Proposed pension reform motivates big spending in Alaska’s legislative races

Eighteen years after Alaska’s Legislature voted to end the state’s guaranteed public pension system, retirement benefits are again playing a key role in the state’s election.

“It’s not an issue to the public. It’s an issue to the people who are backing the individual candidates,” said Joelle Hall, president of the Alaska AFL-CIO, the state’s largest labor organization. Hall is behind an independent expenditure group that has spent more than $500,000 to boost legislative candidates that support a return to guaranteed pensions for Alaska’s public employees.

“We want to ensure that we can have a bipartisan majority that will consider thoughtfully returning to a defined benefit pension. And we’re not interested in electing anybody who won’t,” said Hall.

Those who won’t consider the policy include several Republican candidates backed by Americans for Prosperity, a conservative advocacy group whose affiliated expenditure organization had spent nearly $90,000 as of earlier this month to back Republicans who have been publicly skeptical of the pension reform.

Americans for Prosperity has for years advocated in favor of moving from defined benefits to so-called “defined contribution” systems, which shift the burden of investing from the state to individuals. Earlier this year, the organization indicated it planned to campaign against Republicans who sought to reinstate defined benefits in the state.

The chair of Americans for Prosperity-Alaska, Bethany Marcum, who also serves as senior adviser for the group’s affiliated political action committee, said Alaska’s retirement system, and the prospect of returning to defined benefits, is “by far the issue we care about the most, because we believe it would cause the most financial negative outcomes for the state.”

A possible retirement overhaul could have far-reaching consequences for tens of thousands of state employees and their families, and many say it could also play an important role in addressing the state’s challenges in recruiting and keeping employees in key sectors. But opponents of the policy say it could saddle the state with an unmanageable financial commitment, with no guarantee of improvement in the state’s outmigration trend.

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The outcome of a handful of legislative races could determine whether such an overhaul will be on the table next year.

“I feel like I’m an absolute hypocrite talking about this, because I do have a teacher retirement,” said Rep. Mike Cronk, a Tok Republican running for an open Interior Senate seat, during a debate held in Fairbanks earlier this month.

Cronk, 53, reported receiving between $20,000 and $50,000 per year in retirement for his career as a public school teacher. He is one of a handful of Republicans in state government who collect retirement checks while opposing extending the benefit to Alaska’s current and future public employees.

“My first job and obligation is to the state, to make sure that we are fiscally responsible and we don’t put ourselves into further debt,” Cronk said during the debate.

Republicans in the House, Cronk among them, blocked earlier this year a pension bill from reaching a floor vote. But if a handful of competitive House races are won by more moderate or left-leaning candidates, next year could bring the pension reform long sought by some, and feared by others.

‘Feeling the impact’

Facing billions of dollars in unfunded liability — driven in large part by a faulty actuarial analysis — Alaska legislators in 2006 ended the public-sector pension system for new employees. Since then, public employees — including teachers and firefighters — have made contributions to a 401(k)-style system that a state analysis last year found was leaving many without enough savings to comfortably retire.

Since 2006, groups representing the state’s public sector have increasingly been sounding the alarm about the policy’s impacts in exacerbating the state’s labor shortage. In every public sector, workers are in short supply. Hall, with the AFL-CIO, said that is in large part because the vast majority of public employees can access a pension in other states, meaning many public-sector workers are motivated to leave Alaska early in their career.

Despite warnings about impacts to Alaska’s retirees and workforce, some lawmakers have remained skeptical of returning to a pension system that left the state with more than $10 billion in debt that it has been slowly paying off for more than a decade.

That has left lawmakers divided on how to address the issue. Earlier this year, the Senate passed in a 12-7 vote a bill that would have initiated a pension, or defined benefits program, for the first time since 2006. The plan, sponsored by Anchorage Republican Sen. Cathy Giessel, was designed to minimize risk to the state. Still, the Republican-controlled House shelved the bill, allowing it to languish until the Legislature concluded its session earlier this year.

Now, potential changes to Alaska’s retirement system hang on the outcome of many contested legislative races. Bipartisan coalitions in the House and Senate could pave the way for the adoption of the plan laid out in Senate Bill 88. Victories for conservative Republicans could spell the plan’s demise.

Savannah Fletcher, a nonpartisan candidate running against Cronk, said she supports the defined benefits policy as it was proposed last year, but it’s not something she often hears when she is out talking to voters.

“People are feeling the impact of it. I don’t think it’s what you see on people’s mailers, like the big blasted messaging, but it’s quietly impacting a lot of the things that are motivating voters,” said Fletcher. Those impacts come in the form of unfilled public safety positions and a revolving door for teachers in public schools, she added.

‘Everyone has an excuse’

Lawmakers in favor of the reform say it is needed in order to reverse an ever-increasing challenge in recruiting and retaining employees to Alaska’s public sector, which are already costing the state significantly. Many school districts in the state are facing such steep challenges in keeping teachers that they have turned to hiring foreign educators who come to the state on temporary visas. Alaska’s Department of Corrections has struggled to keep its positions filled despite offering a $10,000 signing bonus.

Cronk is not the only legislator who is skeptical of a return to defined benefits despite receiving a state pension.

Rep. Craig Johnson, an Anchorage Republican, has also sided with his Republican House colleagues in questioning the legislation despite collecting between $10,000 and $20,000 annually in pension payments. Johnson touts “stopping a costly pension bill” as one of his key accomplishments on his campaign website. He did not respond to a request for comment.

Chuck Kopp, a Republican former lawmaker and retired police chief, has said he was motivated to run against Johnson after the Republicans in the House majority blocked the progress of Senate Bill 88 earlier this year. Kopp reported earning between $20,000 and $50,000 per year in a state pension.

The conversation on a return to defined benefits has been driven largely by unions and labor organizations that say pensions are a critical piece of solving the state’s chronic labor woes, particularly in attracting educators and public safety workers.

Dominic Lozano, president of the Alaska Professional Fire Fighters Association, said there are a number of races in which defined benefits have become a key campaign issue, like in a West Anchorage race between Democrat Denny Wells and Republican former lawmaker Mia Costello — who has blocked previous attempts to reinstate defined benefits for public safety workers.

“Everyone has an excuse of why it’s no longer viable,” said Lozano. “When they look at it and they truly understand the security that the pension gives them, it’s often difficult to understand why they wouldn’t want public employees to have that same security in retirement.”

Lozano said retirement overhaul has in the past taken a backseat to other issues like education funding and the Permanent Fund dividend. Meanwhile, he said Alaska has “lost a whole generation of employees that have left to go work in agencies out of state that do have defined benefit retirements, and it’s starting to show.”

Putting Alaskans First, the group led by Hall and other labor organizers, has funded a website attacking Costello, claiming she “pretends to back the blue.” As evidence, the website points to her actions in 2022 that thwarted a revamped retirement benefit exclusively for public safety workers in the state. Costello did not respond to interview requests for this story.

Americans for Prosperity Action — Alaska has spent money backing Costello’s campaign, among several other GOP candidates in competitive races. A website run by Americans for Prosperity encourages Alaskans to vote against a return to defined benefits.

Americans for Prosperity claims the plan laid out in Senate Bill 88 would cost the state $9 billion — a figure not in line with independent actuarial analysis commissioned by the Legislature. Marcum said that Americans for Prosperity – Alaska Action, the political action committee, has selected candidates to support “that align with the principles that we believe in.”

“We do believe that there’s really not any evidence that defined benefits pensions are a relevant factor when you’re looking at employee recruitment and retention,” said Marcum.

Marcum, a former adviser to Republican Gov. Mike Dunleavy, represents a view that will be hard to overcome, regardless of the outcome of the November legislative elections.

“It’s really hard to play whack-a-mole with them,” said Hall. “They want to make it look as expensive as possible.”

“The question is: Can we get the stars to align so that those majorities are willing to take action on this?” said Hall. “I hope we can, but we will still have the impediment of this governor, who is very tight with Americans for Prosperity.”

Correction: An earlier version of this story incorrectly reported that Chuck Kopp is a retired police chief and firefighter. He was not a firefighter.