• 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

    Italy grieves with emotional mass funeral for earthquake victims

    by Associated Press on Aug 28, 12:44

    Mourners in Italy prayed, hugged, wept and even applauded as coffins carrying victims of the country’s devastating earthquakepassed by at a state funeral Saturday, grieving as one nation after three desperate days of trying to save as many people as possible. In the central town of Ascoli Piceno, they gathered to bid farewell to 35 of the […]

  • Crime

    Convict missing from halfway house since Friday, police say

    by KTVA CBS 11 News on Aug 28, 12:22

    A man convicted on a drug charge has been missing from a halfway house since Friday, according to the Anchorage Police Department. Online court records show 44-year-old Arnold Romero was convicted in 2014 of manufacturing and delivering controlled substances and was serving at least part of his sentence at the Glenwood Center on D Street. […]

  • Crime

    APD: 2 homicide victims found in Valley of the Moon Park

    by KTVA CBS 11 News on Aug 28, 10:50

    The Anchorage Police Department is investigating two homicides that were discovered early Sunday morning in Valley of the Moon Park. Someone called police just before 2 a.m. to report they had found a body on the bike path in the park, according to a statement from APD spokeswoman Renee Oistad. When police arrived, they began […]

  • News

    10,000th Syrian reaches US this week in resettlement program

    by Associated Press on Aug 28, 10:31

    The U.S. ambassador to Jordan says Washington will reach its target Monday of taking in 10,000 Syrian war refugees in a yearlong resettlement program. The program emerged as an issue in the U.S. presidential campaign, with Republican nominee Donald Trump alleging in the past that displaced Syrians constitute a potential security threat. Ambassador Alice Wells […]

  • Sports

    Saturday game results for week 3 of Alaska high school football

    by Dave Goldman on Aug 27, 23:03

    Wild scene at Eagle River-Wolves win their first topping Barrow 22-20. 25 yard FG by Andrew Hamilton the difference. pic.twitter.com/ORixoUm36s — KTVA 11 Sports (@KTVASports) August 28, 2016   Eagle River 22  Barrow 20 Andrew Hamilton’s 25-yard field goal with under three minutes remaining gave the Eagle High School Wolves their first win of the […]

  • News

    Crews slow Matanuska River erosion

    by Eric Ruble on Aug 27, 22:56

    Construction crews are making progress on fighting erosion along the Matanuska River. Matanuska-Susitna Borough Emergency Services Director Bill Gamble called the situation “critical” Friday. On Saturday, however, the Alaska Department of Transportation and Public Facilities and its contractors were heaping massive loads of rock onto the edge of the river. They were also digging a […]

  • News

    Anchorage pilot dies in Oregon air show crash

    by KTVA CBS 11 News on Aug 27, 22:16

    Marcus Paine, a pilot based out of Anchorage, died in a plane crash at an airshow in Madras, Oregon on Saturday. The Airshow of the Cascades website stated Marcus Paine died during his Saturday afternoon performance. “The Paine family and the airshow community appreciate your thoughts and prayers during this difficult time,” an air show […]

  • Lifestyle

    Bethel physician Dr. Jill Seaman on splitting her time between Alaska and South Sudan

    by Anna Rose MacArthur/KYUK on Aug 27, 18:26

    This story originated from KYUK Public Media and was republished with permission. A Bethel physician is getting ready to return to South Sudan and the medical organization she’s helped run there since the 1980s. Dr. Jill Seaman spends about four months a year in Bethel working at the Yukon Kuskokwim Health Corporation. Then she travels to Old Fangak, […]