The Alaska Senate passed a bill Tuesday that would once again offer state and local government employees a pension. The House was concurred with the Senate's changes Wednesday, sending the measure to Gov. Mike Dunleavy.
Despite dozens of attempts since the state closed its pension plans in 2006, it was the first time a bill offering state and local employees a pension passed both chambers of the Alaska Legislature.
The bill is a longtime priority for many members of the bipartisan coalitions controlling the House and Senate, who say it would help stem high turnover and fill vacancies in state and local government jobs. The House passed its initial version of the bill last year.
Sen. Cathy Giessel, an Anchorage Republican who spearheaded the effort in the Senate, said Alaska’s public workforce has eroded in the two decades since the state closed its pension system.
“Every other state offers a pension for at least some of their public servants. We do not, and we are seeing the results,” she said. “We ask our public employees to do difficult work, often in the hardest conditions. The question is whether we will give them a reason to build a career here.”
House Bill 78 would allow current employees and new hires to choose between the existing 401(k)-like defined contribution plan — Tier IV of Alaska’s Public Employees’ Retirement System and Tier III of the Teachers’ Retirement System — and a new defined benefit pension plan.
The new plan would allow public safety employees, like police officers or firefighters, to retire after 20 to 25 years of service at age 50 or 55. Other government employees, from teachers to snowplow drivers to accountants and garbage collectors, could retire after 30 years or at age 60. Retirees would get a defined amount of retirement pay each month determined by their pay and years of service.
“This is about the trooper who stays an extra 10 years because they know their family is taken care of. This is about the teacher who decides to buy a home in Fairbanks instead of looking at the job boards in Seattle,” said Sen. Bill Wielechowski, an Anchorage Democrat. “It's a hand extended to our workforce saying, we value you. We want you to stay. We want you to grow old here. Let's stop being a stepping stone. Let's be a home.”
The change would cost the state an average of $89 million annually, according to the state’s actuary. But backers say the potential savings on things like overtime are much larger.
“It's a conservative fiscal choice. We believe it'll be a net revenue savings to the state of over $100 million a year,” said Rep. Chuck Kopp, an Anchorage Republican who backed the bill in the House.
Before passing the bill, senators made a few key changes, including one that would reduce the amount local governments and other non-state employers contribute to the program. Many local governments said they could not afford to pay 24% of their payroll to participate in the pension program as proposed by the Senate Finance Committee.
An amendment on the Senate floor approved by an 11-9 majority reduced the amount to 22.5%, half a percentage point higher than the rate employers contribute to the existing defined contribution plan.
Non-state employers would have the ability to opt out of the pension plan, meaning they would continue to offer their employees only the defined contribution plan.
The final vote in the Senate was 12 to 8, with two members of the bipartisan Senate majority, Sitka Republican Sen. Bert Stedman and Bethel Democratic Sen. Lyman Hoffman, joining the all-Republican minority to oppose the bill.
Alaska’s Constitution prohibits lawmakers from diminishing retirees’ benefits, and Stedman said he was concerned returning to a pension would risk the state’s financial future. Alaska is still paying off billions of dollars linked to an actuarial error that doomed the prior pension system in the early 2000s.
“Let's not do what our granddads, grandparents did to us back in the ‘60s and give us a liability that we struggle with for 30 years,” Stedman said.
Backers of the pension bill say mechanisms that ratchet contributions up and down to keep the plan funded make it much less risky than older plans.
But in any case, Stedman said, there’s a much more direct way to solve Alaska’s issues with hiring and retaining government employees: pay them more. Other jurisdictions do, he said.
“If the Washington average teacher makes $96,000 and we're trying to get him up here for $81,000, with a higher cost of living, it's a difficult thing to do,” Stedman said. “The retirement system makes no difference. It's salaries.”
Minority Republicans, including Fairbanks Sen. Robb Myers, also pointed to salaries. He pointed to the state Department of Law, which requested a budget increase this year.
“Their retention problem has largely gone away. Their vacancy problem is back down to manageable levels. And how did they do that?” Myers said. “Well, a few years ago, we in this building passed a bill to increase the pay of the lawyers at the Department of Law.”
Legislators could improve the state’s retirement system at a lower cost by requiring employers to participate in the state’s Supplemental Benefits System, the state replacement for Social Security, Stedman said. Most Alaska public employees don’t participate in Social Security and many, including teachers, can access neither Social Security or the state Supplemental Benefits System.
Gov. Mike Dunleavy’s office would not say whether the governor planned to sign or veto the bill, saying only that he would review the proposal when it reached his desk. Dunleavy expressed skepticism of a pension plan in 2024 as the Legislature considered a similar bill.
The bill is likely to be transmitted to Dunleavy in the coming days, meaning he will have to sign or veto the bill — or allow it to become law automatically without his signature — before May 20, the Legislature’s constitutional deadline for adjourning for the year.
Given the narrow margin by which the bill passed, 21-19 in the House last year and 12-8 in the Senate on Tuesday, it appears unlikely that legislators could muster the two-thirds majority needed to override a veto.
This story has been updated to reflect the House's vote to concur Wednesday afternoon.
