• 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

    ‘Schools on the Edge’ Part One: Twin Hills

    by Daniella Rivera on Feb 08, 22:32

      ANCHORAGE — The State of Alaska is in a budget crisis, and one lawmaker says education is not off limits. Rep. Lynn Gattis said she wants to change how the state funds rural schools. Right now, a village needs a minimum of 10 students to get state funding. Gattis said she wants to see that number […]

  • News

    Lake Hood pilot: Air traffic control stretched too thin

    by Eric Ruble on Feb 08, 22:24

      ANCHORAGE — Arctic Flyers is one of the many small businesses that dot the shoreline of Lake Hood. The company’s owner, Rick Ruess, says recent flights into and out of the lake have made him nervous. For the last year, he says there is often one air traffic controller managing both Lake Hood and Ted […]

  • Lifestyle

    Tribal and non-tribal voices discuss VAWA across jurisdictions

    by Anna Rose MacArthur/KYUK on Feb 08, 21:54

    This story originates from KYUK Public Media and was published with permission.  BETHEL — The first day of the Violence Against Women Act, or VAWA, training began Monday in Bethel. The three-day session marks the first VAWA training in the state since Alaska’s Attorney General, Craig Richards, issued an opinion last summer that law enforcement must uphold […]

  • News

    Changing a neighborhood through community art

    by Heather Hintze on Feb 08, 21:21

      ANCHORAGE — Two Anchorage artists want to make Mountain View a more peaceful neighborhood. Aurora Sidney-Ando and Christina Determo started the Whale Song Peace Project. They’re creating a large sculpture for the neighborhood they hope will get people talking about ways to make positive changes. “It’s a call to action and to teach people […]

  • News

    15 year old killed in Wasilla collision

    by KTVA CBS 11 News on Feb 08, 20:19

    A 15 year old has died after being struck by a vehicle while he was out walking. The teen, identified as Austin Edenfield, was walking on the shoulder of Pittman Road Monday afternoon when a southbound vehicle struck him, according to Alaska State Troopers. Troopers were notified of the collision just after 3 p.m. and […]

  • News

    FAA says there are now more registered drone operators than licensed pilots

    by Associated Press on Feb 08, 20:01

    The Federal Aviation Administration says there are now more registered drone operators in the U.S. than there are licensed pilots. FAA Administrator Michael Huerta told a legal forum on Monday that the agency passed the milestone last week when it topped 325,000 registered drone owners. There are 320,000 licensed pilots of manned aircraft. Huerta said […]

  • News

    MSBSD aggressively recruiting new teachers and staff

    by Shannon Ballard on Feb 08, 19:50

      ANCHORAGE — The Matanuska-Susitna Borough School District is aggressively recruiting new teachers and staff. District wide enrollment went up by nearly 800 new students just this year. That means more education jobs. The problem is finding qualified applicants to fill them, according to district officials. About 160 people were hired this school year. The district needs to […]

  • Lifestyle

    Alaska Native Heritage Center feeling pinch of tough economy

    by Alexis Fernandez on Feb 08, 19:24

      ANCHORAGE — Alaska’s tough economy is taking a toll on some nonprofits, including one that focuses on Alaska Native history and culture. The Alaska Native Heritage Center said it is preparing to see fewer large private donations than before, partly because of the tough economy. It’s not alone — just last week the Alaska […]