Wall Street Journal singles out Sen. Cathy Giessel for rebuke over push to restore costly state pensions

27
1454

The Wall Street Journal‘s editorial board says that while other states are being crushed by unfunded pensions for public workers, smart states like Florida are de-risking by moving to defined-contribution plans. Alaska is going the other direction, however, in large part due to the efforts of Sen. Cathy Giessel.

“That makes it all the more strange that Alaska may risk its future by returning to defined-benefit pensions,” the board wrote in an editorial on Thursday, weighing in on Senate Bill 88, which would return the state to a pension system for state employees and teachers.

Instead of an individual retirement account, the idea is to return to the pension system, in which the state becomes obligated to pay retirees a fixed amount annually. The pension checks would be inflation-proofed, which means they’d continue to go up each year. Retirees with 30 years of service would be paid about 63% of their final three years of salary, for the rest of their lives.

The editorial board singled out Alaska state Sen. Giessel of Anchorage, saying, “Why go back to this dismal future? Supporters hope the lure of an old-style pension will attract more public workers, especially teachers who are in short supply in the state. Fixed pensions would ‘put efficiency back into state government’ by ‘reducing the constant churn of employees,’ says state Sen. Cathy Giessel.”

Giessel, who was once thought to be a conservative, has embraced most, if not all, of the Democrats’ platform, including the return to the pension plan, as desired by union officials who have great influence over her.

“Give credit to Ms. Giessel for daring to use efficiency and government in the same sentence with a straight face. But if she wants to attract and retain more teachers, the better and more transparent way is to raise their salary. At least politicians and taxpayers would be able to see how much this costs today rather than disguising the fiscal burden in the form of future liabilities,” the editorial board argued.

In 2006, the Alaska Legislature ended the pension program because the costs were outstripping the fund balance, and the actuary tables showed that Alaska could default on the pension payments. Even after 18 years, the fund today is $3 billion short of being able to meet its obligations to those who retired years ago, even without new members, the editorial board pointed out. Newer state employees have 401(k)-type retirement plans that are very generous.

Regarding that $3 billion shortfall, the newspaper reminded readers that the Reason Foundation studied the Alaska pension system and discovered it would add $200 million in unfunded liabilities in 2022, “as potential returns were smothered by a stock-market downturn. The same study projects a $9 billion liability over the long run.”

Alaska already has a historically poor pension-funding gap, and restoring the old plan could move it below even union havens like New Jersey and Connecticut, the newspaper said.

Giving credit where credit is due, the Wall Street Journal noted that the Alaska branch of the National Education Association is one of the big drivers for Giessel’s efforts to restore defined benefits.

“After Juneau reformed its pension plan, the union chose not to join a program that supplements the new 401(k)s with payroll-tax funding. The state teachers union held out instead for fully restored pension benefits, betting its persistent political pressure would eventually prevail. Ms. Giessel’s bill would reward that union bet at great taxpayer expense,” the editorial board wrote.

In Alaska, that tax is in the way of the Legislature stripping out most of Alaskans’ statutory Permanent Fund dividends in order to pay for services the Legislature to which appropriates money.

“The state Senate approved the defined-benefit plans last month, but the House is more skeptical and Republican Gov. Mike Dunleavy hasn’t taken a definite position. It should be an easy choice. Public-worker pensions create incentives for ever-higher taxes as current politicians seek near-term political support by adding to taxpayer liabilities that have to be paid on some future Governor’s watch. Down that road lies New Jersey or Illinois,” the editorial concluded.

27 COMMENTS

  1. The solution is simple. The unions run their own pension program, at their own risk, funded by the employees using the money & matching funds the employees get now. The state & taxpayers are out of it as far as market risk or gauranteed payments & benefits.

    • But the union goons would burn through the money by going on more boondoggles to Las Vegas and then come crying back to the legislature for more.

  2. I lived in a blue state for a while. Unfunded pensions for public workers were a huge albatross on the state budget and was a constant drain on resources. It was a ready excuse to raise taxes.

    Do Not Do This Alaska! It is a Nightmare.

    And frankly Giessel won’t be around when the staggering debts accumulate in the future. How much more debt on we going to dump on the upcoming generations? It is deeply immoral and offensive.

    • When we get to critical mass, we will be deep blue and beg the next democrat administration for a bailout.

  3. Instead of individual Alaskans getting a PFD all the money will go to fund state employees.

    Would you rather keep your PFD or give all of it to state workers?

  4. It seems as if Senator Giessel has some “skin in the game” as her spouse would benefit from this plundering of the Permanent Fund Dividend.

    • Her spouse was FORMERLY a teacher. He is now employed as an Engineer and not subject to the proposed defined benefit proposal (which I oppose BTW). Your comment is inappropriate.

  5. The direction Senator Giessel has chosen now demonstrates she has lost her way. Her abysmal search for power and control is fleeting and a disaster. Claiming her origins as an Alaskan has only certified her ambiguous nature which reveals her misguided demeanor. If ever she was a conservative, there is little to no evidence of this now. She reminds me of Ariana Huffington who fooled many conservatives with her fake conservative viewpoints only to ascribe to full blown progressivism. 20 years ago Huffington switched to the Democrat Party. It may be a good idea for Giessel to show her true blue colors now.

  6. Compared to the vast majority of workers in Alaska, the current benefits package public employees have is a Cadillac. Full stop. For Giessel and others to insinuate that upgrading to a Rolls Royce is essential and imperative to attracting state workers, and must be paid for by those of us driving a 2000 Buick Century, this is perplexing. Senator Giessel is drifting in rough seas. She needs a compass.

  7. Best line in the whole article: “Give credit to Ms. Giessel for daring to use efficiency and government in the same sentence with a straight face.” She is the classic example of “I’ve got mine, who cares what happens to the younger generations?” Or, in my opinion, the epitome of selfishness.

  8. Why would anyone want a state pension payment at 60 of 4-5k a month until they die rather than a personal retirement savings account of 1.5 million to 2 million dollars that they can spend as they choose
    In the old Ak pension Plan the money is never yours. Only a promise of a small monthly check until you die.
    Once you die your spouse and/or family receive nothing.
    If a participant elects the spousal option the monthly benefit is cut in half

    • Dan, you are confused. They can have both. I know a corrections officer who retired last year at age 53. It seems he has half a million in some type of retirement fund, paid for in part by matching contributions from the taxpayers. Also, is receiving about $85K per year for the rest of his life. Contrary to what the author said, that’s based on his highest 3 consecutive years, not necessarily the last three. Overtime counts when calculating the high three. Based upon his family history, that will be 30-40 years of free money protected by statute, not based on the whims of the stock market. Also, he and his wife get health insurance for life.

      All this paid for by prostitutes in the legislature stealing our children’s PFD.

      I hope that answers your question, Dan.

  9. Hey, lets all go to the state of alaska and throw the dice on the stock market for a portion of our retirement funds. Just what walls street wants, more money into there system to prop them up. I would not say generous by any means. The incentives are not strong enough to really put full faith into the stock market or any of its funds. I looked at the documents of funds when I started at my work with all the financial numbers and then tried to find the same or similar numbers on line and it would have taken months with the education I have concerning finances to find the same numbers. Just does not want to wash out. The employer gets a sales line from the retirement company and many options. to many options. I just want to have that wonder thought of getting 63% of my hi3 as they say and then getting some Social security money. as appose to hoping and praying that the stock market crashes don’t come along and wipe everything out. paraphrasing the one character in the old Christmas classic better to get something than nothing at all. Old Mr Potter. don’t trust the banks so much, don’t trust Wall Street financial people so much and don’t trust politicians from the state either. I would rather have something along the lines of what the Norwegians have, as I heard on a video recently, trust in my fellow man to do the right and honest thing. Now that would be a switch in federal state and local governments to do, the right thing. Your can trust walls street only to stuff money in there coats when it comes to finances. Gold bar brother. You can at least vote out the wonderful state or federal elected.. as one state senator once said and I paraphrase the statement as to be understood by the common man. if you want the same benefits I have then run for my position. He lost in the next election cycle. What kind of say do you have in wallstreet financials. NONE, wait a vote, and we all look at the balance sheet of every company to find the best one, RIGHT. It is a punch of hogwash to really dive into retirement issues for the common man/woman. I was trained to be a carpenter, not a financial wizard. we just need to settle on some of the pressing issues and leave the fluff to the side. The pressing issues are to take care of the workers who build America, happy workers make better citizens. End of rant.

  10. I recently retired from employment with the University of Texas. I’m covered under the Teachers’ system, which is defined contribution. . . one unfortunate thing is that they offset part of any Social Security pay out of your payments despite that you paid Into SS for years before joining TRS. The contribution during service was 8%Not exorbitant!

  11. Good for Wall Street Journal for calling this out. Inquiring minds want to know, what happened to Sen Giessel? She used to a sharp knife in the drawer.

  12. Senator Giessel for governor. Yes, she will run in 2026 and get the union vote even if Dunleavy vetoes the plan. She is now known as a friend of the unions. It’s all about votes. Maybe the NEA, which is well funded, should come up with a plan of their own that makes economic sense. Same for the unions. Both would then be part of the solution, and not part of the problem. In the end, something has to be done. Retirement is not for those without sufficient funds.

  13. There is great wisdom in what the WSJ offered about these disastrous defined pension plans. Hopefully Dunleavy will veto SB88 if it gets to him.

    Giessel isn’t qualified to be making important policy decisions. She’d do the entire state a favor by quitting and taking a job she might be competent at. For example, mopping floors.

  14. Whoa, I see a whole lot of negative comment about defined pension plans. I know my neighbor ( DOT) bragged about his 401K, years ago, when the stock market was running wild. Then many years later when he retired, I asked him how he was doing. He said it was a 201K now! 1/2 the value. Reflecting the downturn in the stack market. In the hay day of the pipeline era, the Teamsters were the envy along with State DOT Tier 1 employees. Along the way the Teamsters pension crumbled. The DOT guys were few in number, that actually stayed in the plan for years. The other Unions ,(Laborers, Operators) had much better administration. And some not so good. The 1974 ERISA act compelled fiduciary responsibility. Some of the Pipeliners took their money out and blew it, as most were not savvy financial experts. Me I left my money in, lived through the feast and famine cycles, with Local 302, 40 years later have a decent pension. Some have lot better, some not so good. It all shows how much time you devote to your career. What you put in is what you get. By the way we have not had any cost of living increases in over 10 years.

Comments are closed.