A proposal to reinstate a traditional pension system for new public employees in Alaska is on the House floor for its third and final reading on Monday, and is expected to pass, due to the Democrat-led majority.
House Bill 78 would shift future public employees from the current defined contribution retirement system, which is what most workers have, to a costly defined benefit pension plan. The unions and Democrats say this will help the state recruit and retain public workers.
Actuarial modeling and workforce data suggest the change could impose steep costs without delivering the intended results. In fact, although the unions say Alaska can’t retain teachers because of not having a defined pension plan, there are 11 other states that have more trouble retaining teachers than Alaska — with Arizona being the state that has the worst teacher retention.
HB 78 would cost Alaska an additional $2.1 billion over the next 30 years under the most optimistic investment assumptions, according to a recent financial analysis by the Reason Foundation.
But that’s the rosiest scenario. If investment returns mirror the state’s actual performance over the past 23 years, the additional cost could balloon to $11.4 billion.
The bill is advancing through the Democrat-controlled Legislature at the same time that lawmakers are cutting Alaskans’ Permanent Fund dividends, growing taxes, and scraping the bottom of the state’s savings account — the Constitutional Budget Reserve, which has just $2.8 billion remaining. The governor has set a hiring freeze and travel restrictions in place as revenues are not keeping pace with expenses. Gov. Mike Dunleavy has also asked legislators to join him in working on a fiscal plan that could provide stability.
No study has shown that younger workers want pensions; what they want is portability and quality of life assets. In addition, critics believe that the Legislature is actually debating an item that falls under the Alaska Constitution’s “Diminishment Clause,” which puts the state on the hook for pension payments no matter what happens.
A central issue in HB 78 is the assumed rate of return for the pension plan — 7.25%. That assumption would be among the highest in the country. Since 2001, Alaska’s pension funds have averaged only a 5.8% annual return. If the state adjusted its assumption to a more conservative 6.5%, in line with current actuarial standards, it would add $2 billion to current unfunded liabilities.
Alaska is already liable for $7.6 billion that must be paid out to those still in the pension plan that was closed in 2006.
Whether it would slow employee turnover is also a specious argument. Between 2012 and 2023, Alaska had the 11th-lowest turnover rate among state employees nationwide, averaging 13.6% annually, well below the national average of 18.7%.
Even during the pandemic, when turnover spiked across the US, Alaska remained relatively stable. That’s in part to the 37.5-hour work week and generous holiday and vacation benefits. In fact, the average state worker gets 12 holidays and at least 15 personal leave days per year, for a total of 27 days off, or five work weeks every year that state workers are paid for time off.
Comparisons with other states suggest that pension structure is not a key factor in retention. For example, Oklahoma moved to a DC plan in 2011 but has since reported some of the lowest turnover rates in its region, outperforming several DB-plan states.
Modeling from the Reason Foundation shows that HB 78 may not benefit most employees. Over 90% of new hires would receive lower retirement benefits under the proposed DB system due to its back-loaded nature. Most public workers in Alaska do not stay long enough to vest in the more generous later-years benefits typical of DB plans. In contrast, the current defined contribution plan provides better retirement value and portability for short- and mid-term employees.
One area where Alaska’s retirement system does show a gap is coverage under the Supplemental Annuity Plan, or SBS, a mandatory retirement savings program that serves as a substitute for Social Security.
While most public employees are enrolled in SBS, Alaska’s teachers are not—leaving them with no Social Security and no SBS benefit upon retirement. For a full-career teacher, this can mean a retirement income shortfall of up to $60,000 per year compared to peers with full SBS participation, the Reason Foundation said in its testimony to the Legislature last month.
When the teachers CHOOSE not to participate in SBS or Social Security, my fellow SOA employees and myself could not believe it. Instead the teachers put the mandatory contribution in their pockets.
Nobody talks about that, it is all poor me. It is insane to consider adding additional monetary requirements to the SOA budget. This in itself reflects an off election year radicalization, coupled with the recent bill eliminating the PFD as we know it. The RINO’s starting with Underwear need to go. They lied to get into office, let the truth be told about these Grifters.
The funniest bit is that in the era of your hero you are worried about return 🤣
Additionally, even Republicans support this bill
Also, your denigration of the concept of retirement suggests that you feel no one should retire but should drop dead no longer employed and destitute. Really?
Lastly, you seem to ignore the success of the Permanent Fund, at least up until your darling Gov began to interfere.
Only state workers and fools support this bill it will guarantee am income tax on all of us.
Public service is not a career path. It is an act of service and should not be for profit, power or lifestyle. After service has been given, the servant should go back to their private way of life with their private means of generating income.
To make public service so lucrative only encourages corruption and enforcement of a status quo and takes away from those they should be serving. Thus creating a culture of parasites of privilege.
No more pay raises or pensions. Get back to work like the rest of us and stop elevating yourselves as some sort of government gods.
If this passes we can kiss the PFD gone! Eventually, all of it, including the principal.
If the democrat / RINO coalitions in both houses of the legislature get their way, PFD is gone anyway. One solution would be a dissolution of the Permanent Fund, paying it out and returning subsurface mineral rights to individual Alaskans as shares. Cheers –
I want my mineral rights!
The oil pipeline to feed the machine is like watching cell division under a microscope. Big government paid entities ever expanding like amoebas.
The system needs a shot of iodine.
Disgusting.
Taxpayers being forced to support a pension plan for the parasitic class – government workers.
Yundt?
Parasitic? Do you consider State Troopers parasites? How about firefighters and other emergency personnel? No prisons? You can take care of inmates in your home.
Very, very, very small % of state workers.
The parasitic class can do 401K’s like the private sector.
You are SELFISH – YOU DONT CARE IF YOU BANKRUPT THE STATE.
Shameful..
There is lots of doom and gloom about the pension system. We need to consider this. We’ve got a revolving door with our law enforcement. We recruit, backround check, train, equip, then field train officers. Many fail. When an officer becomes truly valuable and seasoned (5-7 years) they’re gone. Wash rinse repeat. A pension could keep that officer for 20 years plus.
Nothing wrong with turnover in law enforcement.
It’s how law enforcement is being administered.
Troopers stacked up on the Glenn targeting and harassing law abiding working citizens for going 7 mph over the speed limit.
Yet drug addicts, alcoholics, sex assaulters, vagrants, loiterers, panhandlers, shoplifters, and trespassers commit their crimes in the wide open with ZERO accountability.
401K’s like the private sector.
I call the ones on the highway speed-tax collectors you
can drive as fast as you want if you are willing to pay the speed tax
If I’m forced to pay into a pension plan, I have to consider quitting. The last time a plan like this was set in stone, workers themselves ended up having to contribute 25-30% of their income toward it.
There’s no reason to do this.
I wonder if they would be an option. Again, maybe not so much doom and gloom if the majority of state employees stay on Pers. This would make sense if they plan on staying between 5-10 years.
Quit.
Trust me, the State will do just fine without you.
How do you think people in the private sector do it.
You don’t really care if you bankrupt the state.
I’m one of the retired state parasites and I contributed nowhere near 25-30 percent of my pay toward PERS and SBS.
Imagine that. The same socialists in the Legislature who want the expensive pension plan for the state (government) employees, DON’T want a legal, statutory PFD for the common citizens.
Alaska is a socialist state. Whaddya you expect?
Kathy Geissel’s husband stands to gain a LOT as a retiree.
Does that help you understand her vote?
It’s straight out of Nancy Pelosi’s playbook.
I voted to leave the house. It was a unanimous decision, and the best one I ever made. She has a personal angle, and usually a vendetta, on just about every issue she confronts, including his she treats her own constituents, or as she likes to refer to them……….
subjects.
Oh, that’s very good!
There is NO data to suggest that Teachers or State Workers are leaving because of the lack of a DB plan. In fact quite the opposite is true. Often the State that has a DB plan cannot attract workers because it take so long to get vested. There have been no exit surveys, done by any of the state departments at all. Read “The disappearing thin blue line” – he does not mention retirement in the book at all when he talks about why cops are leaving. It is simply not a factor other than in Kopps mind – and probably Drygas as well. It will bankrupt this state and actually drive workers from applying hear.
Sent it amazing that it is an insurmountable amount of 2 billion dollars to make things work. Yet, we have spent way over a hundred billion and sent it to another country to quite literally blow up infrastructure and kill people by the same elected officials happy to send it far away. We are just going to give away money and increase inflation, it’s a shame we couldn’t send those billions to people in america.
This kind of contrast exposes where Allegiance is really are. Apparently, the allegiance to American citizens is way down the list for some people.
Long game’s not about pensions.
.
What if the long game were all about turning Alaska into a deeply, permanently blue state and using the lure of defined-benefit pensions to make it happen?
.
Democrats already control Alaska’s judiciary. They control Alaska’s lobbyist-legislator team.
.
So, what prevents Democrats from grabbing the last piece of the state pie …taking over permanent control of the Executive Branch by featherbedding it with so many overpaid union employees that the governor can’t do his job, can’t make or enforce any kind of policy without unions’, i.e. Democrat approval?
.
Can’t happen here of course, especially if productive residents can’t be taxed enough to afford it, but hey, if your Party now controls every branch of government, and a great big gasline’s right around the corner, anything’s possible, no?
They can’t retain teachers because their buildings are making us sick. I and 2 other teachers had to retire 2 years ago due to illness. When one of us asked Stan Love why most teachers say they are retiring he said 90% due to illness. The lies and deception is deep and in the mean Time they Are going to bankrupt the state.
What?
You think education infrastructure is better in the Lower 48 on average.
Wake up.
Illness?
Let me guess – you took the Covid shot AND boosters and now your immune system is compromised.
Turbo cancer, much?
You can’t make these comments up!
It is. Significantly.
Idiots on parade. I wonder, what happens to the average IQ of folks in Juneau when these 60 clowns and their staff arrive for the legislative session every year. MA: what can you tell us?
I suspect many of us make more trips to the liquor store when your “representatives” arrive in Juneau. But it’s almost impossible to drwon out the sorrow of another session. For those who want the capitol moved up north I say, be careful what you wish for 😂
We all get dumber by association. But our bars and weed shops do really good business.
Why Are they doing this. It doesn’t make any sense. ????? Theirs no Logic in this anyone with a average head on their shoulder can see this
I think it’s called PANDERING. If you bribe the biggest voting blocks you can keep control and skim as much as you want. The POLITICAL EMPLOYEES in the Alaska Legislature are firmly in control and have no intention of giving up until there is nothing left to loot and pillage.
The legislators are
voting to benefit themselves. Why is this not a
conflict of interest? Are they excluded? It will not help recruit new state
employees! PERS Defined contribution along with the additional SBS fully is portable.
Pensions for me, says the legislature and state workers, but not for thee (those who will end up paying for them). No one else in Alaska has pensions like those that will be doled out to already-entitled state employees. And it will bankrupt Alaska. Thanks, Giessel. You really turned out to be an evil person.
At this point, bankrupt the State, once the money is gone the parasitical Legislature will move on to greener pastures. With them goes all the freeloaders!
Any Alaskan state representative voting for HB 78 changing certain state public employee retirement plans to defined benefit plans in my opinion renders that person unfit for any public office.
Nationally, we are witnessing the meltdown of public pensions in most of the blue states, the catalyst for which are gold plated, defined benefit plans. Alaska is not far behind and, by perhaps the most important metric, namely unfunded liabilities per capita, we are the worst in the nation. The worst!
Do you really want Alaska to become the next IL, CA,or HI?
Defined benefit plans are especially vulnerable to political abuse because politicians have all sorts incentives and ways to understate the current costs of such plans as well as the magnitude of the longer term unfunded liabilities they have created. All you have to do is hire some compliant consultant to overestimate the expected future investment returns of the plan. That breach of fiduciary duty to the public at large is usually followed by a proposal to allow the plan’s trustees to take more risk in the investment portfolio, risk that is born by the public, not the plan’s beneficiaries. What could go wrong?
Politicians have the benefit of knowing that the plan will not blow up immediately and they will likely be out of office when it does. Public employees don’t care because they are the exclusive beneficiaries of the scheme. They have absolutely no skin in the game and view the Permanent Fund as their ultimate pension guarantor.
As Frederic Bastiat observed, “all debt must be repaid, if not by the borrower, then by the lender.” So, in the near future when some states like Alaska can no longer meet their statutory pension obligations, not to mention meeting the skyrocketing costs of Medicaid and similar entitlement promises in addition to the current costs of building roads, paying for schools and public safety and the like, who must take the hit? We know the answer, it’s the public and the taxpayers. Ask anyone living in Chicago today.
For years, politicians all across the country have deliberately understated the true cost of the generous pensions they gave to their numerous public employee supporters and hid the real cost from the scrutiny of taxpayers through fraudulent accounting.
The free lunch is over for politicians sticking us with the bill we are handed for buying the political support of public employees.
It’s an interesting experiment in seeing how long before they can literally bankrupt Alaska.
Income taxes and raising the PF corpus are inevitable.
When we can’t balance the budget, we shouldn’t be doing anything to significantly increase costs. Vote no.
Many states have gotten rid of anything close to a defined benefit plan for a reason, to costly in the long run. AK can’t afford it.
But wait, when will these socialists in the legislature pay off the $7 billion dollar obligation to PERS/TRS which was ended 19 years ago?
Where does that money come from?
Exactly.
The original DB plan (which ended as being too expensive) is still not covered by the legislature.
NOW they want you to do it again, hoping it’s different this time?
They have failed to think it through.
There is nothing quite as insufferable as an employee who is working only towards their retirement. They often have the date nailed down to the exact number of days remaining even if it is years. If someone as essential as a teacher has lost the love and drive for what they are doing they should not be staying in the profession for additional years and just “punching the clock” until they are able to get their retirement. A better way would be to reward the great performers for the results of their work and let them invest as they see fit.