  Bill Needed?"                                                               
and offered  that merit  pay and pay  increments are  included in                                                               
statute;  therefore,  DOA  does   not  have  the  flexibility  to                                                               
implement  the freezes  absent legislation.   He  said, as  well,                                                               
that these  freezes were  part of  the governor's  budget package                                                               
and are intended to address  the [fiscal] shortfalls the state is                                                               
MR. FISHER  concluded with Slide  4, titled  "Estimated Savings,"                                                               
and  said  that HB  71  would  affect approximately  5,000  state                                                               
employees, or 23 percent of  the workforce, and over the two-year                                                               
period save about $4.2 million.                                                                                                 
3:12:46 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  asked  why  including the  courts  was  a                                                               
separation  of powers  issue, but  including the  legislature was                                                               
MR. FISHER explained that HB 71,  if enacted, would be a law that                                                               
was  adopted  by the  legislature  and  signed by  the  governor;                                                               
therefore,  both the  legislative  and  executive branches  would                                                               
have  accepted  the  legislation.   Since  the  court  system  is                                                               
outside this  process, he said, the  legal view is that  it would                                                               
be an  impermissible intrusion into  their operations  to include                                                               
them in the legislation.                                                                                                        
REPRESENTATIVE LEDOUX asked Mr. Fisher  if he was saying that the                                                               
legislature has  no say  in employee  compensation for  the court                                                               
MR. FISHER said  that since the legislature  is the appropriating                                                               
body, appropriating the  court system's budget is  subject to its                                                               
discretion.   He said  he believed that  under the  separation of                                                               
powers,  there  are  limitations  on  the  extent  to  which  the                                                               
legislature  and  governor  can  collectively  work  together  to                                                               
manage or dictate salaries in the court system.                                                                                 
REPRESENTATIVE  LEDOUX asked,  "If you  chose not  to freeze  the                                                               
merit  increases, would  there be  anything that  would keep  you                                                               
from simply  changing the  range[s] of people?"   She  cited that                                                               
the  legislature capped  the  salary of  legislative  staff to  a                                                               
range  22, with  a  few exceptions,  in  the Twenty-Ninth  Alaska                                                               
State Legislature, 2015-2016.                                                                                                   
3:16:09 PM                                                                                                                    
BILL MILLS, Assistant Attorney General,  Department of Law (DOL),                                                               
said that  by statute,  the State  of Alaska  does have  a salary                                                               
cap, and  the ranges are  determined by the salary  schedule that                                                               
is   established  by   the  legislature.     The   administration                                                               
determines what jobs fit into  what ranges through classification                                                               
analyses.  He said, "Just saying  we want to save money and we'll                                                               
change a range, I'm not really  sure if that's something that the                                                               
executive  could  do."    He   reiterated  that  a  statute  does                                                               
establish the salary ranges.                                                                                                    
REPRESENTATIVE LEDOUX asked, "So nobody  who's ever been ... at a                                                               
range 23 has ever gone to a range 22 or a range 21?"                                                                            
MR. FISHER  responded he is  sure that has happened,  but offered                                                               
his understanding that what Mr. Mills  is saying is that in cases                                                               
where  it  has   happened,  it  is  consistent   with  the  merit                                                               
principles, such  as, the job  function changed.  He  stated what                                                               
he  believed  to  be  the  real question:    "Could  there  be  a                                                               
wholesale direction to  reduce salaries or cap and  would that be                                                               
consistent   with  the   merit  principle   established  in   the                                                               
constitution?"  He  added, "That would be the  analysis that we'd                                                               
have to think more seriously about."                                                                                            
3:19:40 PM                                                                                                                    
REPRESENTATIVE KNOPP stated he had  a serious level of discomfort                                                               
with HB  71.  He opined  there were serious inequalities:   House                                                               
staff  at ranges  23 and  24 have  been moved  down to  range 22;                                                               
Senate staff ranges  have not been lowered;  and some departments                                                               
have negotiated wages with no step  and COLA increases.  He asked                                                               
if the  5,000 employees that would  be affected by HB  71 include                                                               
those across the university system and all departments.                                                                         
MR.  FISHER responded  yes,  the 5,000  employees  that would  be                                                               
affected are in the executive  branch, the legislature, the other                                                               
corporations, and the university, but  the court system would not                                                               
be included.                                                                                                                    
REPRESENTATIVE  KNOPP identified  other inequalities:   teachers,                                                               
represented by  bargaining units, would continue  to receive COLA                                                               
and merit increases,  but under HB 71,  university teachers would                                                               
not.  He offered, "This is not  a bad concept, but the problem is                                                               
it's  not   shared  equally   ...."     He  mentioned   that  the                                                               
administration  has  discussed   negotiating  freezes  in  future                                                               
collective bargaining  agreements, but  he opined that  there are                                                               
no guarantees.   He  asked if  the House  could enact  that there                                                               
would be no negotiated merit  or COLA increases in the collective                                                               
bargaining agreements for two years.                                                                                            
MR. FISHER said DOA negotiates  about one-third of the collective                                                               
bargaining agreements each  year.  He said that  any change takes                                                               
a  number  of  years  to   be  adopted  across  the  spectrum  of                                                               
bargaining units.  He opined,  "It's important to start somewhere                                                               
and  ...  it's  not  unreasonable to  start  with  our  uncovered                                                               
employees, as the  governor has proposed."  He  stated his belief                                                               
that the  legislature could dictate, by  statute, prohibiting DOA                                                               
from negotiating increases.  He added  that DOA brings all of the                                                               
collective  bargaining  agreements  to the  legislature  for  its                                                               
3:23:41 PM                                                                                                                    
REPRESENTATIVE WOOL queried why fiscal  year 2019 (FY 19) savings                                                               
were less than those of FY 18 [as shown on Slide 4.]                                                                            
MR. FISHER  said the reason  was that pay increments  are awarded                                                               
every year but merit increments every other year.                                                                               
REPRESENTATIVE  WOOL requested  clarification  that  HB 71  would                                                               
result  in a  freeze and  not range  reductions, as  mentioned by                                                               
Representative LeDoux.                                                                                                          
MR. FISHER  responded yes, under HB  71, there would be  a freeze                                                               
of their salaries.                                                                                                              
REPRESENTATIVE  WOOL asked  if other  groups  of state  employees                                                               
have been  subject to  a salary freeze  since the  current fiscal                                                               
crisis began.                                                                                                                   
MR. FISHER answered no, this is  the first salary freeze that DOA                                                               
has introduced.                                                                                                                 
REPRESENTATIVE WOOL asked  if the group of  employees referred to                                                               
in  HB  71   was  the  only  group  not   subject  to  collective                                                               
bargaining.   He  also asked  if other  state employees,  such as                                                               
teachers   and  university   professors,  are   under  collective                                                               
bargaining  agreements; therefore,  imposing a  salary freeze  on                                                               
them would be harder.                                                                                                           
MR. FISHER said yes, the  majority of state employees are subject                                                               
to collective  bargaining; therefore, DOA has  been instructed by                                                               
the  governor  to negotiate  a  comparable  freeze as  collective                                                               
bargaining agreements are up for re-negotiation.                                                                                
3:26:07 PM                                                                                                                    
REPRESENTATIVE BIRCH  said that  if 5,000 employees  represent 23                                                               
percent  of  the  total employment  population,  then  the  total                                                               
employee population  would be about  21,700.   He went on  to say                                                               
that if a  salary freeze for 23 percent of  employees would yield                                                               
$4.2 million in  savings, then a freeze applied  to all employees                                                               
would save  an amount approaching $20  million.  He urged  DOA to                                                               
negotiate a  salary freeze for  all of  the labor contracts.   He                                                               
asked  if the  eleven collective  bargaining agreements  have all                                                               
been negotiated, or if they are coming up for negotiation.                                                                      
MR. FISHER  answered that DOA  is currently in  negotiations with                                                               
the Public Safety Employees Association  (PSEA), the three Alaska                                                               
Marine Highway bargaining units,  the Alaska Vocational Technical                                                               
Center   Teachers'  Association   (AVTECTA),   and  the   Teacher                                                               
Education Association  of Mt. Edgecumbe  (TEAME).  He  said there                                                               
will be more agreements negotiated next year.                                                                                   
3:27:25 PM                                                                                                                    
REPRESENTATIVE  TUCK  asked  how  the court  system's  wages  and                                                               
benefits are determined.                                                                                                        
MR. FISHER responded  that the court system adopts  its own rules                                                               
and policies for wages and benefits.                                                                                            
REPRESENTATIVE TUCK asked  if the rules and policies  were set by                                                               
MR. FISHER  said he didn't  know and would provide  the committee                                                               
with information  as to  whether it  is through  a handbook  or a                                                               
formal regulatory process.                                                                                                      
REPRESENTATIVE TUCK cited  Article XII, Section 6,  of the Alaska                                                               
State Constitution  and read, "The legislature  shall establish a                                                               
system  under   which  the  merit   principle  will   govern  the                                                               
employment of persons by the State."   He stated, "The question I                                                               
have is the  definition of merit."  He offered  that if employees                                                               
are  not  under a  collective  bargaining  agreement, then  merit                                                               
means a salary  could "go up or  go down."  He asked,  "How is it                                                               
that  you wouldn't  be  able  to do  that  already  based on  the                                                               
MR.  FISHER  stated  his understanding  that  the  question  was:                                                               
"Could we  freeze people at a  particular level?"  He  brought up                                                               
an example  of a highly skilled  doctor whose range 29  salary is                                                               
frozen at  a range 20, which  is comparable to someone  with much                                                               
less education  and skill.  He  said the question implied  by the                                                               
clause Representative  Tuck read  is:   "Are we  being consistent                                                               
with the merit principle if we  treat those two people at a range                                                               
20  and don't  acknowledge the  additional education,  skill, and                                                               
capabilities  of  that doctor,  in  this  example?"   Mr.  Fisher                                                               
relayed  that  he   is  not  denying  that  DOA   could  do  what                                                               
Representative Tuck  suggested but  reiterated Mr.  Mills's point                                                               
regarding  a  more sophisticated  analysis  to  determine if  the                                                               
merit principle is being followed.                                                                                              
REPRESENTATIVE TUCK  offered that  the legislature would  have to                                                               
look to case law definition  on merit principle.  He acknowledged                                                               
the separation  between the legislative branch  and the executive                                                               
branch.  He  asked since the legislature oversees  the budget for                                                               
all three branches, why under  the merit system general provision                                                               
court system  employees would be excluded,  when the constitution                                                               
says "will govern the employment of persons by the State."                                                                      
MR.  FISHER gave  an example  to explain  the basic  principle of                                                               
separation of  powers as it related  to the court.   He asked the                                                               
committee to  imagine a  scenario where  the legislature  did not                                                               
like the  opinions that were  being issued by the  Alaska Supreme                                                               
Court and concluded that Alaska  Supreme Court justices should be                                                               
paid a dollar per year.   He said even though the legislature has                                                               
appropriated ample  money to the  court system, the  court system                                                               
still  needs to  have flexibility  to manage  its own  affairs in                                                               
order  to remain  independent of  the  legislative and  executive                                                               
branches.    He added  that  the  court system  has  aggressively                                                               
managed costs, including reduced salary and hours.                                                                              
REPRESENTATIVE  TUCK  conceded  that   a  similar  situation  has                                                               
occurred between the executive  and legislative branches, wherein                                                               
the legislature,  not liking a  governor's appointment,  tried to                                                               
"zero out"  the appointee's  position control  number (PCN).   He                                                               
wondered  aloud  how  the  separation can  be  made  between  the                                                               
judicial and  legislative branches but not  between the executive                                                               
and legislative branches.                                                                                                       
3:34:04 PM                                                                                                                    
REPRESENTATIVE JOHNSON  asked what portions  of HB 71,  in regard                                                               
to salary  freezes and  salary reduction,  are already  under the                                                               
governor's control.                                                                                                             
MR. FISHER answered  that the governor cannot  institute a salary                                                               
freeze without proposed legislation.                                                                                            
REPRESENTATIVE  JOHNSON asked  if the  governor could  accomplish                                                               
what is proposed  in HB 71 internally, because the  merit pay can                                                               
go "up or down."                                                                                                                
MR.  FISHER responded  that the  merit  pay is  a defined  amount                                                               
based  on employee  performance, and  there is  no discretion  as                                                               
currently structured.                                                                                                           
3:36:14 PM                                                                                                                    
REPRESENTATIVE LEDOUX referred to  Mr. Fisher's example about the                                                               
Alaska  Supreme  Court justices  and  expressed  her belief  that                                                               
judges' salaries are constitutionally  guaranteed for the time of                                                               
their service.                                                                                                                  
MR. FISHER repeated the basic  principle of separation of powers,                                                               
as it relates to HB 71. If passed,  HB 71 would be adopted by the                                                               
legislature  and  signed  by  the  executive  branch;  therefore,                                                               
application  of HB  71 to  those  two branches  of government  is                                                               
appropriate  and   doesn't  offend   the  separation   of  powers                                                               
principle  in the  constitution.   He  added that  to extend  the                                                               
statute  to  include   the  court  system  would   be  viewed  as                                                               
troublesome,  because  the  court  system  is  not  part  of  the                                                               
legislative process and has no way to protect itself.                                                                           
[HB 71 was held over.]                                                                                                          

Document Name Date/Time Subjects
HB031 ver A 1.26.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 31
HB031 Sponsor Statement 1.26.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 31
HB031 Supporting Document-Support Letter 1.26.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 31
HB031 Supporting Document-Support Letter 1.26.17 (1).PDF HSTA 1/31/2017 3:00:00 PM
HB 31
HB031 Additional Documents-1.26.17.PDF HSTA 1/31/2017 3:00:00 PM
HB 31
HB007SponsorStatement1.23.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 7
HB007 Supporting Document-Article Denver Post 1.23.17.pdf HCRA 2/18/2017 10:00:00 AM
HSTA 1/31/2017 3:00:00 PM
HB 7
HHB007 Supporting Document-Article Columbia University 1.23.17.pdf HCRA 2/18/2017 10:00:00 AM
HSTA 1/31/2017 3:00:00 PM
HB 7
HB007 Supporting Document-Article Washington Post 1.23.17.pdf HCRA 2/18/2017 10:00:00 AM
HSTA 1/31/2017 3:00:00 PM
HB 7
HB007 Supporting Documents-Article NSCL 1.23.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 7
HB 71 Hearing Request 1.24.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 71
HB 71 Sponsor Statement 1.24.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 71
HB 71 Sectional Analysis 1.24.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 71
HB0071A 1.24.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 71
HB 71 Fiscal Note 1.24.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 71
HB31-Supporting Documents 1.30.17.PDF HSTA 1/31/2017 3:00:00 PM
HB 31
HB31-Supporting letter-1.30.17.PDF HSTA 1/31/2017 3:00:00 PM
HB 31
DOA HB71 Salary Freeze Final STA.PDF HSTA 1/31/2017 3:00:00 PM
HB 71
HB007 Fiscal Note 1.28.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 7
HB031 Fiscal Note 1.28.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 31
HB007 ver A 1.31.17.PDF HCRA 2/18/2017 10:00:00 AM
HSTA 1/31/2017 3:00:00 PM
HB 7
HB007 Sectional Analysis ver A 2.1.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 7
HB007 Supporting Documents-Article NSCL 2.1.17.pdf HSTA 1/31/2017 3:00:00 PM
HB 7