• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
4m 15s

House addresses pension fund debt

By Rhonda McBride 8:06 AM April 18, 2014
JUNEAU –

It’s not every day that you dip into savings to the tune of $3 billion.

But late Thursday night, state lawmakers voted to do just that on behalf of about 130,000 teachers, police, firefighters, troopers and other public employees who are either still working or retired.

“They have a constitutionally guaranteed right to their benefits,” Rep. Mike Hawker said to lawmakers before the vote.

The pension funds for the Public Employees Retirement System and the Teachers’ Retirement System, known as PERS and TRS, have been in trouble for a long time, through no fault of the employees.

A perfect storm of conditions has created a $12 billion debt to these pension funds — bad advice from the state’s financial advisors, a stock market crash, chronic underpayments to the funds as well as a change in the retirement system in 2005 which created another tier of employees who no longer pay into the existing fund. Money from new employees would have helped to replenish the pension trust.

The bottom line:  The state has had to budget hefty payments to the fund every year.

The plan the House voted on Thursday night will pay down $3 billion of the debt and cap annual payments at $500 million a year.

While $500 million set aside in the state budget every year sounds like a lot, the annual payments were expected to grow as to as $2 billion in the next few years, if nothing were done to pay down the debt.

“There’s no easy way to do it,” said Rep. Cathy Munoz, a Juneau Republican. “We can do it today or tomorrow. It’s like paying off a mortgage or a credit card.”

“Do we take a big bite now and pay less later? Or take a smaller bite now and pay more later?” she asked.

Before the vote, lawmakers considered changing House Bill 385, which was introduced by Gov. Sean Parnell, who has said addressing the state’s rising tide of debt to the pension fund was a top priority this session.

Other lawmakers have been pushing for a “pay as you go” plan with smaller payments to the fund spread out over a longer period of time. They’ve also looked at asking local governments to kick in more money, a move that was opposed by municipalities already strapped for cash.

The governor called the “pay as you go” plan “immoral,” because he said it would saddle future generations with debt. Parnell later personally apologized to lawmakers for calling the approach immoral.

On Thursday night, some lawmakers still wanted to tinker with the governor’s plan. For a time, an amendment was under consideration to eliminate the $500 million annual payment and leave the amount up to future legislatures.

“Putting a specific number in statute scares me,” said Rep. Charisse Millett.

Millett said she’s worried about declining state revenues. This year, the state is facing a $2 billion shortfall.

“The expectations that our budget is going to be able to absorb $500 million over the next 26 years is probably not realistic,” said Millett, an Anchorage Republican.

Others, like Rep. Pete Higgins, (R) Fairbanks, told lawmakers discussion on the proposal only began in earnest during the final days of session. He said it would be better to take more time to weigh the decision, especially one which involves so much money.

“Once you put $3 billion into this, it’s gone. It’s gone forever,” Higgins said.

“I’d rather put $3 billion into infrastructure, which would not be gone,” Higgins said. “You can actually drive on it. You can feel it. This unfunded liability is sucking us dry.”

Hawker said unless the Legislature takes action now, the problem will only get worse. He said lawmakers have been kicking the can down the road for years.

“What happens when that can gets kicked down the road until there’s no place further to kick it? You get in a position where you have to make decisions that aren’t easy,” said Hawker, who told lawmakers they will have fewer choices if they postpone dealing with the pension fund obligation.

“That’s why we are so fortunate tonight to be standing here with a choice,” Hawker said.

One of those choices is to draw from state budget reserves, which stand at around $17 billion.

Rep. Sam Kito III, a Juneau Democrat, said the state should use some of its savings now.

“It’s going to be even harder to find those monies in the future,” Kito said.

Rep. Cathy Munoz said if lawmakers do not address the debt soon, it could affect the state’s ability to borrow money, which it might need to fund its share of a partnership in a liquefied natural gas project.

“This puts our fiscal house in order in a significant way,” Munoz said.

The House voted 38-2 to approve HB 385, which would erase the debt completely in about two decades.

Democrats have been longtime advocates of paying down the pension debt, and said they’re glad the governor finally sees it their way.

Parnell commended the House for taking action Thursday night.

The bill now moves on to the Senate.

Latest Stories

  • On-Air

    Mic Check in the Morning: Jonathan J. Bower

    by KTVA CBS 11 News on Oct 24, 14:08

    Friday in the KTVA 11 Studios, Jonathan J. Bower gave Daybreak a sneak peek into his new album, “Hope, Alaska” for Mic Check in the Morning. Bower will perform Friday, Oct. 24 at Studio 2200 at 7 p.m. and Sunday, Oct. 26 at Anchorage Community Works at 3 p.m.

  • News

    Don Young apologizes at AFN for suicide comments

    by KTVA CBS 11 News on Oct 24, 12:19

    Last updated 1:40 p.m. Rep. Don Young, who recently came under fire for his comments about suicide at a Wasilla high school earlier this week, publicly apologized at the Alaska Federation of Natives convention Friday. In a speech, Young said he gives the issues of suicide and mental illness “a high priority,” listing his co-sponorship […]

  • News

    Lanterns with positive message surprise drivers, air traffic controllers

    by Hope Miller on Oct 24, 11:48

    Paper lanterns were launched into the sky in East Anchorage Thursday night with a message of hope for victims of domestic violence. The lanterns, however, came as a surprise to some in the area, causing officials to briefly reroute airplane traffic at Merrill Field. “Shed the Light” is an event aimed at starting the conversation […]

  • On-Air

    Mic Check in Morning: East High School Ukulele Society for Better Living

    by KTVA CBS 11 News on Oct 24, 10:19

    A group of students at an Anchorage high school is inspiring others through the sound of music. The East High School Ukulele Society for Better Living performed live for Daybreak’s Mic Check in the Morning.

  • On-Air

    Get Out: Putters Wild

    by Brett Shepard on Oct 24, 9:23

    Last week I went disc golfing out at Kincaid Park. This week I’m back to a more traditional style of golf and I’ve brought a friend along. Janessa Webb joined me for this Get Out and we challenged each other to a friendly game of golf. “Here we have 18 holes of blacklight mini golf. There’s […]

  • News

    Seismologists study earthquakes near Minto

    by Associated Press on Oct 24, 9:06

    The Alaska state seismologist says big things may be coming from faults near the village of Minto about 50 miles west of Fairbanks. The third earthquake of at least magnitude 5.0 since Aug. 30 rocked the area Thursday. State seismologist Michael West tells the Fairbanks Daily News-Miner the area has become “very vigorous” and faults […]

  • Weather

    Daybreak weather, Oct. 24

    by KTVA Weather on Oct 24, 8:40

    Friday brings a little more cloud coverage along with light rain and snow by afternoon. Clouds will start to fade away as we head into Saturday afternoon with Sunday being the day where sunshine will shine bright. Highs today will be in the upper-30s to low-40s with light winds. A storm system out of the […]

  • News

    End the cycle of violence a key message at AFN

    by KTVA CBS 11 News on Oct 24, 8:21

    Violence affects all communities across Alaska in many different ways. It’s often hard to talk about. The Alaska Federation of Natives Convention is one place where people aren’t shying away from the topic. “Be the one to pull your family together and make them stronger. If you are in a bad situation, make it better. […]