Tier 1: What if COVID ended up saving the State millions? - Must Read Alaska
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Friday, March 5, 2021
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Tier 1: What if COVID ended up saving the State millions?

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File this under idle speculation: COVID could end up saving the State of Alaska millions of dollars. That’s because COVID-19 kills off the elderly more aggressively than other groups.

NPR reports that due to COVID-19 deaths last year, life expectancy at birth for Americans will shorten by 1.13 years to 77.48 years — the largest single-year decline in life expectancy in at least 40 years.

This phenomenon could possibly save the State of Alaska money. Here’s why: If the Tier 1 PRS and TRS retirement beneficiaries die off from COVID-19, the current $7-12 billion in State liability could be reduced substantially over subsequent years.

Of course, it might be just as effective to issue all the Tier 1 retirees, now in their 60s-90s, their very own Ducati Monster muscle motorcycles and wish them the best, but that’s not likely to happen. Dying of COVID? That could be more likely, especially if the world is now in the new-normal of a mutating virus that has to be vaccinated against every year.

State workers — whether chancellors or legislators or deputy commissioners — who worked under the old defined benefits system still reap huge retirement benefits, especially if they worked 20 39 years either as a State worker or a teacher in one of the school districts. They get 90 percent of their high-three salaries for the rest of their lives, and then their immediate beneficiaries get a lesser amount after the retired workers die. It’s no exaggeration to say some are making $12,000 a month as Tier 1 retirees.

The State has been paying the liability on an as-you-go basis for some time — barely keeping up.

Read a technical analysis of the retirement liability at this link.

The real unfunded liability could be over $12 billion, of which the state would pay about $20 billion, according to MRAK sources. The unfunded liability applies entirely to the defined benefit tiers, and mainly Tier 1, which closed back in 2006 for new entrants. A few grandfathered-in workers returned and were able to log in some final years, if they were working again for the State by the beginning of Fiscal Year 2010, but there are not many of those.

The state owes the bulk of the PERS liability not only because it’s the largest employer, but it picks up so much of municipal government employee TRS costs. 

How may Tier 1 retirees are there? Tens of thousands, likely. By the time they retired, they were no longer working at a Clerk 1 wage, either.

Read the Tier benefits at this State chart.

The unfunded liability is concentrated in Tier 1, which initially closed in the early 1980s. Total annual defined benefit wages are now about $800 million.

Of course, there’s likely no Alaska Retirement Management Board analysis on this, because it’s politically too charged to even verbalize. Everyone knows that the unfunded liability is officially understated, but the number is radioactive. 

And what public official would want to talk about a substantial windfall from the COVID-19 coronavirus killing elderly Alaska constituents?

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • Not sure where you are coming from wanting the elderly to die. Disappointed in you.
    You could say the same thing about Federal Retirees. Especially those that double dipped with a Military and Civil Service Retirements.
    Should the Retired Federal Civil Servants be given a Go Fast Snow Machine also to hurt themselves with?
    When I started with the SOA I took a job that paid $7.75 an hour, down from the $16.25 an hour job I had in the private sector. I was tired of working on the Slope and wanted a in town job.
    Took me ten years to work my way up to $16.25. When I started with the SOA I just wanted steady employment in town.
    As far as the unfunded liability it is interesting that do not mention the elected officials since 1980 who have spent money wildly, but not in fully funding the promise made to former employees.
    Further the way the SOA hands out free everything now a days. I rest easy knowing I EARNED my monthly SOA check. That is a Hell of lot more than you or others that get their free SOA monies for being Air Breathers in Alaska.

      • Ooh, Suzanne, you’re gonna get mail on this.

        • Only the elderly who are on the government payroll for their entire career. BIG difference. And herein lies the real problem. Too much government.

      • You are a disgusting piece of shit

        • How so? It is a sadly realistic dark humor piece.

    • Mother nature is going to take care of this for us one way or another.
      BTW, I’m feeling footsteps, but I won’t help the state any because I’m not on their retirement system. Maybe I’ll get a little bonus time, but I probably should give up downhill skiing.

    • You make a good point, but that also makes Suzanne’s point. When I arrived in Alaska almost 50 years ago I was paid 3 times what a state person doing the same job did. As a matter of fact the first time I was told what a state job paid I mistakenly thought I was being told the weekly wage when in fact it was the monthly wage. But that has changed. Now, no miner makes as much as the top paid state troopers, even without considering the benefits (13 paid holidays, time & a half after 37.5 hours, etc.). School supers are paid more than the manager at a logging camp or fish processing camp. And at the lower end, clerks routinely leave the private sector as soon as they can to work for state or municipal government. The relationship between public sector and private sector remuneration has inverted since I first arrived in Alaska, and that is all the more true if benefits are considered in the mix. We all know this; it’s not a revelation. But it has implications for the PERS and TRS unfunded liability, and it also has implications when anyone is talking about considering a state income tax.

    • Joe Hartley, I can’t believe you really think Suzanne wants people to die. Why would you twist things to say she is indicating that? Go back and read it…word for word…very slowly.

  • I’m curious how you calculated 90% of high three years. If you look at the SOA PERS chart, tier one received 2% per year for the first decade of service, 2.25 percent per year decade two, and 2.5 percent per year for decade three. If you worked THIRTY years as a tier one employee, your retirement percentage totaled 67.5 percent of the average of your high three. If your high three was at $100K per year, then your PERS retirement would be at $67,500, or $5,625 per month. If you stayed in-state after retirement, you’d receive a 10 percent COLA of your base benefit.

    • The rate of inflation and the average hourly wage are sharply divorced, and have been the last 40 years.

      It doesn’t sound like you made school district superintendent money, nor senior legal council money either. The issue is the high wage folks who made 6 figure salaries for their last 3 years of employment and then enjoy 90% of that income forever (some make more than $12,000 a month in retirement, as the article says). Then selected descendents earn the same amount without ever working for the state a day in their lives.

      Do you think these folks have created a world class education system or a legal system that is the envy of the world? Our claims to fame are that we aren’t as bad as Alabama in terms of education outcome, and a good old boy’s club gets to decide who selects the future state Supreme Court justices. Anchorage is a socialist disaster and everyone dislikes UAA. On paper, sounds like these high dollar pensioners need to start writing us some checks.

      We are running out of free money to pay everyone off with. We are seriously looking at a prospect in the next couple of years where the people with jobs will pay income tax to continue paying people without jobs a PFD.

      Will you be upset when your pension is taxed to pay for the Alaskan Cyber Monday?

    • But the public retirement systems have anomalies that work to the advantage of beneficiaries. Elected officials are beneficiaries by the way. I have known countless municipal educators who went to Barrow for their “high 3.” A vested PERS or TRS beneficiary in Tier 1 can become vested in the other (PERS to TRS, for example) after two years. People can and do buy years in PERS and TRS for federal service. Rural municipal boards, like REAA school boards, count board membership toward PERS and TRS defined benefit years. And then there is the University opt-out that allows the unfunded liability make-up payments by the state to go to the University officials. And of course there were the early retirement incentive programs that legislators adopted a few times when the corn was tall. If you were a long-time defined benefit enrollee and your high 3 were as something with spectacular pay like a University Chancellor the $12,000 per month MustReadAlaska example would be a retirement check pay cut.

  • I’m 75, and I appreciate the gallows humor. Ahahahahahahaha!

    • Another that gets it! 🙂
      So, I could wonder if how the VA is handling is that to help in reducing the VA costs to treat vets?
      Could there be a hope by CDC in their actions to ensure that the amount of military retirement, disability payments for vets and of course Social Security, Medicare and Medicaid?
      BTW the humorless socialist whose minds (well if they have one) blows up. I’m a senior, getting SSN and Medicare and a disabled Retired USAF vet.

    • Me too! I think I remember an Alaska legislator proposing some sort of euthanasia or death with dignity legislation a couple of sessions ago. I don’t think it got any traction then, but who knows where it would go now in this sick world. I read today where it’s legal to compost human bodies for fertilizer in Washington State. Be careful where your produce comes from. Snort! I saw the Soylent Green movie back in 1972, as I recall, and I dismissed it as a morbid fantasy. Not so much now.

      • As I dug into more details on human composting, I should say the products of the process are not currently used for commercial purposes, as I understand. However, the way the world is evolving, I wouldn’t be surprised if that is the wave of the future.

  • Where do you get the 90% figure. I worked for the State for 36 years, if I wanted I could have retired at 80% of my salary, I chose survivor benefits so my wife will get part which reduced it to 72%. Please tell me where you come up with the 90%. I like your blog, you might try to got your facts straight.

    Benefit formula:
    • 2% for first 10 years,
    • 2.25% for the next 10 years, and
    • 2.5% per year thereafter. Benefit calculation is
    determined on the average of the high three
    consecutive years’ salary.
    • Police/Fire: 2% X 10; 2.5% over 10.

    • But if right before you retired you went to Thailand and picked up a 22 year-old wife even that haircut to 72% is an actuarial hit to the PERS or TRS system. Of course if your ex is still around then she, your new wife and you had to reach an accord before you retired so that the spouses agreed beforehand who got what, including the life-time health care. There is an accounting specialty in Alaska that works on nothing else!

      • If you don’t reach another settlement, the spouse gets half.

  • I’ve wondered if this is why Cuomo sent Covid+ patients into nursing homes.

    • Still gotta pay out beneficiaries. Somebody will get it.

  • I am new to your site, so I may not get where you are coming from in this article. When I started with the SOA in 1971, I was paid less than a thousand dollars a month, no overtime and on call seven days a week, No unions, no job security, I could go on but you get the picture. I have no idea where you came up with 20 years and out at 90 per cent of three highest years pay??? I put in 25 years and received 47.5 per cent, and very greatly appreciate what I have. Maybe you should do a little bit more research before quoting numbers that just make sound bites. This article allowed me to save the $100.00 I was going to send as support. And by the way I hope I am still getting a SOA retirement benefit when I am 100 years old.

    • I hope you do too! I find it very disturbing when money is more important than life.

  • I thought COVID-19 was a nothing burger? And no-one was actually dying from COVID-19?

    • Not sure where you got your info. Sure, it has a survival rate of 99.5%, but there is still that half-percentage of the population who will die of complications because they have other health issues and COVID pushes them over the edge.

    • A whole lot more people have died with CV-19 than from it. It has proven a miracle cure for pneumonia and influenza and it appears that total death toll from natural causes was less in 2020 than in 2019. The “pandemic” is largely a gaslighting operation.

  • How much could have been saved if Dunleavy hadn’t given the little dictator Ethan the ability to strangle small businesses

    • Little Ethan was in the picture sent to the television news reporter. I am told that ladies have all felt sorry for the erstwhile Anchorage First Lady ever since then.

  • Morbid story. Totally unnecessary.

    • cruel

    • Morbid, but the ideology of abortion made it inevitable. The “right” to kill inconvenient people will eventually become a duty to die for a sick society.

      • You’re right on with that! (Sadly.)

  • That’s wishful thinking from the peanut gallery if Covid really exists. Right now people are just getting the cold and flu passing it off as covid. You have more chance dying after being put on a ventilator from over concerned health care employees who are all in it for their two week pay.

  • The 12,000 per month figure isn’t that much of a stretch especially if you factor in the gold plated health care for life which is part of the tier one package and has has not been mentioned here.. The fellow above who cites his measly salary as a State Worker back in ’71, (less than a grand per month) might want to recall that in 1967, my father a Director earned only just North of 14 k per year. I too was a State employee in the early ’70’s for a stint, I earned a grand per month. Believe me that was some serious cabbage back then. What is the point of Suzanne’s story here? Perhaps that these legacy plans are not sustainable. BTW… when a tier one Momma comes on the market for marriage I have noticed that she attracts suitors faster than a hot pink Coho trolling spoon. Seems a lot of fella’s in my age group didn’t plan so well for their retirement. Just an observation.

  • The old saw that “reading comprehension is a gift” seems to apply to some posters.

  • Great tongue in cheek article!

  • Maybe you should file this under Really Weird journalism. I was beginning to think Susan might suggest putting covid virus in aerosol cans to use like bug spray. Very strange sense of humor.

  • If you really want to save the State money quit wishing the lower paid workers die and start holding the current administration responsible for paying the appointed officials above the salary schedule. If State workers are paid such high salaries, why can’t the current appointees be paid according to the salary schedule? I have been told that those private sector appointees won’t take the jobs at the correct salaries.

  • A couple of years after I retired, I represented the Correctional Officers in a failure to bargain case against the State in which they sought to bargain some of the conditions of retirement, notably the gap between retirement eligibility after twenty years but no health insurance until age 55 in Tiers II and III. I’d note that among State employees only law enforcement officers and the few teachers that State employs have 20 year retirement, all others have 30 years service or 55 years of age. I’m Tier I and back then I still smoked and had a close personal relationship with Chivas Regal scotch. In my opening statement I suggested that the best investment in retirement funding that the State could make would be to issue me a carton of Winston cigarettes and a fifth of Chivas every week.

    The “gold plated” health care only lasts until you turn 65 then Medicare becomes your primary and PERS Retiree only serves as a supplemental plus you can purchase State DVA insurance, and many Medicare benefits are more robust than State benefits. Mythology aside, both State active employee and PERS retiree plans are among the least expensive comprehensive large/public employer plans. And to put aside a couple of other talk radio myths, the State does not bargain either health insurance or retirement benefits with the unions. It doesn’t bargain any aspect of retirement and only bargains the contribution amount for health insurance for active employees. That isn’t to say the unions don’t have considerable influence, but they don’t have a legal right to compel bargaining.

    In the late Eighties and into the mid-Nineties, our general belief was that PERS was over-funded and we feared that our Legislature would do as some others had, notably Arkansas, and tap the PERS reserves for general spending. Somehow over about a decade PERS/TRS went from over-funded to not only under-funded but dramatically so. My best explanation is there was a confluence of events. First, the retirement system was poorly managed and entirely too politically managed. The school districts and REAAs gamed the system with buyouts to get rid of employees that were treated as PERS wages. Several polisubs were dramatically in arrears but nobody had the political will to do anything about it. On the State side there were still lots of Tier One employees and it was a common practice for employees to take positions in rural duty stations to jack up their “high three” with the high geographic differential for rural assignments. Later tiers don’t count geo dif or overtime as PERS earnings. The Division only had two auditors and from the outside they seemed more like State tourists than State auditors. Auditing is something the State doesn’t do at all or doesn’t do well throughout. Second, the State and polisub workforce expanded dramatically in the late Sixties and early Seventies and the bulk of that workforce in the 30 year system was reaching retirement age in the late Nineties and early 2000s. I stayed a couple years longer than I had to just to get more service credit since I’d been out of the PERS workforce for most of the Eighties. When I retired at 57 in 2006, there were very few of my age cohort left in State service. And, third, I think one or more of the actuarial studies in the Nineties was manipulated. It is a distant memory now for the minority of the population that was even here then, but the oil price crash of the mid-Eighties didn’t end, we just became better adapted to it and had a couple of economic bubbles that helped, notably the Exxon Valdez cleanup and the Gulf War. Money, general fund money, stayed very tight throughout the Nineties for PERS/TRS employers. The last thing the Knowles Administration wanted to do was to have to tell the SDs and REAAs, the polisubs, and State employees that their PERS/TRS contribution had to go up, and fortuitously Mercer found no additional contributions were necessary. There is a reason the State settled for what was nothing more than “go away” money rather than take it to trial. I would love to have seen that trial; the only thing I’d like more would be to see some people wearing orange jumpsuits.

    • Just another lawsuit ol’Tony Knowles messed up.

  • Wow, speculating/musing on the pro side of the effects of the virus. Interesting you would focus on the pro saving of public money side of death rather than the cons of immeasurable loss and enormous suffering on the grandest scale globally anyone alive today has ever experienced. Which side,, to put quality of health and life, collapse of the health care system designed to to care for all with
    medical needs, economic devastation of huge populations of humans being plunged into poverty? Which column to put the too large number of people fighting as enemies against the war to stop this virus? A sharp contrast is the many warriors fighting against the spread of this awful virus.Perhaps the anti maskers and those who refuse to support measures for the fight, will also decrease in number as they succumb to the virus when they may have been spared? Since you started this absurd speculating, I ask, which side, pro or con?

    • In my view what you have said would only be plausible if Red China is funding MustReadAlaska. MustRead is reporting the news here, not causing it.

  • so you stirred the pot to get readership up. This isn’t news-it’s just entertainment for people-if and when you come upon any story of substance you diminish any credibility you might have had. When we are in a crisis, in so many ways, you choose disrespect and attack many of the people that helped in the building of ALASKA-but you got the message for 15 seconds-shame on you. Your blog is just what it is-nonsense and hate.

    • And yet here you are. No one is forcing you to read it are they? there’s a lot worse things to read or look at on the TV. If you’re looking for answers then probably you need to do a little soul searching instead of trying to find them on the interweb. I lived in Alaska for a long time and I feel like I have Roots there but I no longer live there. I still care about what happens to Alaska. It is entertaining almost in a sick way to come on here and fight the liberal trolls that moved in from Portland and Seattle. They’re young and dumb it’s almost like playing with a cat keeping something just out of their reach. Then there are the valid stories that the States leaders actually read to get a pulse from the population or see which way the winds blowing. Murkowski is easily manipulated by doing this. Suzanne can run a story and then a bunch of conservatives will get on murkowski’s butt and then chill come out a couple of days later with some kind of a statement. So that’s kind of humorous by itself. Maybe don’t take things so personal or serious and just go with the flow, turn the Page or don’t press the send button.

    • Not true. She didn’t even mention the savings to taxpayers across the nation from the incarcerated people the Chinese flu has killed. On average every State of Alaska prisoner it kills saves the state a net present value of $3.5 million, and that doesn’t even count the court and public defender costs! So killing one prisoner this year adds $5 to your PFD this year, in NPV terms. The majority of Alaskans I know would say great. When government is such a big part of all our lives (not to mention how much of our lives it controls) then somewhere in the bowels of government there are people doing exactly this kind of arithmetic for 7.5 hours (State of Alaska workday) every day.

  • Similar to this post, one could argue abortion saves the state lots of social service money too, but that would be a sick and wrong suggestion, or immoral. Old people dying, now that we can discuss, even if in a cynical way, since it migh save the state money.

  • Always looking on the bright side, eh? Nevermind that the State and Tier-1 employees both agreed to a contract that the State then failed to plan for. Nevermind that the Tier-1 employees whose imminent demise you are so thrilled to predict faithfully upheld their end of the bargain.

    Suzanne, I’m typically a big fan of your writing and Must Read AK. I also tend to have a pretty dark sense of humor and tend to be more logical than emotional. Despite all of that, I still can’t understand what could possibly have made you think that writing this article was a good idea. I expect much better from you.

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