Senate bill aims to address state employment crisis with a better retirement system

Sen. Cathy Giessel, R-Anchorage, at a Senate Majority press availability in 2017. (Photo by Skip Gray/360 North)

Alaska’s state agencies are in the midst of an employment crisis, struggling to incentivize new hires and retain the staff they have. A report last year estimated one in five state jobs is vacant. 

A new bill introduced in the state Senate this week aims to address the shortage with a revamped retirement system.

The current “defined contribution” or 401(k)-style plan leaves employees to manage their own retirement account investments. Under this system, employees shoulder all the risk, and according to a report from the Division of Retirement and Benefits, they often don’t end up saving enough. 

“Employees were not earning enough through the defined contribution plan to actually retire with enough savings to support themselves,” said Sen. Cathy Giessel, an Anchorage Republican who introduced the new bill on Wednesday along with nine bipartisan co-sponsors. 

Giessel’s bill would return public employees to a pension plan that would guarantee set payments upon retirement. The state moved off a more comprehensive defined benefit pension plan in favor of the current defined contribution plan in 2006. The switch was driven by concerns the state could no longer afford the earlier pension system.

There won’t be a financial evaluation of how much the new system costs the state until it’s gone through the committee process, but Giessel said she expects it will be “very affordable.” 

“If we can more effectively retain our state employees, keep those skilled people in their jobs, it makes a huge cost savings for the state. And not only that, it serves the Alaska public much better,” she said. 

One of the ways lawmakers are proposing to keep the new pension system lean is by not offering retiree health benefits. However, former employees can draw from a health reimbursement account until they are eligible for Medicare.

Jeff Kasper, business manager for the Alaska Public Employees Association, said that’s not ideal but it’s not a dealbreaker. He said returning to a pension plan has been the union’s number one goal since the 2006 switch.

“Anything’s probably better than what state employees have right now,” Kasper said. 

Giessel’s bill has to move through the Senate Labor & Commerce and Finance committees before it gets to the floor. 

It will likely face an uphill battle in the conservative-majority House. Rep. Andy Josephson, an Anchorage Democrat in the House minority, sponsored a limited version of Giessel’s bill targeting retirement system reform only for public safety officers. That bill’s future is unclear too; it still has three more committees to get through.

“There’s more support for her bill in the Senate than there is for my bill in the House,” Josephson said, adding he would gladly sign on to Giessel’s so-called “everyone” bill.

Giessel said she can’t predict what will happen in the House, but she’s hopeful she and other proponents will be able to rally support for the “everyone” bill.

Kavitha George is Alaska Public Media’s climate change reporter. Reach her at Read more about Kavitha here.

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