AK is 47/50 in pension funding obligation
The state says it’s handling the multi-billion dollar pension debt responsibly.
A recent report from the non-partisan group "Truth In Accounting" found that Alaska has $18.5 billion in bills and that $10.1 billion is unfunded pension benefits and retiree health care benefits.
That unfunded liability is the difference between the anticipated cost of paying retiree pension and medical benefits for decades to come and the amount the state thinks it will have in its funds.
Sam Trivette started working for the state before he graduated college. In 1965, he was hired as one of Alaska's first corrections officers and stayed in the department for the next 32 years.
“Since the system was really quite new at that point and time I got in on the ground floor.”
Trivette is a tier 1 employee, one of the state’s oldest beneficiaries with some of the best benefits with PERS, or Public Employees Retirement System. He’s been retired for 19 years now, he says, thanks to four things: social security, savings, and the pension and healthcare the state now pays for.
“It's critical. It's absolutely crucial.”
Crucial, but also very expensive. Between pension and retiree healthcare, "Truth in Accounting" says about $10 billion in Alaska is unfunded.
Budget director Pat Pitney says one of the biggest increases in the budget this year will go towards teacher's and public employee’s retirement. Pitney says the legislature has done a good job over the past few years to get that debt under control.
In 2015 they injected $3 billion towards the problem.
“There is true attention to this; it's very methodical and it's very consistent. This is a commitment and liability of the state we must pay; it's one of the first bills out the door, then you get to decide on troopers, then you get to decide on corrections.”
Pitney says the problem has a 50-year solution, and while it's not as funded as she would like it to be, she believes the state has things under control.
“This is a long-term time horizon and when you look at it in that horizon it's not that significant.”
Economist Jonathan King also believes the state is being responsible with its debt and doing the best it can right now. In 2010, the state settled a lawsuit with its former actuary, Mercer, about mismanagement of funds.
The state claims their bad decisions cost PERS and TRS, the Teacher’s Retirement System, billions. Since then, the state has funded the systems more than the recommended amount.
“Alaska been aware of its situation for over a decade now and has been trying to manage that situation and really being much more proactive than some of the other states are.”
Meanwhile, Trivette feels lucky to have such generous benefits. Since he retired 19 years ago, his check from the state has gone up 28 percent. He's confident the state will continue to pay his and other state employees benefits. The only thing he's worried about are people like his son, who don't have the same state benefits.
“We've spent time together talking about how much money they're going to have to have to retire and it's in the millions of dollars to replace what my wife and I have.”
In the early 2000s, the state of Alaska got rid of pensions and switched to a 401k system because of the high cost.
Alaska is certainly better off than other states when it comes to pension debt. In Illinois, they are $190 billion unfunded, and in New Jersey, that number is $118 billion.
The Wall Street Journal recently compared all 50 states and found that Alaska is one of the worst when it comes to funding that pension obligation. With 52.2% funded, Alaska ranks 47 out of 50 states.
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