The Alaska Senate on Wednesday approved legislation to revive a pension program for state employees, an act that could bring new benefits to as many as 37,000 Alaskans and is intended to ease a chronic employee shortage at state agencies.
Alaska has been without a public-employee pension program for new workers since 2006, when the Alaska Legislature abolished it in favor of a 401(k)-like program in which benefits are not guaranteed.
Subsequent data has shown that new employees are now much less likely to remain in the state and frequently earn less money toward their retirement than employees who receive pensions. Compounding the problems, most Alaska teachers are ineligible for Social Security or the supplemental program intended to replace its benefits.
Wednesday’s action to pass Senate Bill 88, as the pension legislation is formally known, is seen by supporters as a significant step toward fixing those problems.
“We need to correct this. We need to put efficiency back into state government by reducing the constant churn of employees,” said Senate Majority Leader Cathy Giessel, R-Anchorage and the bill’s prime sponsor.
The Senate vote was 12-5. Voting “no” were Republican Sens. Shelley Hughes of Palmer, James Kaufman of Anchorage, Robert Myers of North Pole, Bert Stedman of Sitka, and David Wilson of Wasilla. Sens. Matt Claman, D-Anchorage, Mike Shower, R-Wasilla, and Click Bishop, R-Fairbanks, were excused absent from the vote.
After the vote, Giessel was greeted with handshakes by representatives of public employee unions outside the Senate chambers.
“I think it’s nice to see that the building, the entire building, recognizes that Alaska has a problem,” said Dominic Lozano, president of the Alaska Professional Fire Fighters union. “Alaska has a public safety problem. Alaska has a retention problem. And there might be some disagreement on how we fix that problem, but the entire building recognizes Alaska has a problem that needs to be fixed today.”
Despite the Senate’s action, the pension bill faces long odds to become law.
Many members of the Alaska House of Representatives are skeptical of the proposal, and a similar House bill hasn’t received a hearing since it was introduced last year. Legislators say they believe Gov. Mike Dunleavy is also a skeptic, though a spokesperson for the governor said last year that “Anything and everything should be explored to have an advantage in recruiting and retaining new employees.”
Asked whether she believes the House will even hold a hearing on the bill, Giessel was noncommittal but said she’s optimistic.
“We’ll see. I’ll certainly be pushing for that. And the stakeholders will be pushing also,” she said.
If it were to become law, SB 88 would create a new pension tier and pension fund for teachers and state employees. New employees would be required to join the program, and existing employees would be allowed to switch over.
Regular employees would pay between 8-12% of their salaries and could retire at 60 years old or with 30 years of service. Public safety employees could retire at age 50 with 25 years of service or at age 55 with 20 years.
The contribution rate would be set annually by the Alaska Retirement Management Board, which could also adjust the state’s contribution and reduce annual inflation-adjustment payments for retirees in order to keep the new pension fund solvent if it earns less than is needed to pay benefits.
The state’s current pension fund has billions of dollars more in liabilities than assets, the result of past misestimates, and that has resulted in some skepticism about the pension revival.
Stedman, co-chair of the Senate Finance Committee, voted in favor of abolishing the state’s old pension system in 2005 and against Wednesday’s bill.
Speaking Wednesday, he said he’s skeptical of cost estimates that indicate the new pension plan will be cheaper in its initial years than the state’s current retirement system.
“There’s a concern there that we’re going to instantly create another unfunded liability,” he said.
Some other Republicans, including Myers and Hughes, said they shared those concerns. Hughes said she would support a pension program for public safety employees specifically, but not for all state employees.
Sen. Jesse Kiehl, D-Juneau, has supported the revival of a pension plan for nearly 20 years — first as a legislative aide, and then as a legislator himself.
He acknowledged that there is some risk if the state revives its pension plan, but that risk is lower than the risks faced by the state right now.
“We have a much, much safer program in front of us to reopen the pension system,” he said.
Giessel said that the state doesn’t have enough workers to keep its streets clear of snow and to keep construction projects permitted.
In his Tuesday night State of the State address, Dunleavy highlighted the absence of construction cranes in Anchorage and said that’s an indicator of bad economic health.
Giessel noted that comment on Wednesday and said that construction cranes require permits. If the state wants a healthy economy, she said, it needs to have employees.
