• 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

    Veterans get winter gear, other assistance at annual event

    by KTVA CBS 11 News on Oct 25, 17:44

    Hundreds of veterans turned out to the Ted Stevens Anchorage International Airport Friday for the 22nd annual Stand Down program. The event is a yearly opportunity for organizations to give back to servicemen and servicewomen. Agencies were on-hand at the event to help with dental, medical, housing and employment assistance. A lot of veterans come […]

  • News

    US to recognize same-sex marriage in 6 new states

    by Associated Press on Oct 25, 16:38

    The federal government is recognizing gay marriage in six more states, extending federal benefits to those couples. Attorney General Eric Holder says the states are: Alaska, Arizona, Idaho, North Carolina, West Virginia and Wyoming. Saturday’s announcement brings the total number of states with federal recognition of same-sex marriage to 32, plus the District of Columbia. […]

  • News

    Anchorage police respond to multiple accidents on Glenn Highway

    by KTVA CBS 11 News on Oct 25, 13:26

    As of 12 p.m. Saturday, the Anchorage Police Department says that there have been 20 accidents reported in the Anchorage area since midnight. APD says 11 of those accidents — two of which resulted in minor injuries — have happened on the Glenn Highway. This comes after the department sent out a warning to drivers […]

  • Sports

    South defeats West for state football title

    by KTVA Sports on Oct 25, 12:34

    Five weeks ago, the South High Wolverines and the West High Eagles met for a matchup, in which the Wolverines won 55-9. A month later, the two teams met for a chance at the state title on Oct. 24. South’s head coach John Lewis warned his team that a blowout like the first may not be […]

  • News

    Alaska Federation of Natives Convention Day 2: Courting the Native vote

    by Rhonda McBride on Oct 24, 23:31

    Candidates have traditionally courted the Alaska Native vote at the Alaska Federation of Natives convention. But this election-season ritual has reached a fever pitch this year. Some of that could be due to the formation of the Unity ticket; the merged campaigns of Bill Walker, who was running as an independent candidate for governor, and […]

  • News

    In Fairbanks, Steese Highway collision kills 1

    by KTVA CBS 11 News on Oct 24, 23:00

    One person is dead and others are injured following a head-on crash outside Fairbanks Friday night, Alaska State Troopers said. The collision on the Steese Highway near Hagelbarger Avenue was reported to troopers in Fairbanks just before 7:15 p.m., according to an AST dispatch. One person was seriously injured and later succumbed to their injuries, […]

  • News

    South Anchorage crash injures 1, temporarily closes highway

    by KTVA CBS 11 News on Oct 24, 22:15

    Both lanes of the Seward Highway were closed for more than two hours Friday evening following a two-vehicle collision that left one person hospitalized. According to the Anchorage Police Department, the crash happened just after 5:30 p.m. near the highway’s intersection with O’Malley Road. A vehicle heading north crossed the median and hit another vehicle […]

  • Weather

    Evening News weather, Oct. 24

    by KTVA Weather on Oct 24, 19:58