• 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

    200 baby turtles rescued at Anchorage airport

    by Shannon Ballard on Dec 17, 18:24

    The U.S. Fish and Wildlife Service seized more than 200 live, baby turtles that were being smuggled to China for the food and pet trade in September. As the turtles made their way through Ted Stevens Anchorage International Airport in September, officials discovered them packed inside boots, according to the National Mississippi River Museum and Aquarium. As […]

  • News

    Sony cancels Christmas release of ‘The Interview’

    by CNN / AP on Dec 17, 15:59

    WASHINGTON – President Barack Obama says his administration is taking the cyberattack against Sony studios seriously. He says people should “go to the movies.” Sony said Wednesday it was canceling the Dec. 25 release of “The Interview” after many theaters said they would hold off on screening the film. Threats have been made against theaters […]

  • DayBreak

    On the couch with vlogger Cory Williams, Dec. 17

    by Daybreak Staff on Dec 17, 15:04

    Video blogger Cory Williams, better known as DudeLikeHELLA, returned to the original frozen lake that made the “coolest sound ever” when he skipped rocks on it. This time, however, he was welcomed by the scariest sounds ever, he says. “I start walking out and then all of a sudden these crazy noises, like the Loch […]

  • News

    Anchorage police seek help finding 13-year-old runaway

    by KTVA CBS 11 News on Dec 17, 15:03

    Anchorage police are seeking the public’s help finding a 13-year-old runaway. Kayleas Gray was last seen at her Chugach Way residence Tuesday night. She was reported missing Wednesday morning around 8 a.m., according to a statement from the Anchorage Police Department. Neither friends nor family have seen or heard from Kayleas since, police say. Kayleas is […]

  • News

    Pipeline coordinator’s office to close

    by Associated Press on Dec 17, 14:49

    The office of the federal coordinator for Alaska gas pipeline projects is shutting down. Federal coordinator Larry Persily says the office was not funded in the budget passed by Congress last week. The office was created in a 2004 law aimed at helping advance an Alaska gas pipeline project that would serve North American markets. […]

  • News

    Calendar of Heroes: Anchorage firefighters strip down for a good cause

    by Heather Hintze on Dec 17, 14:49

    Anchorage firefighters are stripping down for a good cause. The 2015 Calendar of Heroes features 12 of Anchorage’s finest dressed only in their turnout gear. The money raised will be split between two charities — the Alaska Fallen Firefighter Memorial and the American Cancer Society’s Relay for Life. “It’s a really great thing,” said Station 12 Capt. […]

  • News

    Togiak health clinic remains closed following recent burglary

    by Dave Bendinger / KDLG on Dec 17, 13:44

    The Togiak Health Clinic was vandalized during an apparent burglary late Monday night or early Tuesday morning, and two young men have been identified as the suspects. The only health facility for the village of 900 residents remains closed Wednesday on account of the damages to electrical and communication systems. Brett K. Pauk, 18, was […]

  • DayBreak

    Mark Begich says providing veterans care is senatorial legacy

    by Daybreak Staff on Dec 17, 13:22

    As his current run in the U.S. Senate comes to a close, Sen. Mark Begich says he’s proud of his record in the past six years, helping veterans in particular. “We did something that everyone told me we couldn’t do,” Begich said. “That is, if you are a veteran living in the smallest or largest […]