Dunleavy vetoes public employee pension bill after gas line bill stalls in House

Governor, after Legislature fails to pass gas line bill, says costs of improving retirement benefits needs to come with new revenue for state

Legislators and staff at the Alaska State Capitol wait in the hallway to the House records office for the arrival of a message from Gov. Mike Dunleavy announcing his veto of a bill reviving pensions for public employees on Monday, May 18, 2026. (Mark Sabbatini / Juneau Independent)

By Mark Sabbatini

Juneau Independent

This is a developing story.

A bill reviving traditional pension benefits for public employees 20 years after they were eliminated by lawmakers was vetoed by Gov. Mike Dunleavy on Monday night after a gas line bill that’s his top session priority stalled on the House floor.

"If the Legislature intends to increase the State’s long-term spending obligations, it must also be prepared to support the long-term revenue needed to pay for them," Dunleavy wrote in veto letters sent to the Senate president and House speaker at about 10:30 p.m. "That requires a serious commitment to natural resource development, private-sector growth, and a stronger economic foundation for Alaska’s future."

The House spent about 10 hours debating a bill intended to advance the long-discussed Alaska LNG Project, which was openly discussed as part of a deal where its passage by the Legislature would result in the pension bill becoming law. Dunleavy had until midnight to take final action on the bill that passed the Legislature with 33 total votes in the House and Senate — far short of the 40 necessary for a veto override.

House Speaker Bryce Edgmon, I-Dillingham, said in a prepared statement after the veto that both the House and Senate worked tirelessly on the gas line bill Dunleavy introduced March 20, even though that was "a highly compressed timeline."

"Legislation of this magnitude would normally take a full session, if not longer, to properly evaluate and consider," Edgmon wrote. "Instead, lawmakers were asked to take it up in the middle of session while balancing budgets and addressing numerous other urgent priorities facing the state."

"HB 78, the pension bill, should stand on its own merits," he added. "Alaska’s public employee retirement crisis is real, and the bipartisan effort to restore a reasonable pension system should never have been leveraged against unrelated gasline legislation. These are separate policy issues with separate consequences for Alaska’s future."

The deadline for adjournment of the regular session is 11:59 p.m. Wednesday. House Majority Leader Cathy Giessel, R-Anchorage, said Monday night it does not appear practically possible to pass a gas line bill by then. Dunleavy has said he will call a special session if such a bill — with provisions he favors — does not pass.

The Legislature in 2006 abolished pensions for public employees due to skyrocketing costs that left the state with billions of dollars in unfunded liabilities. Employees hired since then have been covered by a 401(k)-style defined contribution plan that workers contribute to without guaranteed income from the state.

The revival passed this year by the Legislature, House Bill 78, is more limited in scope in an attempt to prevent the financial perils of the previous system. Among the most significant changes is allowing non-state entities such as municipalities and school districts to opt out of offering pensions if they feel it’s too expensive.

Supporters of the bill argued the state is experiencing a high vacancy and turnover rate due to poor retirement benefits, and HB 78 would thus economically benefit the state by providing a stable workforce. Opponents, including Dunleavy, stated the bill risked yet more crippling cost overruns.

"Pension obligations extend for decades, and the full cost of this bill may not be apparent until years after its enactment," he wrote.

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.