By DAN FAGAN
In 2006, Republican Gov. Frank Murkowski signed a law ending the state’s generous pension based retirement plans for state employees.
The law instead shifted state workers to a 401(k)-type retirement mirroring plans offered to the vast majority of employees in the private sector. These are often referred to as defined contribution benefits.
The Murkowski-signed legislation passed with the help of Senate President Ben Stevens and House Speaker John Harris. At the time, conservatives described the legislation as a rare fiscally common sense moment for Alaska politicians.
The cost of pension-based retirements are not only more expensive, they are also considerably more risky to the state. If there were to be a downturn in the stock market or other investments, the state of Alaska would be on the hook to make up the difference for retired state employees. With 401(k) plans, the retiree takes more of the risk and benefit amounts are not guaranteed.
Even though the state shifted to a 401(k) retirement plan in 2006, Alaska is still $7 billion behind in funding the remaining pension obligations. This, despite contributing billions already to the pension fund and the market having done quite well since 2006.
If Frank Murkowski had not ended the pension plan that year, the state’s $7 billion debt would be considerably higher today.
The Reason Foundation, a libertarian think tank, estimates the state returning to a pension plan will grow that $7 billion debt by at least another $11 billion over the next 10 years. That number could be much higher if there is a downturn in the stock market or politicians don’t have the political will to fund the pension obligation account.
Republican Sen. Cathy Giessel and Rep. Chuck Kopp are pushing hard for Alaska to bring back pensions for state employees. They claim the generous, expensive and risky plan is necessary to help retain state employees.
But the data doesn’t back that up.
Mariana Trujillo, a policy analyst with the Reason Foundation says Alaska does not have a retention problem for state employees.
“Official turnover data does not show Alaska has ever encountered a unique retention crisis,” writes Trujillo. “Alaska’s public employee turnover is actually quite typical, lower than that of many states offering pensions today, which is surprising given Alaska’s reputation as a state with high employee turnover in the private sector.”
Alaska’s turnover rate for state employees is less than 18%. That’s lower than Utah at 28%, and Texas and Kansas at 23%. These three states all offer state employees pension retirement plans.
Alaska’s lower-than-average turnover rate for state employees is extraordinary considering the state’s overall turnover rate for all workers. Alaska has the highest overall workforce turnover rate in the nation, in part due to our cyclical private sector of fisheries, oil, and mining.
“In contrast to Alaska’s public employee turnover rate of 17.5% in 2022, Alaska’s total statewide workforce turnover, which includes both private and public sector employment, was 78%,” reports Trujillo.
Alaska leads the nation with a 60% higher turnover rate for private sector workers compared to state government employees.
Compare that to Kansas with only a 21% higher turnover rate for private sector workers compared to state employees.
“If public sector jobs in Alaska were highly unattractive, one would expect a smaller difference or even a higher public employee turnover rate relative to the general workforce and to other states,” writes Trujillo.
National data from exit interviews of state employees show retirement plans are not a top priority for job applicants. Why? Today’s workforce is more mobile and less likely to stick around long enough to become vested in a pension plan.
“It’s not pensions driving decisions, but rather salary, work-life balance, and workplace conditions that are the main factors influencing job decisions,” writes Trujillo.
It’s curious that public employee union bosses and their puppet legislators like Giessel and Kopp are pushing for the return of a highly risky and costly pension retirement plan for state employees. This is especially curious in light of Giessel claiming recently that the state’s financial troubles are so dire we need an income tax. She’s also worried if the state doesn’t get more money it could lead to people killing themselves.
“Alaska’s public employee turnover data does not indicate a crisis,” said Trujillo. “In fact, the state’s public sector remains one of the most stable employment sectors in Alaska, with turnover rates that are significantly lower than both statewide and national private-sector averages and lower than most other states offering pension plans across the country. In context, Alaska’s public employee turnover rate might be among the best.”
Even though bringing back pensions for state employees could end in economic disaster for Alaska, sources say there are currently enough votes in the Democrat controlled Legislature to pass the legislation.
Gov. Michael Dunleavy is expected to veto it, but public employee union bosses are a powerful bunch in Juneau and will pressure uncooperative legislators to join in on an override veto vote.
Dan Fagan hosts a morning drive radio talk show weekdays on KVNT found at 1020AM 92.5FM and 104.5FM. The broadcast is also streamed on 1020KVNT.com.
When some of the most wealthy people in Juneau are state pensioners, we have all the case studies we need to establish that defined-benefit retirement plans are unsustainable
There are many state services that should be privatized. DOT being one of them.
I so agree!
Pensions and benefits indemnified by taxes create false economies and increased prices. It is better if government employees participated in the freemarket for pensions and benefits, like the common people do.
If you want common sense to take over, force all municipalities to get even with the board by paying the State all past due debt that’s currently riding on the books, before any new version of Defined Benefits goes into effect…
Even Anchorage’s Assembly would flip out…
The phrase “public employee union bosses” is a misnomer. It really should read “public employee union thugs”. These are the people who go on boondoggles to Las Vegas on union member’s money and push around the weak legislators in Juneau.
Want to retain people? Stop making it difficult to live here.
This article should be MANDATORY reading for EVERY legislator in Juneau!
I don’t know about State employees in general, but when it comes to retaining teachers, the lack of defined benefits is a major reason why we have trouble retaining good teachers.
All to often a new teacher works in Alaska until they gain some experience and become proficient at their job, and then they move out of State seeking teaching positions with better benefits. It’s a well know problem.
Remember, it’s not the fancy buildings or expensive computers, or the quality of the art supplies which make schools work, it’s the teachers.
As for cutting costs… while the State government has grown several fold since 2006, has the number of teachers increased? No! Stop with the BS, guys. Educators aren’t the one’s breaking the bank. Make the responsible choice here.
I don’t know if it’s just me, but I’ve lost every ounce of faith I had in the republican party. The party gave the majority to the union democrats and they are about to screw every Alaskan and the GOP leadership is silent.
No.
The less state government we have the better.
We want fewer state workers, not more.
Anything that is not infrastructure or public safety driven needs to be done eliminated or severely cut back .
For whatever reason – the parasitical government class isn’t taking the Trump victory seriously.
We the People – are beyond fed up with the graft, corruption, fraud, misuse, and waste of taxpayer money.
A pension may retain state workers, but it will not cause productivity to increase. The opposite will be the case. I know a couple state employees who work their backsides off because they understand that they work for Alaskans. But those employees are few and far between. As long as they are protected by public unions, we will be beholden to mediocracy, not meritocracy.
Senator Giessel is promoting a pension fiscal nightmare that the State of California has wrestled with for years.
‘https://calmatters.org/politics/2024/04/calpers-pension-cost/
To summarize her political priorities – she wants to use a bankrupt state government as her North Star of governance.
This is how – look at this quote/citation to remind ourselves why the Alaska Permanent Fund was created.
“ Stewarding wealth for future generations
In March 1968, oil was discovered on state land in the far north of Alaska. In the years that followed, the vast initial windfall from exploration licenses was rapidly spent.”
‘https://earth4all.life/views/the-alaska-permanent-fund/#:~:text=The%20Alaska%20Permanent%20Fund%20was,to%20citizens%20as%20a%20dividend.
The Alaska Capital Fund was created to allocate Permanent Fund proceeds for the upkeep, maintenance of state-owned capital assets.
Senator Giessel wants to abolish the PFD Dividend to Alaska Citizens, and concurrently bring back a state employee pension plan that puts the State into further debt; therefore justifying her fiscal plan to reach and take the PFD from individuals and utilize the language in the AK PFD that vaguely justifies the States reason to fund the operating budget – covering debt..
Manufacturing debt by resurrecting a pension program is incremental governmental shape-shifting.
The State of California suffers because of their out of control pension plans – among a lot of poor governance decisions.
If a pension plan in California has added to bringing their government to their knees, how could any Alaska Statesman or woman justify using that state as a model?
And to put an exclamation point in it; California has a Gross Domestic Product (GDP) that surpasses most countries, as well as most U.S. states.
And it’s about bankrupt.
Cathy is a reminder of why the AK Permanent Fund was created in the first place.
The Alaska Permanent Fund has the authorization language they could exercise.
The State has vast data of underdeveloped resources throughout all regions of Alaska.
The AK Permanent Fund Board could calculate an annual fee to those regions that cost the State operating budget – yet choose not to use the tools to develop local economies and opportunities.
We cannot keep funding non-profit consortiums – for profit competitive advantages in federal contracting that benefit a few executives.
The game is rigged and perpetuates the few to coach the masses that a new day is on the horizon.
Well, I have been accused of being inpatient and if I am one of the few, so be it.
The most federal and state government dependent regions of Alaska need to finally be tested on the price of sovereignty and self-sufficiency.
I challenge the State and Federal Governments to put our sovereign Alaska Native Systems to the test.
Something has to change.
The Dot state website says we have 3393 employees, if you do average math at $65.000 per year in wages, insurance and retirement that works out to about $2.3 billion a year. Now add training and other expenses plus the facilities and we just passed $3 billion and now let’s add transportation of employees and the big one equipment and good grief. We are sitting at close to $3.5billion a year easily and we have not bought any pavement yet. The private sector builds all our roads and airports how about they bid to maintain them and we put 50 state employee engineers to oversee the projects and maintenance and to sign purchase orders to make sure the tax payers are getting what we are paying for. I guarantee this would save us north of $1.8 billion a year. Plus we the tax payers would have accountability. Something needs done soon. It’s 2025 our current system isn’t working. Time to change the game plan.
Or, I know this is comment is off the direct topic – Alaska Native Claims Settlement Act has been in place since December 18, 1971.
The regional corporations and a handful of village corporations have found success. But the redistribution of funds remains intact.
I think it is prudent change the language in ANCSA section 7(i) which currently reads:
“ANCSA 7(i)” refers to a provision within the Alaska Native Claims Settlement Act (ANCSA) that mandates that each of the 12 regional Alaska Native corporations must share 70% of their net revenue from subsurface resources (like oil and gas) and timber sales with all the other regional corporations, essentially distributing wealth generated from resource-rich regions across all the corporations based on their original shareholder numbers; this is often called “revenue sharing.”.
I would challenge that after 50+ years, the 7(I) and 7(j) language be changed as follows: 70% of net revenue from each of the 13 Regional corporations be redistributed directly to shareholders – regardless of what industry those revenues were derived.
The revenue sharing has helped solidify the western corporate model as intended, making rich corporations and executives- yet the people that ANCSA was intended to protect, empower and uplift still have been left behind.
Now is the time to redistribute that wealth directly to shareholders.
No matter how much agencies, ngos, corporations are funded, they cannot afford to invest systemically to affordable housing.
But if all these tools came together – used directly – by using village and regional corporation plots of land being transferred to shareholder creates collateral by title, coupled with direct liquid annual cold hard ANCSA cash, HUD 184 mortgage opportunities, SBA business loans, people can be uplifted.
It is not fiscally sound to build full-blown low income development properties in rural Alaska.
And it does not cost anybody any more money that is already being transacted- it simply redirects the financial tools of hope, empowerment and prosperity.
If I were lobbying the federal government- my proposal would have to pass the Congressional Budget Office (CBO) score.
This proposal nets a zero score.
It costs Congress nothing. It costs ANCSA corporations nothing.