In response to questions, Mr. Johnson said that in a worst case
scenario, the State can borrow from the Federal Government at the
current rate of interest which is just below 6% right now.

Rep. Martinez said he would like the study committee to meet earlier,
and have the new legislation take effect next year in 2004.

Mr. Johnson said a fall date for the committee gives more time to see
how the economy is going to move. No legislation can be passed until
2004, so two years is really needed in order for businesses to plan ahead.
If it was next year’s legislation, it would have to be retroactive. In
response to his second question, Mr. Johnson said all the money in the UI
fund is for benefits, none is for administration.

In response to Rep. Ringo’s question, Roger Madsen, Head of the
Department of Labor said by the time the internal study reached his desk
it was October 31. Economic times were uncertain, and it was felt waiting
another year would produce more informed results. In fact, things were
better the 4^th quarter. He promised the Interim Committee will meet this
fall.

In response to Rep. Naccarato’s question, Mr. Johnson said the rates
were frozen in 2002 also.

In response to Rep. Trail’s question, Mr. Johnson said borrowing was
not necessary in 1983 as the Legislature was in session and passed a bill
that corrected the situation.

In response to Rep. Martinez’s question, Mr. Whaley said he would
not oppose a freeze of only one year.

Rep. Naccarato said that the Lewiston Chamber of Commerce
supports a one year freeze.

Mr. Stark said it will take two years to work through the process.

Mr. Winkle said “the good times are over.” In 2000, the Legislature
amended the law to provide for the gain sharing program, and recom-mended a fund reserve sufficient to absorb a one standard deviation

(-5%) market devaluation. There was a 6% asset loss in 2001 and
another 7% loss in 2002. To reduce the amortization period to less than
25 years, the Fund needs at least an .81% of pay increase in
contributions. The actuaries say the fund lost one billion in funds because
they expect a 8% increase. The actual asset loss was half that amount.

In the years of good markets the contribution rates went down, in
effect. Now we need to return to the 1997 rates. However, since these
rates will go back in effect gradually, starting July 1 of 2004 with a 1%
increase each year, a six month grace period clause is being invoked. By
policy, the Board doesn’t raise contribution rates to pay for Cost of Living
Allowance (COLA) therefore no discretionary COLA was approved.
These new rates assume a 1% investment return the next two years. The
Board feels this is a prudent assumption.

Rep. Trail inquired if changing the allocation of 70% in stock and 30%
in bonds has been considered. Mr. Winkle said there has been no
change to the asset allocation. With the proposed plan, the general
teacher will take home $7.84 less a month, and police officers and
firemen will take home $12 less. (Policemen and firemen retire earlier, so
contribute more.)

59-0105-0201

Retirement

59-0106-0201

Their goal is to improve the life of state employees. Their goals
include, supporting changes in the Gain Sharing allocations, reinstating a
three panel hearing under the State Problem Solving Procedure,
supporting a study to have the state provide self-supporting day care
facilities, and supporting salary increases for state employees.

The charts show that in 2001 state employees received a 3.5%
increase in pay. Some employees received a much larger increase, and
some received only 1%, if that. Health care rates are going up, but with
the salary staying the same, take-home pay is going down.

In response to Rep. Trail’s question, Ms. Patterson said it is state
policy that state employees are not to use the phone, e-mail or fax for
personal issues during working hours.

In discussing Gain Sharing, Rep. Lake asked why, in good times,
employers should not get a break as they pay 2/3 of the funds into PERSI,
and the employees only pay 1/3. Ms. Patterson said the money in
PERSI belongs to the state employees. Rep. Naccarato pointed out that
money from the fund can only go to employees. Mr. Winkle said that was
true. No funds were drawn out, but employers got a “holiday” from paying
into the fund.

Rep. Trail asked how the employees felt when CEC (Change in State
Employee Compensation) Hearings were not held this year. Ms.
Patterson said there were mixed emotions. There was a report that
hearings would be held later when more information about the budget was
available. Their attitude is “wait and see.”

At the request of several Committee members for a detailed report on
employee salaries and who got the few raises that were allowed last year,
Gabe Weske, of the Department of Human Resources, promised to have
that information to the Committee by the end of the week.

& 1-13

Renea Nelson, Grant Administrator for the Idaho Department of
Commerce, presented the rules. Rule 48-0103-0101 deals with the
rules concerning their logo. The rule change now allows the logo to be
printed in color, providing the color is pre-approval by the ITC staff.

48-0103-0301

An informal bid is required when the amount is between $1500 and
$5000. (The maximum amount is being raised from $2500.)

A formal bid is required for amounts over $5000. (This is being raised
from $2500)

Chairman McKague asked what the hotel, motel and campground 2%
tax is used for. Ms. Nelson said it is used only for tourism promotion.
Karl Tueller pointed out that in Boise there is an additional 2% auditorium
district tax which is not handled by them. The 2% tax throughout the
State is not used for construction or maintenance.

EXCUSED:

January 21

The Fact sheet gave the monthly insurance premiums the state has paid
since 1989 for employees. Once a year, the opportunity to change
insurance coverage is offered to the employees. Employees receive health
and medical insurance. The state pays for life and disability insurance.
There is a flexible account of up to $2500 for employees to put aside pre-tax money for medical expenses or day care.

A report on the group insurance plan as of July 1, 2002 was given. The
total number of people covered was 48,177. The U of I is not included in
the plan, but there are 17,041 active and 3,008 retired employees in the
plan. The State of Idaho pays 90% of the premium costs and the employee
pays 10%. For most employees, there are two modules with differing
premiums and deductibles. Retirees are only offered Module 2. About 200
employees in a few small counties are part of a third plan.

The Department’s administrative costs are considered to be fairly low.

Ms. Ahrens discussed the Claims Distribution. The average age for
employees is 45. Four major health conditions cost 40% of the expenses.
Heart disease was first and cancer was second.

Rep. Bradford asked if employees are encouraged to buy the generic
drugs. Ms. Ahrens said that the co-pay is three-tiered. It is $12 for generic
drugs, $18 if no generic drugs are available, and $40 if generic is available,
but the patient chooses the non-generic. They are encouraging patients to
buy 30 days of the drug to see how it works, rather than 90 at first shot.
They have actually seen a slight decrease in their drug costs.

Retirees expenses are 53.5% for drugs since Medicare does not provide
drug benefits.

Thirty per cent of employees never file a claim in a given year. Only 7% of
retired employees do not submit a claim in any one year. Seventy-five per
cent of retirees submit claims of over $500 in a given year.

Rep Lake asked if there is tracking to see which employees or retirees file
large claims each year. Ms. Ahrens said they are not allowed to track
individuals by State law. Rep. Lake inquired how many have filed claims in
multiple years. Ms. Ahrens said she would have to look that information up
by groups.

Ms. Ahrens said for the year 2003, the insurance plan will not cover the
expenses. The Department was charged with not raising the premiums, so
some changes had to be made. After conferring with employees, the
decision was made to put in a 90-day wait period for eligibility, increase the
deductibles and maximum out-of-pocket expenses, increase the
emergency room co-pay, increase the prescription co-pays, and require two
co-pays for a 90-day supply of maintenance medication.

For FY 2004 in order to maintain a similar coverage, they expect a 15%
increase in premiums. The Governor recommends funding in the agency
budgets to cover the increase. The national trend is not looking good. In
Colorado they have had three straight years of up to double-digit increases
in the cost of health care premiums and are concerned about even finding a
carrier in the future.

The Department has been in contact with their two major carriers. They are
reviewing prescription drug management, analyzing a multi-state
prescription drug purchasing Coalition (RxIS), and reviewing prescription
formulary plan alternatives.

Rep. Bradford asked about a proposed Coalition on drug purchases. Ms.
Ahrens said they have looked at a couple of states that have that type of
program, but the savings do not seem to be that much.

Cynthia Ness, of the Department, spoke on prescriptions. The
Department’s dispensing fee is about $2.50 per prescription. Pharmacies
also charge a transaction fee, which the department doesn’t pay.

Rep. Naccarato asked about the return of unused prescriptions. Many
agencies have to throw away expensive medications. Ms. Ahrens said they
deal with individuals, so are not a part of that discussion.

Rep. Ringo asked if the State Police being a part of the plan raises the
rates. Mrs. Ahrens said State Police are covered by Worker’s
Comprehension for injuries on the job. Rep. Ringo said local police
departments are having a terrible time getting health insurance. She asked
if local agencies could also be covered under the state plan. Ms. Ahrens
said over the past few years the concept has been discussed. It could
raise the rates for the State. The local government would have to pay
whatever costs are decided by the state whether they have the funds or
not. There would be people going in and out of the plan, so this would
make it difficult for the State. She suggested that the Association of
Counties put together a plan.

Rep. Garrett asked about the feeling that state active employees are
picking up the cost of retirees insurance. Mrs. Ahrens said each active
employees contributes $8 a month and the state also contributes $8 each
month. The retirees pay a substantial amount per month for their coverage.
A retiree with no Medicare pays well over $300. If there are two members
in the family the cost is over $500. If both are on Medicare, an individual
person would pay $304.

Rep. Garrett pointed out the number of retired employees is increasing.
Ms. Ahrens said the average active employee age of 45 is about 10 years
higher than most large groups. The law states that retirees get the same
plan as the active state employees, but they do have to pay for it.

In response to Rep. Naccarato’s question, Ms. Ahrens said the state
contributes the same amount for each employee per month, regardless of
how many family members the employees has or what coverage is chosen.
In response to a question on the graph on page 5–how to distinguish
between dental and medical portions, Ms. Ahrens said the dental contract
is separate and was not shown in the charts she presented. Also not
included is employee mental health or employee assistance.

Rep. Lake asked how the 10%-90% contribution rates compare with
private plans. Ms. Ahrens said the plan compares favorably. She said
State will most likely be picking up a larger percentage of insurance costs
in the future.

Rep. Lake asked why there is a 50/50 split on the active employees’ and
the State’s contributions to retirees expenses. Ms. Ness said it is in law.

Big companies who do business in many states are allowed to report to
the Department of Labor under an ERISA qualification. Like big
companies, a professional employer can offer benefit plans for its
workers. However, if it is considered a multiple employer welfare
arrangement, the company does not qualify for ERISA (Employee
Retirement Income Security Act.) This bills states that the professional
employer is not considered to be a multiple employer welfare
arrangement within the meaning of the applicable law. Currently the
Idaho Department of Labor claims that a professional employer is a
MEWA (multiple employer welfare arrangement) and that they have the
right to regulate them. Professional employers are a new concept, so the
old models do not work. The first act dealing with this subject was passed
in 1994. Since it is a new “creature,” there needs to be more refinements
as time goes by. This bill would make professional employers qualify
under the federal rules only under ERISA, and not at the state level as a
MEWA.

A third part of the bill concerns tort claims against governmental agencies.
This does not diminish the protection for government agencies in regards
to torts.

Rep. Lake inquired as to the term “living wage?” He asked if this term
has a dollar sign attached, or is that the next step? Rep. Naccarato said
it wouldn’t come from him, and he doesn’t see this coming. Rep. Garrett
pointed out that resolutions are only for “feel good” purposes. They have
“no teeth”. She asked if this is worth $700 or more for printing. Rep.
Naccarato said he feels it is good for us to stand up as legislators and
say we support Idaho workers. He said the term “living wage” would be
defined at a later date.

Rep. Martinez said that he has seen other resolutions passed that have a
symbolic meaning. At this time of economic crisis, he feels that this is an
important piece of legislation. People are working so hard at low salaries
without health insurance, and are having to fall back on state help. He
feels this is a “good concept.”

Vice Chairman McKague asked what event brought about this RS?
Rep. Bieter, said that jobs which are intended to stay in Idaho are not
being given to those not living in Idaho. Rep. Ringo asked about the
fiscal impact statement. Rep. Bieter said there was a typo. It should
have been “no fiscal impact.” He said there would be no added cost of
enforcement. Additional fines would benefit law enforcement indirectly.
Rep. Ringo asked how this is enforced now. Rep. Bieter said there are
others who are better able to answer, but he would assume it would be an
investigation as a result of a complaint to the Sheriff.

Rep. Lake asked what we are enforcing? Rep. Bieter said we are
enforcing a penalty for not giving preference to Idaho employees on Idaho
public works contracts. With contractors personally, the preference is
given reciprocity depending upon what the contractor’s home state does
in granting preferences to its own citizens.

Rep. Bradford said he lives in a border town with Utah. He expressed
concern that this bill would limit where people can get help. Rep. Bieter
said the law is already in place. This is only for public works, not for
private jobs. This is to help our Idaho workers

Rep. Martinez said he looks at this bill as not a quota issue, but an
attempt to support people living in our state. He understands the
problems of small boarder communities, however, he feels this would help
the majority of the workers in Idaho. He said he thought this RS should
be brought to print.

Rep. Ringo debated against the motion as well. She said she doesn’t
like it that companies may agree to comply with certain guide lines to get
a contract, and then not keep their word.

EXCUSED:

Rep. Martinez moved we approve the minutes of February 11 as
printed. By voice vote the motion passed

Last year there was a large trade mission delegation to Asia led by
Governor Kempthorn. Both large and small companies were represented.
After this mission left, they received a lot of comments and questions. He
mentioned Value Partner World–a project to encourage participation in
Idaho’s agriculture products abroad. The Governor goes to their country
and gives certificates of appreciation to the importers. He is the only
governor who does this.

Idaho tortillas and chips have become a popular item in coffee
shops in Taiwan. Now the trend is spreading to China. He mentioned
two other companies from Idaho who are now selling their products in
Asia. Peaches from Idaho are being shipped to Taiwan. Among other
companies shipping products to Taiwan is Precision Panel. Cabins and
summer homes are becoming popular in Taiwan. Simplot has an offices
in Beijing. He showed brochures printed in Chinese and simplified
Chinese which are used as sales tools. He received a large response on
the mouse pads with Idaho’s outline with pictures from the state and a
Chinese calendar with information. Each committee member was given a
mouse pad.

He closed with the comment that the international market place
belongs to those with the right products who will take the effort to sell their
products abroad.

He is working on a large order that would double the number of
employees of a company in Idaho that works in the area of software for
power generation.

Idaho bean seed is a profitable business, and he has hopes for
expansion. There is a market for machinery for bean growers that is built
here in Idaho. Also there is a market for Idaho-made potato processing
equipment in Mexico.

The largest bakery in Mexico now makes a bread with Idaho Potatoes.
He is working on developing even better relations. They help recruit
buyers from key Mexican regions to buy Idaho products.

In 2001, the Governor led a trade mission to his part of the world. Our
Idaho Universities have exchange programs with other Universities in his
region. They work with the Farm Bureau to sell bean seed in North
Mexico. They also help collect monies owed by companies in Mexico to
Idaho farmers. There was a special shipment of wheat to a miller in west
Mexico. The miller was so pleased, he has reordered this special, more
expensive wheat.

He is working with a big retailer in Mexico­they compete with
WalMart­to encourage them to buy food and finished products from
Idaho.

He closed with a mention of the anti-American demonstrations in
South Korea. He said it is not against Americans personally. There is a
long, good relation between the U.S. and South Korea. The
demonstrators wanted more equality with the U.S. He said that South
Korea is grateful for all the U.S. has done for it.

Mr. Tueller said Mr. Yen and Mr. Orellana are full-time contract
offices to the state. The others are part-time. For very little money, they
do a lot. The two departments have joint staff meetings at least on a
weekly basis. The Agricultural Department has money for international
travel that they do not have.

Rep. Lake commented that with our trading partners, Japan is
first, and Canada is second. He asked about our presence in Japan. Mr.
Tueller stated that for a long time we did have representation in Japan.
However, our representative there died two years ago. He did a lot for us
because of his relationship with the U of I. For a small fee they could
maintain a business contact in Japan. Doing business in Japan is very
expensive. With cutbacks, they now occasionally use JETRO (Japanese
External Trade Organization) from Oregon.

Rep. Bradford commented that last year the market for Idaho
table grapes looked hopeful. He asked what happened? Mr. Yen said
there was a shipment last year to Taiwan. However this last year the
yield was down. They got some federal money and are trying to get wine
importers to buy Idaho grapes. They are doing some special programs to
bring importers to Idaho.

Mr. Tueller thanked the Committee for their time. He mentioned this is
one of a series of meetings. These gentlemen do an excellent job for the
State of Idaho.

Rep. Lake asked if the letter was required. Rep. McKague said she
was told by leadership that a letter was required.

In response to questions, he said his superior was the Buy Idaho
Board comprised of 19 people from across the state. Members pay dues.
It also cost $50 to have a business display at the Capitol in January. The
term “Build Idaho” is also on their poster down stairs in the display case.
They feel this bill would be an encouragement to Buy Idaho.

In response to questions, Mr. Williams said a Boise “living wage” is
$11 to $12 an hour, but many places are only paying $6 an hour. This
requires people to work a second or part-time job which cuts into family
time. He feels this bill will help this situation.

In response to questions, Mr. Williams said jobs were lost in Eastern
Idaho with the malt plant. He did not think this would hurt the hiring of
specialists from out-of-state. He said he hoped his daughter would be
able to afford to live in Idaho when she graduated from college. He said
employers have a responsibility to pay “living wages” to their employees.

Rep. Martinez also opposed the amendments. He said this bill just
supports Idaho workers. He said he thought the term means $10 to
$10.50 an hour. But this bill doesn’t set any dollar amount. He said he
didn’t understand the fright in those words.

Rep. Crow said if this is a wage setting issue, it should say so. It
looks as if we are dealing with two different issues. She called for a vote.

This bill does specify that a separate, segregated fund must be
established which is only used for political purposes. Contributions are
voluntary. Employees must be informed about the purposes in general
terms. Employees must also be informed that they have the right not to
participate. (This is already in code.) Labor organizations may use dues
to communicate directly with their membership.

On Page 3, it states that it is unlawful to provide any form of
compensation to those who do participate in giving to a political action
committee or fund. There is nothing to prevent the employee from making
contributions.

When questioned by a Representative, he said he couldn’t explain
exactly if fire fighters are paying for political activities through their dues,
but said he was testifying against the bill. He claimed that this bill
wouldn’t allow teachers or fire fighters to testify about political issues.

In answer to questioning, he claimed that the PFF of ID endorses
candidates almost half and half of each major party.

During questions, Mr. Whaley said Voluntary contributions must be
signed for on a separate card. This bill would restricts their members.
Any attempt to restrict any voice is a restriction on them. Where does this
stop? Who is next? Their constitution says they only support those who
support workers, they have no other political cause.

During questioning, she said that they pay for a teacher’s substitute
and give them travel money when they come to Boise to speak. She said
those expenses are paid from dues as is her salary and she was there as
a lobbyist. She asked what was the problem with that.

He referred to the book of comments each member received. He said
there are still problems with the Utah law and currently their legislature is
trying to fix them. He said we don’t live in Utah. He said violations for
non-compliance are stricter than under the “sunshine laws.” Those have
civil penalties, this bill makes it a misdemeanor with possible jail
penalties. He pointed out a discrepancy in the bill’s wording. He said he
disagreed with what this bill does. He thinks it is bad policy. He is sure it
will be tested in court and sections will be declared unconstitutional.

Under questioning he said there have been no complaints and he has
no idea why this bill is being brought at this time.

When asked what the problem was, Mr. Deide said the problem is that
the current situation is reactive, rather than proactive. It is one of
omission rather than commission. He said he had not received any
correspondence on this issue. He said this is a matter of local control
being carried one step further to individual control. He said he couldn’t
cite a particular catalyst for this bill. There is a general consensus that all
people should make political contributions as a separate act on their part,
or refrain from making any at all.

In response to further questions he said this bill does not limit lobbying,
or door-to-door campaigning, but the money for this can’t come from
dues.

Rep. Lake said he sees the bill as an empowering people to contribute
how they want to and when they want do.

Rep. Ringo said the bill is perplexing to her. It is supported by
leadership, but no one has been able to identify a problem to her
satisfaction. She said it will make it more difficult for labor unions to
collect money for political action committees and will affect how well those
committees will be able to carry out their programs.

EXCUSED:

Ann Heilman, of the Department of Administration, spoke. She
believes this is a great idea and will serve as a spark for state
employees. Her agency will be given the task of rule making, which the
Committee will then approve next session. Some states allow
employees to gain a percentage of the savings and have saved a quarter
of a million in the process. There will have to be a process of fairness
and a mathematical analysis of the actual savings.

In questioning, she said there is a problem in that a program like this
can become too cumbersome. They are doing research on the internet.
The State did have a program a few years ago, but it took a formalized
board, and suggestions stopped coming in. She believes this program
will be administered by both the agency and the Department of
Administration. The only place the money could come from now is the
agency personnel budget, but they will be doing research to see if it
could come from operations.