• 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

    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

    Steese Highway collision kills 1

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

    One person is dead and another 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, troopers […]

  • 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

     

  • News

    Dam expansion increases Sitka’s power production

    by Heather Hintze on Oct 24, 19:44

    The Blue Lake Project in Sitka is set to dramatically increase the production of hydroelectricity for the city. Five miles out of town, up a one-lane dirt road, tucked into the mountains, construction crews work on the expansion in the windy canyon. The project is so massive it takes Alaska’s largest, 600-ton crane to make […]

  • News

    Anchorage mom loses boxing match, still wins big

    by Lauren Maxwell on Oct 24, 19:18

    Maria Edwards had never boxed before she got in the ring Thursday night at the Egan Center. But she had a good reason for taking part in Anchorage’s Thursday Night Fights: She was trying to earn enough cash to afford gymnastic lessons for her 3-year-old son. Edwards had her eye on the prize money, $50 […]

  • News

    Complaints lead to towing ordinance update

    by Bonney Bowman on Oct 24, 18:46

    Anchorage residents who are angry over inconsistent and often exorbitant towing fees may soon see some relief. The Anchorage Assembly discussed a proposed amendment to the municipal towing ordinance Friday. The amendment would cap the price of non-consensual tows, such as when cars are towed from private lots, at $225. It also prevents towing companies from […]

  • News

    Assembly debates software program audit

    by Bonney Bowman on Oct 24, 18:06

    Anchorage Assembly members met Friday to discuss how to best move forward with the municipality’s troubled software overhaul. Members debated conducting an independent audit of the SAP program, which is designed to automate many aspects of government, including payroll. But the program is three years overdue and more than $20 million over budget. Assembly members […]