Revival of public employee pensions nears final passage in Legislature — but still faces big final hurdle
- Mark Sabbatini
- 2 minutes ago
- 4 min read
Supporters say it will help Alaska’s worker shortage in key occupations, but opponents urging Gov. Dunleavy to veto the bill due to potential cost of providing benefits
By Mark Sabbatini
Juneau Independent
This is a developing story.
A years-long effort to revive a traditional pension system for public employees in Alaska may finally make it through the Legislature this year. But it will be more limited than the plan abandoned 20 years ago due to its cost and won’t take effect for another year even if Gov. Mike Dunleavy signs it — which is anything but certain.
Supporters hailed the bill’s advancement as a major step toward addressing the state’s workforce shortage. Critics say the bill could cost the state billions of dollars in extra benefits payments.
The state Senate on Tuesday passed House Bill 78 by a 12-8 vote, setting up a scenario where the House — which passed the bill last year 21-19 — can approve changes made by the upper body during the final three weeks of the legislative session and send it to the governor. Representative Ashley Carrick, D-Fairbanks, stated in a Facebook post a concurrence vote by the House is expected Wednesday.
Dunleavy is among lawmakers who have expressed skepticism about reviving pensions and he is being urged to veto the bill by fellow Republicans in the legislative minority. He has not officially taken a stance on whether he will sign or veto the bill.
Among the most significant changes made by the Senate is allowing non-state entities such as municipalities and school districts to opt out of offering pensions if they feel it’s too expensive. All public employees will also be able to opt for the pension system or the current 401(k)-style plan.
"It's not going to cost the taxpayers in Anchorage or anyplace else one penny if they decide not to opt in," Sen. Lyman Hoffman, D-Bethel, said during floor debate. "If they decided to opt in they're making a decision to tax themselves for these additional benefits that they will get."
An amendment adopted Tuesday also delays the implementation of the pension system until July 1, 2027, giving public employers more time to determine if they will participate and implement necessary changes. That also means the Legislature could, if Dunleavy vetoes the bill, pass similar legislation with the same effective date during next year’s session and send it to whoever is elected governor this November.
Alaska’s previous pension system for public employees was shut down in 2006 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.
Advocates of restoring pensions say Alaska now has a worker shortage in many key occupations such as public safety and education because retirement benefits are too poor to retain long-term employees.
"We have, in effect, turned Alaska into a training ground, a place where people come, gain experience and then leave," Senate Majority Leader Cathy Giessel, R-Anchorage, said during floor debate.
That is also costing the state more than $200 million a year in "premium pay" such as overtime and extra shifts, an 80% increase from five years ago, she said. Supporters of the bill also argue it will save the costs of hiring and training new employees, and improve the efficiency of public services by retaining experienced staff.
House Bill 78, as adopted by the Senate, is projected to cost the state up to $89 million annually, according to a fiscal note. That will depend largely on how many employees opt for pensions (often referred to as a "defined benefit" plan ) compared to the 401(k)-style plan.
However, a statement issued by the Senate’s Republican minority caucus asserts the fiscal note is from 2025, and "these numbers were calculated prior to the current global and local economic shifts and do not reflect significant changes made to HB 78 in committee." Two members of the Senate’s bipartisan majority — Hoffman and Bert Stedman, R-Sitka Republican, also voted against the bill.
Stedman, a Senate Finance Committee co-chair who was in the Legislature when it voted to do away with pensions 20 years ago, said during floor debate he continues to have concerns about the state incurring further unfunded liabilities. Furthermore, he said studies in his committees about the state’s worker shortage show insufficient salaries appear to be a more important factor than retirement benefits.
"Let me talk about the teacher system because that is within the scope of this bill," he said. "Alaska has the highest cost of living in the country. Our salaries are about number 11."
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
