• 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

    Authorities report 2 arrests in Portland’s Arctic drilling protest

    by Associated Press on Jul 31, 11:24

    The Multnomah County Sheriff’s Office says it made one arrest during an effort by protesters to block a Royal Dutch Shell icebreaker from leaving Portland for an Arctic drilling operation. Lt. Harry Smith says 19-year-old Christian Pence refused to leave the Willamette River after being told the waterway was closed Thursday afternoon, and then assaulted […]

  • Sports

    Anchorage dentist provides free exams at Special Olympics World Games

    by Megan Mazurek on Jul 31, 11:08

    An Anchorage dentist has peered into more than 300 mouths a day for the past week at the Special Olympics World Games. “I saw some patients yesterday where I almost wanted to start to cry because they were still smiling,” said Dr. Lara Mabry, a volunteer dentist for Healthy Athletes. “When I saw the condition […]

  • DayBreak

    Mic Check in the Morning: Marty Raney

    by Daybreak Staff on Jul 31, 10:44

    Marty Raney is a mountain climber and musician who you might recognize from the National Geographic show “Ultimate Survival Alaska.” His fame started thanks to Mount McKinley. “I do guide on Mount McKinley and that turned into films on Mount McKinley,” Raney said. “I think the first film I worked on was 1988. It’s still […]

  • Crime

    Police seek more information after woman killed in apparent hit-and-run

    by KTVA CBS 11 News on Jul 31, 10:28

    Anchorage police are asking the public for information after a pedestrian was killed in an apparent hit-and-run in Mountain View early Friday morning. Around 1:40 a.m., the Anchorage Police Department responded to the intersection of Mountain View Drive and North Park Street following reports of a female in the roadway. When police arrived at the […]

  • News

    New ruling on protective orders for Alaska Native tribes

    by Associated Press on Jul 31, 9:54

    Alaska Native tribes will no longer be forced to go the extra mile to have their domestic violence restraining orders enforced by the state. The Fairbanks Daily News-Miner reports (http://bit.ly/1VRuRMf) Alaska Attorney General Craig Richards issued a legal opinion stating that Alaska law was in violation of the federal Violence Against Women Act. The legal […]

  • Weather

    Daybreak weather, July 31

    by KTVA Weather on Jul 31, 9:23

    Anchorage Mostly sunny with highs in the lower 70s. Light winds. Kenai and Prince William Sound Partly cloudy with highs in the 60s and 70s. Isolated showers over mountain areas. Southeast Mostly cloudy with rain showers. Highs in the 50s and 60s. Interior Sunshine and clouds with isolated showers/t-storms. Highs in the 70s. North Slope […]

  • DayBreak

    Fun-loving felines: Daybreak’s Adopt-A-Pets

    by Daybreak Staff on Jul 31, 8:34

    Elmo: Outgoing, demonstrative and loving. This 2-year-old charmer is good with other cats, dogs and children. Tippy Toes: A fun-loving and playful young lady who enjoys taking treats from your hand. She’ll be sure to keep you entertained. Nico: A playful adventurer who likes to chat with you. Nico also loves affection and purrs with […]

  • News

    Mild winter lowers number of moose, car collisions

    by Associated Press on Jul 31, 7:07

    Wildlife officials say the mild winter this year kept road visibility decent enough to save some moose and driver’s lives. The Peninsula Clarion reports (http://bit.ly/1UbyScq) that the Alaska Moose Federation tracked 167 moose-car collisions in the Kenai Peninsula’s highways this year, compared to 206 in the previous year. Alaska Department of Fish and Game wildlife […]