Corinne Smith, Alaska Beacon
The Alaska House of Representatives voted to approve a revised bill to reinstate a pension system for all Alaska public sector employees, following passage by the Senate on Tuesday. The bill now heads to Gov. Mike Dunleavy’s desk for consideration.
With just 21 days to go in the second year of the 34th Legislature, the governor has 15 days, excluding Sundays, to approve or veto the bill, or allow it to become law without his signature.
A spokesperson with Dunleavy’s office declined to comment on the governor’s position on lawmakers’ pension plan on Wednesday.
If enacted, the bill would revive the state’s defined benefit retirement system that was eliminated in 2006, a top priority of both the multipartisan Senate Majority and House Majority caucuses.
The proposed defined benefit system would be open to all state employees, including teachers, public safety workers and public employees of cities and boroughs statewide. Those municipal employers have six months to decide whether to participate in the program or opt out beginning in January, and the new program would be launched in July 2027.
Within the new plan, 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.
The House narrowly passed the bill along caucus lines by a vote of 21 to 19 on Wednesday. The Senate passed the bill with significant revisions the day before, by a vote of 12 to 8.
Sen. Cathy Giessel, R-Anchorage, a longtime proponent of reviving the plan, said it took two decades of work in the Legislature and praised the House vote at a news conference on Wednesday.
“We are pleased that it was successful. And it was designed to be a modest, and yet secure, pension for retirement. And it had some amendments made on the floor that kind of made it a little bit more moderated. Choice was put in for employers, which is a big deal,” she said.
But she pointed out that the governor has yet to weigh in: “We still have one more stop, though. We have the big red pen potentially. So we’ll see what happens.”
House Majority Leader Rep. Chuck Kopp, R-Anchorage, carried House Bill 78, and told the Anchorage Daily News that he’s discussed the proposed plan with Dunleavy and members of his staff and is “encouraged” by those conversations.
Kopp, speaking on the House floor Wednesday, said the new plan is entirely separate from the old plan, and has been revised with safeguards to prevent future unfunded liabilities.
“Do we want to continue down this path, with high turnover, constant vacancies and a growing strain on public services?” he added. “Or do we want to move forward with the plan that’s been vetted, improved and supported by both chambers, a plan that’s involved a lot of collaboration and compromise, and a plan that reflects Alaska’s long term interests.”
State lawmakers voted to axe the state’s defined benefit contribution plan in 2006, after the system accrued a multi-billion dollar shortfall that was misreported by a state actuary. Alaska sued the actuary, Mercer, for $1.8 billion in damages for miscalculating liabilities and settled in 2010 for $500 million. But, opponents of the bill noted, the state still owes billions of dollars on the old system and is on track to pay it off in 2039.
Proponents of the bill say the new pension system is structured differently to avoid repeating the same mistakes — it includes mechanisms to adjust contributions up and down, safeguards in the form of three actuaries checking each other’s work and no healthcare insurance benefits — to prevent the pension system from going underfunded.
Health insurance benefits, a major driver of ballooning costs of the old pension system, isn’t included in the new proposal. Under the new plan, employers would pay into a health reimbursement fund of up to 3% of teachers salaries and 4% of public sector workers’ salaries to supplement Medicare for those over age 65.
On Wednesday, members of the all-Republican House minority put up a potential technical hurdle by voting against the effective date clause of the bill, which needed a two-thirds majority vote to pass. That sets up a potential conflict between the effective date written in the bill and the Alaska Constitution, which says that the bill would be enacted within 90 days after the governor’s signature without a two-thirds majority vote to do otherwise.
