JUNEAU -- Legislators last year said they were bolstering state retirement systems when they authorized pumping $3 billion from savings into the trust funds that provide retirement checks and health care for tens of thousands of Alaska state and local government retirees.
But members of the Alaska Retirement Management Board, meeting in Juneau this week, said other changes legislators made at the same time will wind up costing Alaskans billions more than that over the years.
The goal, it appears, was to reduce costs in the next few years while moving costs down the road, they said.
Trustee Kris Erchinger called one of the major changes "essentially refinancing your 15-year mortgage out to a 25-year mortgage."
The change, she said, will mean years of additional payments into the state's unfunded retirement liability and cost employers in the Public Employees Retirement System an additional $5.7 billion, she said. About 60 percent of covered employees work for the state, with others working for local governments.
Trustees have been analyzing what the Legislature did since it acted -- and questioning why it acted without reviewing a detailed actuarial analysis of the costs.
Among the changes legislators made was altering the actuarial method from one called "level dollar" to one called "level percent of pay," resulting in less cost to the state initially while costing more over time. The other major change was extending by about nine years the time during which the unfunded liability will be paid off.
In December the trustees sought additional analysis from Buck Consultants, the state's actuarial consultant, which was provided in January and reviewed in ARM board meetings in Juneau this week.
Much of the additional $5.7 billion will be paid by residents of communities where public employees are in PERS.
"The cost to Anchorage of that nine-year extension is $544 million; Juneau, I think, is $116 million; Fairbanks is $175 million; in my little community it's $50 million," said board member Martin Pihl, who lives in Ketchikan.
The state's unfunded liability has been growing for years, but the state waited until it was in deficit spending to put additional money into the retirement savings.
Former Gov. Sean Parnell proposed adding $3 billion to the retirement trust funds last session.
The Legislature did so, putting $1 billion into the $15 billion PERS and $2 billion into the smaller $7 billion Teachers' Retirement System, but also adopted the provisions reducing costs initially and costing more over time. Board members said more money was put into TRS, which the state pays a larger share of, leaving cities and other local governments to pay a larger share of the PERS debt.
Paying more now would save in the long term, said Erchinger, who also serves as Seward's finance director.
The money now in the trust funds is invested and is expected to earn about 8 percent annually, reducing cost to public employers had the ARM Board's level-dollar method and payment schedule been used, she said.
"That's because the contributions would come into the system earlier and those interest earnings would eliminate the need for employers to make those contributions," she said.
But ARM Board Chair Gail Schubert said the board committee reviewing the actuarial analysis praised the $3 billion contribution.
"It was agreed unanimously that it was a very good move for former Gov. Parnell to put $3 billion into the pension fund when he did. We're really fortunate that happened," she said.