I have great respect for former Sen. Lyda Green. She was a champion for bipartisanship while serving in the Legislature, and attained the heights of the upper chamber, serving as Senate President.
However, her recent opinion piece discouraging an improved retirement plan for Alaska’s first responders, who make up a very small percentage of public employees statewide, is misinformed.
The bill in question is House Bill 55, a bill that drew strong bipartisan support when it passed the House of Representatives in May of 2021. The bill would restore a defined benefit or traditional pension for newly employed first responders, and those who wish to buy in to the new tier.
There is no hiding the goal: It is to provide these critically important workers with sufficient monies to retire after age 55, so that they might stay in Alaska, keeping us and our communities safe. We are one of only two states that fail to do so, rendering our training and recruitment of new police, fire and corrections officers a constant and perpetual conveyor belt. The Department of Public Safety and local police and fire train new employees, usually at a cost of between $100,000-$200,000 per employee. Do they stay in their jobs, here in Alaska, keeping us safe from harm? Generally, no. They leave Alaska after 5 years with a portable 401(k) or its equivalent, seeking greener pastures in the Lower 48.
And, then, it starts all over again: more recruitment, more training in an endless cycle.
House Bill 55 is an effort to stanch this bleeding of personnel to our sister states. It is this effort that Sen. Green criticizes. But what are her criticisms?
First, Sen. Green mostly elided the fact that this benefit would initially cover no more than 2,358 employees, a number that would only hold true if every Tier 4 peace officer or firefighter bought into a defined benefit program. Over time, yes, the number of public employees who have a defined benefit might grow to cover about 3,400 individuals. Still, this is a very small portion of all public employees. This reduces the risk substantially.
Second, in Green’s commentary, she referenced HB 55 continuing the “same flawed policies” that proved troublesome 15 years ago. This is inaccurate. The bill makes myriad reforms, adjusting and de-risking the negative potential costs to the state. This is done by withholding inflation adjustment if required, requiring the calculation of a “High 5″ rather than “High 3″ of salaries, delaying retirement to age 55, removing the Alaska-specific cost of living adjustment, increasing employee contribution rates if needed, and providing a very restricted health care benefit in retirement. Under old defined benefit tiers, pre-Medicare health care coverage accounts for roughly one-third of the benefits paid. No such benefit exists here.
Third, oddly, Sen. Green claimed that there have been no actuarial analyses done of House Bill 55. This is 100% inaccurate. Between House Bill 55, and its predecessor, House Bill 79, the state of Alaska has paid for and seen the completion of three actuarial analyses on this bill: An actuarial analysis was completed by Buck Consulting in February 2020 — she acknowledged this one for House Bill 79. But actuarial reports were also provided in April 2021 and March 2022, again from Buck, and this time relating to House Bill 55, the bill at issue. So Sen. Green is asking you to rely on her opinion when she has missed this basic fact. Buck, the state’s actuary, has more than 30 offices spread throughout six countries. The state retained the best to evaluate House Bill 55. The backers of HB 55 would expect no less.
Additionally, Sen. Green referenced a presumed 7.38% rate of return in the bill. However, the bill makes no such presumption. Instead, the actuary for the stakeholders presumes a 7% rate of return, but proves that the plan will perform very well at considerably under that number. It’s noteworthy that the historic rate of return for the ARM Board is around 8.33% over the last 30 years. This return is still nearly 1% greater than the ARM Board’s 7.38% long-term projections and 1.33% greater than what HB 55 was designed around. Additionally, the firefighters’ actuary showed that the plan would remain well-funded down to long-term returns around 5.4%.
HB 55 does not reopen the earlier defined-benefit tiers that were, we concede, underfunded. It provides for a new trust in its own silo, one that creates no new costs to the state from the new class of retirees themselves. The HB55 plan is financially sound, with any cost to the state attributable to reduced payment from the new plan to past retirement plan indebtedness.
Finally, the evidence is clear, contrary to the commentary in question, that first responders well and truly do leave Alaska when they become vested in their defined contributions (401ks). They do so because they are poached away with the prospects of a retirement on which they can actually survive. And, again, the state and cities are left holding the bag, needing to retrain fire, police, and corrections at our local proving grounds.
After evaluating this plan for more than 10 years, it is beyond time to reduce the costs paid by the state and our local governments to the training of our first responders, only to see them quickly leave Alaska. Instead, we need these first responders to remain in Alaska for their entire careers, keeping us and our loved ones safe from threats of harm to our personal safety. HB 55 is the pathway to achieving this goal, and will ultimately save state and local governments tens of millions of dollars in recruitment and training funds that will no longer walk out the door.
Andy Josephson was elected to the Alaska State House of Representatives in 2012 and represents residents in Midtown, the university area, and East Anchorage.
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