Alaska lawmakers say pension reform is a 'two-year project'

Revamping retirement options for Alaska's public sector is "a two-year project," state Senate and House majority leaders said Tuesday, signaling that adoption of a new pension bill was unlikely before this year's legislative session ends next month.

The bipartisan House and Senate coalitions both identified pension reform as one of their top policy goals when they formed late last year, amid ongoing recruitment and retention challenges in Alaska's public sector.

Senate Majority Leader Cathy Giessel, an Anchorage Republican, since 2023 has advocated for a new defined benefit plan that would guarantee income to retirees from Alaska's public sector employers — including the state, school districts and law enforcement agencies — for the first time since 2006.

In 2023, the Senate adopted Giessel's bill only to have it languish in the Republican-controlled House. This year, Giessel said the Senate is waiting on the House to act on the bill first.

Meanwhile, House Majority Leader Chuck Kopp, also an Anchorage Republican, said Tuesday that though pension reform remains a priority for his caucus, progress on the legislation was slowed by several factors, including an unexpectedly protracted debate on the operating budget in the House Finance Committee.

In February, Kopp said the bill would be voted on by the full House by the end of March. March came and went, and the bill remains before the House Finance Committee. On Tuesday, Kopp said he expected House Bill 78 — which would create a new defined benefit program for the public sector — to be before the full House for a vote by the first week of May.

Alaska discontinued its previous defined benefit plan for new public sector workers in 2006, amid an unfunded liability that was fueled by incorrect actuarial analyses. Nearly 20 years later, the state is still paying off its debt to the plan.

Since then, Alaska has offered its teachers, police officers, firefighters and other public sector workers access to a defined contribution plan similar to a 401(k), under which workers could contribute to an investment account but had no option for guaranteed income from the state in retirement.

That change has left many public sector workers in Alaska without enough funds to securely retire. It has also made Alaska the only state in the union to offer its teachers neither a pension nor access to Social Security.

Public sector union leaders and agency heads now say that the lack of a defined benefit option is a key driver in the state's recruitment and retention crisis, which has led to high vacancy rates in Alaska school districts, state agencies, and law enforcement posts.

Jesse Slone, a data analyst for the Alaska Department of Corrections and a representative for his union, said earlier this month that he supports the return of pensions for state employees.

Those who were hired by the state before it discontinued pensions — including his relatives — "aren't wealthy, but they have what so many in my generation fear that they won't: a dignified, stable retirement," he told lawmakers in the House Finance Committee.

"Some say young people don't want pensions, but when I've repeated that line to recent graduates, they've literally laughed at my face," said Slone. "That belief that hard work should be honored — it isn't outdated."

But disagreements persist on whether a new pension system will solve Alaska's worker recruitment and retention crisis. Republicans in the House and Senate minorities have largely opposed the effort to reintroduce pensions, citing fears over another unfunded liability or a cost that the state cannot bear amid reduced revenue forecasts and disinterest in levying new taxes.

A new actuarial analysis presented to the House Finance Committee earlier this month indicated the bill would cost up to $580 million over a 14-year period, averaging out to around $40 million per year. Kopp said that cost will likely be balanced in the long run by reductions in hiring and retention bonuses that the state has resorted in recent years to offering in key sectors — including to correctional officers, state troopers and state workers who process food assistance applications. The state would also likely save money by reducing the cost of frequently hiring and training new workers, Kopp said.

"It compares favorably with the projected savings to the state, which is $76 million a year in savings in just reduced lost training dollars, the cost of turnover, recruitment, rehire, retraining," Kopp said. "The cost of doing nothing is dramatically higher than what's being presented in this bill."

Past efforts to reintroduce a pension plan have stalled in either the House or the Senate. But Kopp said that over time, the cause of improving public sector retirement has become more popular among voters and elected officials. Kopp last year won his seat against incumbent Rep. Craig Johnson, after Kopp made public pensions a key element of his campaign.

The defined benefit plan considered this year is not a return to the pensions Alaska offered until 2006, Kopp and Giessel say. Unlike that plan, their proposal would have Alaska workers shoulder a share of the burden if the retirement plan becomes underfunded. Their plan also does not offer health insurance to retirees, and does not offer a cost of living adjustment to those who choose to stay in Alaska.

Those changes have some Alaskans worried. During a recent session of public testimony before the House Finance Committee, most speakers said they favored a return to defined benefits, but some worried about the specifics of the plan encompassed in House Bill 78.

Danielle Redmond, a former retirement counselor for the state of Alaska, said she was concerned about the lack of medical benefits — known as AlaskaCare — included for retirees in the new pension plan proposal.

"I can't tell you how many retirees told me it was even more important to them than the money," said Redmond. "You can get a 401(k) plan anywhere, but retiree medical was the key for many of the members that I talked to."

Redmond, who herself does not currently qualify for a pension because she was hired by the state after 2006, said she was not sure how she would pick "if forced to choose between a pension plan or health care."

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