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Alaska lawmakers debate how to stuff a sock in yawning pension shortfall

Pat Forgey
Gov. Sean Parnell's pay-down plan is largely endorsed by the Alaska House. The cash infusion would reduce the size of future annual payments towards the unfunded liability. EvinDC / cc via flickr

JUNEAU -- For years, Alaska leaders have not dealt with the state's growing retirement debts, making minimum payments in years of oil-fueled surplus so they could have more money available for more popular programs.

This year, the will to deal with that unfunded liability may be there, but the 2014 legislative session is rapidly drawing to a close.

This year, Gov. Sean Parnell offered support to the call for action by the Alaska Retirement Management Board. He proposed $2 billion in addition to the required $1 billion minimum payment, what's being called a "$3 billion cash infusion."

That would help pay down what's grown into a $12 billion unfunded liability for retiree pensions and health care, the annual costs of which threaten to overwhelm the state budget.

"This unfunded liability is sucking us dry, no doubt," said Rep. Pete Higgins, R-Fairbanks.

The Alaska House on Thursday adopted its version of the governor's proposal, with action on the issue now shifting to the Senate, which has been debating the issue behind closed doors.

Sen. Johnny Ellis, D-Anchorage, said he hopes the Legislature and governor will finally act on the retirement debt, but he also fears that they may not.

Some may not want the problem solved, he said, if they find it a useful "bogeyman" with which to attack public employees.

"They almost look forward to the day when they could pit public employees and retirees against Alaska’s Permanent Fund, and say 'Hey Alaskans, look at these greedy union members and retired teachers and employees who are demanding the pensions they were promised,'" Ellis said.

State funds eventually will have to be used to pay them, even if the only state funds available are from the Alaska Permanent Fund, state officials say.

"Our constitution is pretty unambiguous," said Rep. Bill Stoltze, R-Chugiak. "Retirement benefits are a contractual obligation. It couldn't be any more clear."

Parnell's pay-down plan is largely endorsed by the House. The cash infusion would reduce the size of future annual payments towards the unfunded liability, including those payments in statute.

But in what could be a preview of Senate battles, some House members have raised concerns about obligating the state to make future unfunded liability payments when the state might not have the money.

"We'll be in deficit spending," warned Rep. Charisse Millet, R-Anchorage, and putting any promises in statute could be risky.

"We're giving false expectations that we're going to have that money in the future."

Rep. Paul Seaton, R-Homer, warned that a retirement bill the House passed, HB385, only called for paying $500 million year; paying less could significantly lengthen the repayment period, he said.

"The plan now being proposing simply won't work," he said.

Rep. Mike Hawker, R-Anchorage, said that decisions made by the Legislature in the past, including closing the retirement plan and then delaying action on paying down the unfunded liability, are the reason it is so high now.

"There's nothing that we can talk about that will relieve us of the necessity of dealing with this issue," he said.

The issue now moves to the Senate, where members have considered everything from a pay-as-you-go plan suggested by Sen. Pete Kelly, R-Fairbanks, to a possible $4 billion contribution suggested by Sen. Anna Fairclough, R-Anchorage.

Contact Pat Forgey at pat(at)alaskadispatch.com