• 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

  • News

    Memorial Day a weekend-long affair for Alaska Vets Motorcycle Club

    by Heather Hintze on May 29, 19:41

    For members of the Alaska Vets Motorcycle Club, Memorial Day isn’t just a Monday off from work; it’s a weekend-long celebration to remember the fallen. On Sunday, hundreds of bikers from around the state met at Mary’s McKinley View Lodge then road the Parks Highway to the Alaska Veterans Memorial. They’ve been doing the Byers […]

  • Sports

    Sports writer loses job over tweet on Japanese Indy winner

    by Associated Press on May 29, 16:52

    DENVER (AP) – A veteran sports writer is no longer working with The Denver Post after he posted on Twitter that he was “uncomfortable with a Japanese driver winning the Indianapolis 500 during Memorial Day weekend.” Terry Frei sent the tweet after Takuma Sato on Sunday became the first Japanese driver to win the race. […]

  • News

    First cruise ship of the summer docks at Port of Anchorage

    by Lauren Maxwell on May 29, 16:42

    The first cruise ship to dock at the Port of Anchorage this summer pulled into town early Monday morning. Nearly 1,400 passengers disembarked from Holland America’s ‘Amsterdam’ to check out the sights before an 11 p.m. call to be back on the ship. Julie Saupe, president of Visit Anchorage, said the cruise industry in the […]

  • News

    Volunteers place markers in Anchorage cemetery to honor fallen soldiers

    by Dave Leval on May 29, 15:43

    Wenda Sudduth and others from American Legion Post 1 found the going not so easy at Anchorage’s Memorial Park Cemetery. They went on a quest Sunday to pay tribute some of our nation’s most honored dead. They placed religious markers at the grave sites of those who served in the nation’s military. “I come from a […]

  • News

    Interior Secretary Ryan Zinke says Denali name should remain

    by Associated Press on May 29, 10:58

    ANCHORAGE, Alaska (AP) – U.S. Interior Secretary Ryan Zinke says the name for America’s tallest mountain should remain Denali. The News-Miner reports that he spoke at the Fairbanks International Airport late Saturday on his way to a Memorial Day ceremony in Denali State Park. The peak was once called Mount McKinley, named after President William McKinley. […]

  • Police: Tiger Woods arrested in Florida for DUI

    by Associated Press on May 29, 10:52

    JUPITER, Fla. (AP) – Tiger Woods says an unexpected reaction to prescription medicine led to his arrest on a DUI charge in Florida. Woods spent nearly four hours in the Palm Beach County Jail after being arrested early Monday on suspicion of DUI. The 14-time major champion says in a statement that alcohol wasn’t involved. […]

  • News

    Interior Secretary Zinke focuses on energy, parks during Alaska visit

    by Heather Hintze on May 29, 10:29

    Interior Secretary Ryan Zinke is in Alaska for his first visit to the state since his confirmation to the position in March. His first public appearance included a ride to the Alaska Veteran’s Memorial on the George Parks Highway with the Alaska Vets Motorcycle Club for their 29th annual Memorial Run. “I think it’s important on […]

  • News

    North Korea launches short-range ballistic missile, U.S. military says

    by CBS News on May 28, 19:06

    North Korea on Sunday launched a short-range ballistic missile, the U.S. Pacific Command said. The missile was tracked for six minutes until it landed in the Sea of Japan, the U.S. Pacific Command said. The White House said President Trump had been briefed on the launch. This is the ninth missile test North Korea has […]