The Legislature has sent to the governor a bill to bring back a retirement plan for public employees.
Unless it is vetoed by the governor, the bill would reinstate a defined-benefit retirement system — based on years of service — for Alaska state employees, teachers and municipal employees statewide starting next year.
Members of the Alaska Senate voted 12-8 to approve the long-awaited pension bill on April 28, amid debate on the cost of the new public retirement benefits system and the financial responsibilities of state, municipal and school district employers.
The House voted 21-19 a day later to accept the Senate changes to the bill, which had passed the House last year before undergoing significant revisions in the Senate Finance Committee this month.
In a move to cut employer costs and confront a growing unfunded liability for future retirement benefits, the Legislature more than 20 years ago ended defined-benefit retirement for public employees hired after July 1, 2006. Employees in the plan before that date retained their benefits.
Employees hired after that date were enrolled in what’s known as a defined-contribution plan, where their retirement income is determined by how much they contribute to the account and its investment earnings.
“It strikes me as a historic day,” said Anchorage Sen. Cathy Giessel after the Senate vote on April 28. She has been working on the issue for several years.
The move comes as the state struggles to fill jobs across multiple departments, including state troopers and in prisons.
Supporters said the retirement benefit is crucial for hiring and retaining a skilled public-sector workforce in Alaska, while detractors say the uncertainty around the added cost to the state and municipalities is too great a risk.
House Majority Leader Rep. Chuck Kopp, of Anchorage, speaking on the House floor on April 29, said the new plan is entirely separate from the old plan and has been revised with safeguards to prevent future unfunded liabilities.
The move was applauded by the state’s largest public employees union, the Alaska State Employees Association, which represents roughly 8,500 public employees.
The governor has been critical of previous pension proposals and has not publicly indicated whether he will sign the bill into law, veto the measure or allow it to become law without his signature.
Dunleavy receives a state pension for his previous employment as an educator and schools superintendent.
If the bill becomes law, current state employees would be allowed to switch from their 401(k)-style retirement plan to the new system.
Retirement for teachers and public employees would be possible at age 60 or any age after 30 years of service. For public safety officers, including police and firefighters, it would be age 50 with 25 years of service, or age 55 with 20 years of service.
“Every other state offers a pension for at least some of the public servants, we do not,” Giessel said on the Senate floor. “And we are seeing the results. We ask our public employees to do difficult work, often in the hardest conditions. The question is whether we will give them a reason to build a career here.”
After several hours of debate, the Senate approved several amendments, including a change to allow cities and boroughs to choose whether to opt out of the new defined-benefit retirement plan, instead of opting in.
“If they don’t like our choice, they’re certainly allowed to make their own choice and opt out, but if they don’t take any action, they’re in,” said Anchorage Sen. Matt Claman, who sponsored the provision.
Cities and boroughs can choose whether to opt out of the retirement plan, if enacted, between January and June of 2027. The new system would begin July 1, 2027.
Under the revised bill, employees would contribute 8% of their pay to the pension plan. Employers would pay up to 22.5% for state and municipal employees and up to 12.5% for teachers.
Employers would also pay into a health reimbursement fund of up to 4% of workers’ salaries to supplement Medicare for those over age 65.
Sitka Sen. Bert Stedman, a co-chair of the Senate Finance Committee, opposed the bill, citing the risk that the state will repeat the mistakes of the early 2000s when the state-managed public employees and teachers retirement accounts were underfunded.
Giessel and other lawmakers cited the state’s ballooning costs paying state employee overtime to cover vacancies and essential public services, called “premium pay.”
“It is costing us over $200 million a year in premium pay,” she said. “Just to keep basic services running — that number has grown nearly 80% in the past five years. We have, in effect, turned Alaska into a training ground, a place where people come, gain experience and then leave.”
Supporters of the pension plan also pointed to the state’s struggle with high turnover rates, including up to 30% of teachers in urban and rural districts each year.
Opponents of the bill pointed to other factors contributing to high turnover like work environment, leadership and a need to raise salaries.
The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.
