• Forecast
  • News Tip
  • Categories
News Alert: DIRECTV Customers. Tell DIRECTV to bring back KTVA. Call 800-531-5000. - Read More
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

  • Alaskans weigh in on new deportation rules from Trump administration

    by Eric Ruble on Feb 21, 22:27

    New rules from the Department of Homeland Security regarding illegal immigration will allow for increased deportations. The rules, announced Tuesday by Secretary of Homeland Security John Kelly, outline a number of ways the government will speed up deportations. It requests the hiring of 10,000 new Immigrations and Customs Enforcement (ICE) personnel, publicizing crimes illegal immigrants […]

  • Lifestyle

    Lovers of Italian olive oil in for some sticker shock

    by Associated Press on Feb 21, 21:59

    From specialty shops in Rome to supermarkets around the world, lovers of Italian olive oil are in for some sticker shock this year, with prices due to jump by as much as 20 percent. The combination of bad weather and pests hit the harvest in Southern Europe, most of all in Italy, where production is […]

  • News

    Attorney: Some victims, witnesses of crimes may not feel safe coming forward under immigration changes

    by KTVA CBS 11 News on Feb 21, 21:33

    Robin Bronen is an Anchorage attorney and the executive director of the Alaska Institute for Justice, which works to protect human rights, refugees and immigrants, among other things. She sat down with Joe Vigil to discuss recently released guidelines from the Department of Homeland Security regarding immigration and deportation. Bronen said one concern with the new […]

  • Suspect arraigned on new charges related to deadly shooting

    by KTVA CBS 11 News on Feb 21, 21:06

    A man accused of killing an Anchorage 19-year-old appeared in court Tuesday on two new charges in the case. Christopher Birotte, 23, was arraigned for first-degree murder and first-degree attempted murder in connection to a Jan. 24 shooting that resulted in the death of Tiwan Johnson. Birotte was previously arraigned on other charges of second-degree […]

  • Weather

    KTVA Weather Lab: Scenic Park Elementary School

    by Melissa Frey on Feb 21, 20:33

    In this week’s KTVA Weather Lab, I visited Scenic Park Elementary School. The third-graders in Ms. Westfall’s class are learning that the sun is always shining, regardless of what the weather looks like outside their window. While I was there, they asked me the Weather Lab Question of the Week: How do clouds get their shapes? Every Tuesday, […]

  • Sports

    Aces hit the road, and the timing may be right

    by Dave Goldman on Feb 21, 20:31

    It has not gone well of late for the Alaska Aces. Uncertainty over their future, combined with a slide on the ice has the team reeling. Perhaps a road trip will do them some good—a long one.  Tuesday was their final skate at Sullivan Arena for a while. On Wednesday, they’ll depart for the East Coast on a 10-game, three-week trek. “We go […]

  • News

    DHS issues memos meant to crack down on illegal immigration

    by Rebecca Shabad / CBS News on Feb 21, 20:15

    The Department of Homeland Security issued two memos Tuesday morning that could expand the number of immigrants detained or deported as part the administration’s crackdown on undocumented immigrants in the U.S. The memos are intended to implement President Trump’s immigration actions from last month and enforce existing immigration law. CBS News’ Jeff Pegues previewed some […]

  • Weather

    Alaska Weather Forecast – Feb. 21, 2017

    by KTVA Weather on Feb 21, 20:01

    Winter weather advisories are in place for parts of the state, including Bristol Bay, according to meteorologist Carlos Faura. He explains what the rest of the state can expect in the coming days, including whether there will be more snow, and how much. Follow KTVA 11’s Weather Team on Facebook and Twitter. Got a weather-related […]