• 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

  • Lifestyle

    A look back at the history of Mount Marathon

    by KTVA CBS 11 News on Jun 29, 23:18

    As she prepares to take on one of Alaska’s most popular foot races, KTVA 11′s Emily Carlson takes a look at the colorful history of the Fourth of July Mount Marathon race in Seward. This year is the 100th anniversary of the running of Mount Marathon. The main event features a grueling 3,022-foot race to the […]

  • Crime

    Anchorage man sentenced in case of teen heroin overdose

    by KTVA CBS 11 News on Jun 29, 22:27

    A man who admitted to injecting heroin into a 14-year-old who later died has been sentenced on a single charge related to her death. Sean Michael Warner, 29, was sentenced to 18 years in prison by U.S. District Court Judge Sharon L. Gleason for the charge of distributing heroin. Warner pleaded guilty to the charge on […]

  • On-Air

    New treatment for breast cancer

    by Ivanhoe Newswire on Jun 29, 20:10

    A breast cancer diagnosis is scary enough by itself, and for many patients, making endless trips back to the hospital for radiation therapy adds to the misery. But a new radiation treatment offers convenience and peace of mind to a lot of women. In her twenties, Beverly Treat was a dancer and physically fit. A […]

  • Politics

    Anchorage Mayor Dan Sullivan reflects on his legacy

    by Alexis Fernandez on Jun 29, 20:08

    A cleaner, safer and stronger city — that’s the legacy Anchorage Mayor Dan Sullivan says he hopes to leave behind as he prepares to hand over the keys to the next mayor this week. Sullivan updated the public on the state of the city at the Make it Monday forum. He told the crowd he’s most […]

  • Weather

    Evening News Weather, June 29

    by KTVA Weather on Jun 29, 19:58

    Kenai Peninsula/Prince William Sound Mostly cloudy with scattered showers and mountain areas could see a heavy shower or a thunderstorm or two.   Southeast Mostly cloudy with a chance of rain showers. Best chance for northern locations. Ketchikan will see a bit of sunshine and should be dry.   Interior/North Slope The interior will have […]

  • News

    ANSEP students test towers for earthquakes

    by Heather Hintze on Jun 29, 19:28

    High schoolers from around Alaska are shaking up their summer vacation with some hands-on math and science work. During the last week of their Acceleration Academy, Alaska Native Science and Engineering Program (ANSEP) students tested their PVC pipe buildings to see if they were seismically sound. “My favorite part is just building it and seeing […]

  • News

    Panic, frustration as Greece nears debt default

    by CBS News on Jun 29, 17:38

    The world financial markets took a major hit Monday from the debt crisis in Greece. The Dow lost 350 points. The S&P was down more than two percent, as was the NASDAQ. Greece can’t pay creditors and will likely go into default tomorrow. Greeks will vote this weekend on whether to accept strict austerity in exchange for a bailout […]

  • News

    Busy construction season at Anchorage schools this summer

    by Lauren Maxwell on Jun 29, 16:18

    The Anchorage School District is having one of its busiest summer construction seasons in almost a decade, according to Edie Knapp, construction manager for the district. Knapp said $170 million worth of projects are taking place this summer. They range from things like parking lot improvements to major renovations. At $28 million, Airport Heights Elementary […]