Alaska Senate advances public-sector pension plan to address recruitment and retention crisis

JUNEAU — The Alaska Senate on Wednesday advanced legislation to the House that would reestablish a public-sector pension in an effort to address significant challenges in Alaska with the recruitment and retention of public employees and teachers.

The bill would establish predictable retirement payments for tens of thousands of state and municipal workers and teachers. Opposition to the plan focused on concerns that a new defined benefits pension plan could see state costs spiral and debt balloon unsustainably.

The Senate on Wednesday voted 12-5 to advance the pension bill to the House, where it could face long odds of advancing further.

All of the yes votes were from Democrats and Republicans in the bipartisan Senate majority. Three Republicans in the majority caucus — Sens. Bert Stedman, David Wilson and James Kaufman — joined minority GOP Sens. Shelley Hughes and Robb Myers in opposing the bill.

Facing billions of dollars in unfunded liability, Alaska legislators ended in 2006 a previous public-sector pension system for new employees. Since then, public employees and teachers have made contributions to a 401(k)-style system that a state analysis last year found was delivering substantially smaller benefits than under a pension.

Anchorage Republican Sen. Cathy Giessel, the lead sponsor behind Senate Bill 88, said the new hybrid pension plan was not “gold-plated” and that safeguards were put in place to mitigate risk.

Employee contribution rates would be adjustable and could be increased to ensure the plan remains solvent. The new pension does not include health insurance for workers upon retirement, leaving them dependent on savings and Medicare once they stop working.

Senate majority members highlighted in floor speeches a long-standing crisis with public-sector recruitment and retention. Around one in seven state jobs are currently vacant; a shortage of snowplow drivers in November was partly blamed for roads going weeks to be cleared in Anchorage. The state Department of Corrections wanted to lower the minimum age of correctional officers to 18 to attract more applicants, before that idea was eventually rejected in December.

“There is a crisis in this state. We can’t fill jobs,” said Sen. Bill Wielechowski, D-Anchorage, who argued a pension could help reverse Alaska’s 11 straight years of outmigration of working-age residents.

Alaska is the only state in the union that offers public workers neither a defined benefits plan nor access to Social Security. Many public employees are eligible for supplemental retirement benefits, but neither teachers nor all municipal employees can receive that extra financial assistance.

“This monumental step to return a dignified retirement to public employees has been years in the making,” said Heidi Drygas, director of Alaska’s largest public employee union, in response to the Senate advancing the bill. She cited monthslong delays for the state to deliver food stamps as a reason to implement a more generous public-sector retirement plan.

“A defined benefit retirement will help make the State of Alaska and public employers an attractive place to work again,” Drygas said by text message.

After the Senate’s vote, Dominic Lozano, president of the Alaska Professional Firefighters Association, said no other state has a 401(k)-style retirement system for firefighters, which has worsened Alaska’s retention challenges compared to other states.

“Firefighters aren’t leaving at the rates that Alaska firefighters are leaving,” he said. “We’re becoming a training ground.”

Buck Consulting, the state’s actuary, last year studied the Senate’s bill and projected that the new pension plan would cost the state $1.2 billion until 2039. A second analysis into the Senate’s pension plan by Buck is expected to be ready in a few weeks.

Senate members said the actuary’s analysis actually projected the costs of the highest possible success of the plan. To cost $1.2 billion, all the current public employees would need to switch over to the pension plan, and the state’s recruitment and retention crisis would largely need to have been solved.

Teresa Ghilarducci, an economics professor at the New School for Social Research in New York, offered another analysis for lawmakers earlier in the month. She estimated that a new public sector pension plan in Alaska could save the state $76 million per year by reducing turnover of public employees and teachers.

But several Senate Republicans were not convinced. Sitka GOP Sen. Bert Stedman — long an opponent of reimplementing a defined benefits pension — remained deeply skeptical that the new pension would be cost neutral and the risk that billions of dollars could be added in state debt obligations.

Sen. Shelley Hughes, R-Palmer, strongly opposed the bill. She was concerned by the conflicting cost estimates and said a new public-sector pension would disadvantage private-sector employers that don’t offer similar benefits. Referencing the Pete Seeger song “Where Have All the Flowers Gone?” on the Senate floor, Hughes asked, “Where have all the fiscal conservatives gone?”

After Wednesday’s vote, Giessel said she was optimistic the bill could pass through the House this year. But the Republican-led House majority has shown hostility to reimplementing a defined benefits pension plan in Alaska.

House GOP leadership took the unusual step last year of establishing a legislative subcommittee to study retirement plans and the Senate’s pension bill before it had passed to the House. Supporters of a new public-sector pension argued the House was attempting to bury the measure. The subcommittee has not continued to meet.

Anchorage Republican Rep. Laddie Shaw last year said the subcommittee was needed as he had too many bills to consider as chair of the House State Affairs Committee. Shaw did not wish to comment Wednesday on the Senate’s bill.

During his sixth annual address to the Legislature, Dunleavy on Tuesday spoke about his proposal to pay bonuses as a way to improve recruitment and retention of teachers. Jeff Turner, a spokesperson for the governor’s office, said Dunleavy wants more data demonstrating that a new pension will attract the most highly qualified candidates, and that state debt would not increase.

“The governor wants to see the research just like the research that supports paying classroom teachers more could incentivize them to stay longer in their jobs. He’s also interested in the research surrounding a defined benefit program,” Turner said.