Alaska Senate approves new pension program for state employees, but final approval remains uncertain

ai express – Senate Bill 88 received strong support from Senate Majority Leader Cathy Giessel, R-Anchorage, during a session held on January 31, 2024. Giessel’s endorsement of the bill was evident as she passionately spoke in favor of it on the floor of the Alaska Senate. A photograph captured the moment, showcasing the dedication and commitment displayed by Giessel.

The Alaska Senate took a significant step on Wednesday by passing a bill to reinstate a pension program for state employees. This legislation aims to address the ongoing employee shortage at state agencies and potentially provide additional benefits to around 37,000 Alaskans.

In 2006, the Alaska Legislature made the decision to eliminate the public-employee pension program for new workers. Instead, they opted for a 401(k)-like program that does not guarantee benefits. As a result, Alaska has been without a public-employee pension program for new workers since then.

According to recent data, it has been observed that new employees in Alaska have a decreased likelihood of staying in the state. Additionally, these employees tend to earn lower incomes towards their retirement compared to those who receive pensions. Moreover, it is worth noting that a significant number of Alaska teachers are not eligible for Social Security or the supplemental program designed to compensate for its benefits.

Supporters view Wednesday’s passage of Senate Bill 88, also known as the pension legislation, as a crucial milestone in addressing these issues.

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“We must address this issue and restore efficiency to state government by reducing the frequent turnover of employees,” stated Senate Majority Leader Cathy Giessel, R-Anchorage, who also serves as the primary sponsor of the bill.

The Senate vote resulted in a 12-5 outcome, with Republican Senators Shelley Hughes of Palmer, James Kaufman of Anchorage, Robert Myers of North Pole, Bert Stedman of Sitka, and David Wilson of Wasilla voting against it. Senators Matt Claman, a Democrat from Anchorage, Mike Shower, a Republican from Wasilla, and Click Bishop, a Republican from Fairbanks, were excused and absent from the vote.

Legislators and staff eagerly observe the vote count for and against Senate Bill 88 on Wednesday, January 31, 2024. The photo captured by James Brooks/Alaska Beacon depicts the moment of anticipation and engagement.

After the vote, representatives of public employee unions greeted Giessel with handshakes outside the Senate chambers.

According to Dominic Lozano, president of the Alaska Professional Fire Fighters union, it is encouraging to witness the entire building acknowledging the challenges faced by Alaska. He emphasizes that Alaska is grappling with public safety issues and retention concerns. While there may be varying opinions on the solutions, the consensus is that Alaska’s problems need immediate attention and resolution.

Despite the Senate taking action, the chances of the pension bill becoming law remain uncertain.

Many members of the Alaska House of Representatives have expressed skepticism towards the proposal, and a similar House bill introduced last year did not receive a hearing. Legislators believe that Governor Mike Dunleavy shares their skepticism, although his spokesperson stated last year that they believe “Anything and everything should be explored to have an advantage in recruiting and retaining new employees.”

When asked about her thoughts on whether the House will hold a hearing on the bill, Giessel was hesitant to give a definite answer but expressed optimism.

“We’ll see. I’ll definitely be advocating for that, and the stakeholders will be advocating as well,” she expressed.

If SB 88 is passed as a law, it would establish a fresh pension tier and pension fund that specifically caters to teachers and state employees. All new employees would be mandated to enroll in this program, while existing employees would have the option to transition into it.

Regular employees would contribute 8-12% of their salaries towards retirement and would have the option to retire at either 60 years old or with 30 years of service. On the other hand, public safety employees would have the flexibility to retire at age 50 with 25 years of service or at age 55 with 20 years.

The Alaska Retirement Management Board would have the authority to determine the annual contribution rate. Additionally, they would be able to make adjustments to the state’s contribution and decrease inflation-adjustment payments for retirees if necessary to ensure the sustainability of the pension fund. This would be done in the event that the fund does not earn enough to cover benefit payments.

The pension revival has sparked some skepticism due to the state’s current pension fund having billions of dollars more in liabilities than assets, a consequence of past misestimates.

Senator Stedman, who serves as the co-chair of the Senate Finance Committee, supported the elimination of the state’s previous pension system in 2005. However, he voted against the bill presented on Wednesday.

On Wednesday, he expressed his skepticism regarding the cost estimates that suggest the new pension plan will be more affordable in its early years compared to the state’s current retirement system.

He expressed concern that creating another unfunded liability would be an immediate consequence.

Myers and Hughes, along with other Republicans, expressed their shared concerns. Hughes stated her support for a pension program solely for public safety employees, but not for all state employees.

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Senator Jesse Kiehl, a Democrat from Juneau, has been a strong advocate for the reinstatement of a pension plan for almost two decades. His support for this cause began when he served as a legislative aide and has continued throughout his tenure as a legislator.

He acknowledged that reviving the state’s pension plan carries some level of risk, but he believes that this risk is actually lower compared to the risks currently faced by the state.

According to him, the pension system reopening program ahead of us is significantly safer.

According to Giessel, the state is facing a shortage of workers to ensure snow-free roads and maintain authorized construction projects.

In his State of the State address on Tuesday night, Dunleavy emphasized the lack of construction cranes in Anchorage as a clear sign of economic weakness.

According to Giessel, construction cranes necessitate permits, as she pointed out in her comment on Wednesday. She emphasized that in order to maintain a robust economy, the state must ensure the availability of skilled workers.

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