Alaska senators introduce bipartisan bill intended to revive a pension program for state workers

a woman sits at a desk
Sen. Cathy Giessel, R-Anchorage, speaks about Senate Bill 88, the Senate Majority’s new public employee pension proposal, on Wednesday, March 1, 2023. (James Brooks/Alaska Beacon)

Half of the members of the Alaska Senate formally announced their support Wednesday for new legislation intended to reinstate a pension for all state employees, and more are expected to back the idea.

Long a priority of public-employee unions, senators said they envision the new “defined benefit” retirement system — which resembles the one abolished by state legislators in 2006 — as a way to address the fact that one in five state jobs is vacant.

“You bring this back, and I do think our recruitment problems will start to lessen,” said Sen. Click Bishop, R-Fairbanks and one of the bill’s sponsors.

It would be a mistake to think Senate Bill 88 takes the state’s retirement system back in time to accomplish that goal, said Sen. Cathy Giessel, R-Anchorage and the bill’s primary sponsor.

“This is not your grandma’s defined benefit plan. It’s a whole new system,” she said.

  • Public employees would be required to pay more than they did under the old system, and that amount could rise if state retirement experts say it’s needed.
  • Unlike the old system, no health insurance is included, though there would be a small health savings account to cover the time between retirement and the minimum age for Medicare. 
  • Current state employees would be given an opportunity to switch from the state’s existing 401(k)-style retirement system to the new system, and all new employees would be required to use the new system. 
  • Police, firefighters and other public safety employees would be able to retire at age 50 with 25 years of service (or at age 55 with 20 years), while teachers and other public employees would be allowed to retire at age 60 or with 30 years of service.
  • Retirement payments would be based on an employee’s highest five consecutive years of salary, and benefits wouldn’t be available for anyone who works less than five years.
  • There would be no cost of living bonus for retirees who live in Alaska, and the state’s supplemental benefit system — which allows employees to sock away an additional (matched by the state) 6.12% of their income — would remain untouched. 

Senate President Gary Stevens, R-Kodiak, is the bill’s third sponsor and said public employee recruitment and retention has always been a priority of the 17-member Senate majority, and this bill answers that priority.

“I’m very glad that Sen. Giessel has taken on this challenge. I know it’s taken a lot of work,” he said.

 Senate President Gary Stevens, R-Kodiak, speaks about Senate Bill 88, the Senate majority’s new public-employee pension proposal, on Wednesday, March 1, 2023. (Photo by James Brooks/Alaska Beacon)

A coalition of unions, including those representing teachers, police, firefighters, and general-government employees announced their support for the bill on Wednesday and said they will be lobbying legislators to pass it. 

In addition to the bill’s three sponsors, seven members of the Senate signed on as co-sponsors Wednesday. Sen. Jesse Bjorkman, R-Nikiski, neither sponsored nor co-sponsored the bill but participated in a news conference announcing its release.

Bjorkman is the chair of the Senate Labor and Commerce Committee, which will receive the bill first, and he said he wants to hold hearings “as soon as possible.”

Sen. Kelly Merrick, R-Eagle River, said she supports the bill in concept but wants to examine the details more and said she looks forward “to ensuring a defined benefit plan is both effective and fiscally sound.”

Stevens said he would like to see the bill pass into law this year but called that “very hard to do,” not least because the bill will also have to pass muster in the state House and with Gov. Mike Dunleavy before becoming law. 

Giessel said the Senate majority talks regularly with Dunleavy and the leaders of the predominantly Republican coalition majority in the House, and she expects to talk to them about the pension bill as it advances.

Stevens said the bill is likely to change as it advances through the legislative process and lawmakers learn more about the details. 

A detailed actuarial study has not yet been done, but Giessel said she expects the financial numbers to look similar to last year’s House Bill 220, which proposed a pension plan that would not have raised costs for the state. That bill – which also did not include health benefits – died at the end of the 32nd Legislature without House or Senate approval.

Pension bills are a regular feature of legislative sessions — the senators who have represented Juneau since 2006 introduce them biennially — but this bill has more support than any of the prior efforts.

Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee, has been skeptical of prior bills and sat in the back of the conference room as his colleagues introduced the new bill at a news conference on Wednesday.

He said he remains concerned about the multibillion-dollar unfunded liability left behind by actuarial misestimates when the state’s prior pension system was active. 

Sen. Bill Wielechowski, D-Anchorage and a supporter of the new bill, noted that Senate Bill 88 keeps a repayment provision present in the state’s existing retirement formula.

“We’re not going to escape that anytime soon,” he said of the unfunded liability.

Sen. Shelley Hughes, R-Palmer, isn’t a member of the 17-person Senate majority and watched the majority’s news conference from her office.

She’s still analyzing the details of the bill, she said, but said she’s not yet convinced that switching to a pension-style retirement system will help recruitment.

“I think the younger generation wants flexibility and mobility,” she said.

Under the state’s existing retirement system, the employee bears the risk; if their investments underperform, the state isn’t required to make up the gap. Under a defined benefit system like the one proposed by the new bill, the state would have to come up with additional money if pension fund investments fail to match payouts.

Hughes said she’s worried about that risk.

“No risk is better than some risk, and there is some risk if we go to defined benefit,” she said.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: Follow Alaska Beacon on Facebook and Twitter.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: Follow Alaska Beacon on Facebook and X.

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