JUNEAU, AK — Today, members of the Alaska House Minority expressed deep concern following the House of Representatives’ narrow 21-19 vote to concur with Senate changes to House Bill 78, which seeks to return the state to a defined benefit pension system.
The bill creates a major shift in the state’s financial obligations that risks repeating the most expensive financial mistake in Alaska’s history.
“Alaska is already struggling under a $7 billion deficit in its retirement systems, despite a massive $3 billion infusion in 2014,” Minority Leader Rep. DeLena Johnson, R-Palmer, said. “While other states struggle under the weight of their own defined benefit plans, Alaska had previously found a more stable path. This plan costs $40 million a year. Where is the state going to find the money to cover these new costs?”
“Because of Article 7 of the Alaska Constitution, which prohibits the diminishment of benefits, the bill creates a forever liability that future legislatures cannot adjust, even in the event of a revenue collapse,” Rep. Will Stapp, R-Fairbanks, said. “The state’s previous defined benefit plan saw its liabilities balloon from $15 billion to over $25 billion after it was closed.”
House Bill 78 was rushed to the House floor after changes were made live on the Senate floor only 24 hours prior, without an updated actuarial report or financial analysis.
The plan punishes employee mobility and may not even provide better benefits for teachers compared to the current system.
A provision for municipalities may force smaller boroughs to choose between unaffordable contribution rates or losing employees to larger cities, effectively leveraging them into a system they cannot afford.
“Today, we took action that will bind not only this Legislature, but future legislatures, for the next half of the century,” Rep. Stapp said. “We don’t know the impacts of the risks that we’re taking. We learned that lesson 20 years ago, and we can’t afford to relearn it.”
Media Contact: Amanda Bohman, 907-378-6809