• 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

    Man missing after hike on Far Mountain

    by KTVA CBS 11 News on Aug 29, 13:13

    A 19-year-old employee of Chena Hot Springs, a resort near Fairbanks, is missing. Anatoliy Balko left the resort at 9:30 a.m. to hike Far Mountain — a 30-mile trek — according to a dispatch from Alaska State Troopers. Balko was expected to be back at work by 9 a.m. Sunday, but never returned, troopers said. […]

  • News

    Young updating filings to reflect farm stake, lease income

    by Associated Press on Aug 29, 12:34

    JUNEAU, Alaska (AP) – A spokesman for U.S. Rep. Don Young said the Alaska Republican is updating his financial disclosures to show ownership in a family farm dating to the 1990s and income from oil and gas leases. Spokesman Matt Shuckerow says the failure to include the farm prior to his 2015 report was an […]

  • Sports

    East High School football still ranked number 1 in Alaska

    by KTVA Sports on Aug 29, 12:32

    Finally, some staying power. For a second straight week, East High School is the number one ranked large school football team in Alaska, according the Alaska Sports Broadcast Network (ASBN) poll. The T-Birds topped Dimond High School and improved to 3-0 in the 1-2 match — winning 40-20. West High School is back to number […]

  • Lifestyle

    Willy Wonka star, Gene Wilder, dies at age 83

    by Associated Press on Aug 29, 12:00

    Gene Wilder, the star of such comedy classics as “Young Frankenstein” and “Blazing Saddles,” has died. He was 83. Wilder’s nephew said Monday that the actor and writer died late Sunday in Stamford, Connecticut from complications from Alzheimer’s disease. The frizzy-haired actor was a master at playing panicked characters caught up in schemes that only […]

  • Crime

    UPDATE: Police identify 1 of 2 victims in Valley of the Moon Park murders

    by KTVA CBS 11 News on Aug 29, 11:46

    Last updated at 11:40 a.m. on Monday, Aug. 29.  The Anchorage Police Department has identified one of the victims as 25-year-old Bryant C. Dehusson of Anchorage. Police said they’re holding the name of the second victim until next of kin is notified. Original story  The Anchorage Police Department is investigating two homicides that were discovered early […]

  • Weather

    It’s never been so hot, so late in Anchorage — until Sunday

    by Rachael Penton on Aug 29, 10:58

    The weather across Southcentral Alaska didn’t disappoint for the final weekend of August, with warm and sunny conditions throughout the region. Anchorage recorded a high temperature of 77 degrees on Sunday, Aug. 28 — something that’s never been done so late in the season. Previously, the latest a temperature of 77 degrees was recorded in Anchorage […]

  • Sports

    No age rule change keeps UAA hockey players on the ice

    by Dave Leval on Aug 29, 10:38

    University of Alaska Anchorage (UAA) hockey goalie Olivier Mantha could not wait for training camp. He took to the Wells Fargo Sports Complex ice for voluntarily workouts. “It’s really one of the best times of the year — being back, no school, so we can just practice, get better, work out,” said the junior goalie, […]

  • DayBreak

    Story Time w/ Aunt Phil: 8 decades of the Alaska State Fair

    by Daybreak Staff on Aug 29, 10:33

    The Alaska State Fair is celebrating a milestone this year; 80 years of food and fun. In this installment of Story Time with Aunt Phil, Daybreak explores the reason why the fair started in the first place. The story starts in 1935 when the U.S. Government transplanted 203 families from Minnestoa, Michigan, Wisconsin and Oklahoma […]