Legislature considers restoring traditional pensions for public employees

JUNEAU — Amid a deepening crisis in recruiting and keeping state workers, the Alaska Legislature is again considering measures to recreate a pension plan for public employees, but disagreements on the type and extent of the plan mean a long path ahead.

A deficit of billions of dollars led lawmakers in 2006 to do away with the state’s defined-benefits plans, which gave state and municipal employees a dependable pension calculated on their years of service and average salary, not reliant on the ups and downs of the stock market. Instead, the state now offers public employees a 401(k)-style option that allows them to invest in the stock market but gives less stability — and less of an incentive for workers to remain in Alaska.

Since then, some lawmakers, union leaders and worker advocates have raised alarm about the loss in Alaska’s ability to recruit new employees and keep existing workers, who are sometimes lured by more generous benefits plans to other states. In the 2021-2022 legislative session, a bill to recreate a defined-benefits pension plan for public safety workers came close to passage but stalled in a Senate committee.

This year, the bipartisan Senate majority has named improving recruitment and retention of state employees as one of their top priorities. Members of both the Senate majority and the House coalition are hoping to see a new plan. But among the more conservative Republicans that govern the House, lingering fear over committing the state to an affordable plan could translate to a long and difficult legislative process.

In the House, lawmakers are already considering a bill that would create a pension plan only for public safety workers. That measure is a reincarnation of the bill that passed the House in 2021. Rep. Andy Josephson, an Anchorage Democrat who sponsored the bill both in 2021 and this year, says it’s a conservative measure that can demonstrate the efficacy of such a pension plan without putting the state under an unreasonable financial burden.

Josephson called his bill “the sweet spot” that can appeal to the Republican-dominated House majority’s more conservative side. But leadership in the House referred Josephson’s bill to four different committees for hearings, typically signaling an interest to stall the measure.

The measure passed its first committee last Thursday, picking up support from two Republicans.

Josephson’s plan would apply to roughly 2,300 first responders, who make up around 7.5% of public employees in Alaska.

The reasoning for giving public safety workers a pension option while setting aside other workers is the investment needed to train first responders. Josephson pegged the number between $100,000 and $200,000 per worker, shouldered entirely by the state or local government. His bill has a price tag of roughly $6 million annually, but he says that is less than the millions the state currently pays in recruiting and training public safety workers that are leaving because of unattractive benefits options.

Dominic Lozano, president of the Alaska Professional Firefighters Association, told the House Community and Regional Affairs committee last month that after the state got rid of the defined benefits plan in 2006, firefighters began noticing more of their colleagues leaving. And in their field, more experience is essential.

“You can pretty much go around the state, and it doesn’t matter what municipality, what town, what fire service area — the fact they cannot keep and retain public safety employees is becoming a big concern,” said Lozano.

Josephson acknowledged that other public sectors, including education, face a crisis in turnover that could be addressed with a new pension plan, and that he hopes that a bill targeting public safety workers will ultimately lead to a plan that applies to other workers.

“If it leads to success and a culture of spreading the wealth — great,” he said.

That is exactly what some more conservative Republicans worry about. They say that even a narrow bill opens the door for other state employees to demand similar benefits.

“That is a big concern with folks I talk to about a bill like this, that you’re opening the door for a tremendous financial burden on the state by allowing thousands of public workers to demand this program,” said Anchorage Republican Rep. Tom McKay, during a hearing on the bill.

But Republicans are not united in their opposition. Soldotna Rep. Justin Ruffridge said he is open to considering a defined-benefits program for all public employees. Whatever plan is adopted, he said that “it has to be everybody.”

“You can’t just pick one group and not offer the same to everybody,” Ruffridge said.

But even with a renewed focus on the challenges created by worker turnover, some want to take time to review all of the state’s options, including possibilities like increasing worker salaries rather than creating a new pension plan.

Given the complexity of the issue, Sitka Sen. Bert Stedman, co-chair of the Senate Finance Committee, predicted it will take longer than one legislative session — typically lasting four months — for the Legislature to agree on a new plan, meaning the issue could drag at least until the 2024 legislative session.

The length of time lawmakers debate the issue could in itself prove contentious. Nikiski Republican Sen. Jesse Bjorkman said there is urgency in addressing Alaska’s retirement system sooner rather than later. The problem, he said, has already been studied for years.

“At a certain point in time, study hall needs to be dismissed,” said Bjorkman, a social studies teacher.

 

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