REDUCTIONS HAVE LARGELY BEEN THROUGH ATTRITION

BY WIN GRUENING

The Walker Administration and a supportive legislative minority have struggled mightily to persuade Alaskans the budget really has been “cut to the bone” and it’s time to restructure the Permanent Fund and implement taxes to balance the budget.

As part of their campaign to convince Alaskans the budget has been substantially reduced, Pat Pitney, Director of the Office of Management and Budget, is making presentations around the state. At a recent Commonwealth North meeting in Anchorage, she explained state employee numbers have dropped by 1,700 – from 26,500 two years ago to 24,800 today.

These reductions have happened mostly through attrition as only 70 employees actually received pink slips. It should be noted this includes the University of Alaska, Legislature, and Court System and other entities outside the purview of the executive branch.

Meanwhile, over 3,000 Alaskan oil sector workers will have lost their jobs by the end of 2016 with more to come next year. Alaska now has the highest unemployment rate in the nation at 6.7 percent.

Claims by administration officials notwithstanding, the public has been confused by conflicting information regarding what and how much has been cut. Accounting gymnastics allow money to be moved around, appearing to reduce the operating budget only to have the expense appear somewhere else. Comparisons with expenditures in the past may not tell the whole story.

Even though most Alaskans realize Permanent Fund restructuring and increased taxes are inevitable, many remain skeptical that sufficient steps have been taken to reduce government and are reluctant to pay new taxes and sacrifice part of their Permanent Fund dividend to subsidize government largesse. That’s why many legislators returned to their districts without considering new tax measures, knowing they would face many voters this fall who feel this way.

FIT, FAT OR FIDDLING

How “fat” is measured is largely in the eye of the beholder. The number of reduced state employees may or may not have included Craig Richards, who was Gov. Bill Walker’s Attorney General until he abruptly resigned last month. He was replaced shortly thereafter but re-hired on a contract and is no longer counted as a state employee.

Richards’ contract calls for payments of up to $25,000/month — over twice what he made as Attorney General. (His contract is limited initially to $50,000 but can be amended at the discretion of the State). One might ask how many other positions have been replaced under some contractual arrangement and whether this distorts the actual number of reductions cited by the Administration.

Assuming the number of reduced employees is correct, one wonders why total employee compensation hasn’t decreased accordingly. The biggest reason, of course, is attributable to state salaries and benefits that are primarily determined by union contracts.

Alaska is now experiencing, in the words of many, the worst fiscal crisis it has ever faced. Yet, many of the expense reductions undertaken by the private sector have been overlooked or minimized by the State. In addition to layoffs, it is commonplace in the private sector to freeze employee pay, eliminate overtime pay, forgo merit increases and bonuses, reduce or forgo contributions to health insurance plans, and temporarily furlough employees in order to reduce costs when faced with severe budget deficits.

So why is the State still signing off on union contracts containing salary and benefit provisions that offset savings from employee reductions and only worsen the deficit?

The State concluded negotiations this year with the Alaska State Employees Association (ASEA) that represents 8,125 employees – 51.3 percent of the total executive branch workforce with a yearly payroll of $466 million. It called for continued merit/step increases that automatically give raises to employees over the life of the contract. However, freezing merit/step increases in currently pending contracts then could potentially have saved $70 million in the executive branch alone.

Union negotiators also succeeded in getting the State to cover ASEA employee healthcare premiums at the same level as 2016. That exceedingly generous contribution will eventually top $17,000 per employee annually without requiring state employees to contribute anything.

Alaska remains one of a handful of states reimbursing 100 percent of premiums for employee health coverage while across the United States, municipal employees contribute an average of 20 percent of their health care costs.

Surely state employees are hard-working dedicated people but with a benefit package around 50 percent of base pay, it’s much richer than comparable private sector employees. Isn’t it time to consider some sharing of healthcare costs?

Employee salary and benefits containing these kind of “stealth” provisions, if modified, offer potential savings that must be considered in light of sacrifices being made by workers in the private sector.

Unfortunately, as long as examples like this are ignored, Gov. Walker will have a difficult time making the case the budget has been cut to the bone.

Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations. This opinion first appeared in the Juneau Empire.