Alaska is a state far removed geographically from the rest of the country it belongs to. But financially, it may as well be a part of the lower 48—because, unfortunately for Alaska, the United States’ public pension problems know no borders.
The state’s lawmakers have been trying to address the state’s pension funding shortfall—the fund was only 59.2% funded as of 2011, 9th worst in the country—with concrete proposals for months.
Alaska governor Sean Parnell proposed in December that the state move $3 billion from its rainy day fund into its retirement system in an effort to start paying down its $12 billion pension obligation.
The plan went to the state House of Representatives, where it passed with near unanimity, and now the bill has passed the Senate as well—albeit with some changes. In essence, the plan is to use the state’s savings account to infuse its retirement system with $3 billion in additional contributions over the next 25 years.
The Republic has more details:
The Senate Finance Committee’s rewrite of HB385 calls for a contribution rate determined by what’s known as a level percent of pay method for 25 years. While the bill itself does not include dollar amounts, information provided by the Legislative Finance Division and Buck Consultants indicates combined annual payments for the two systems starting at about $345 million in 2016 and slowly building to about $514 million in 2038. It calls for a final payment of about $490 million the following year.
The information shows the Senate Finance approach extending payments by three years beyond Parnell’s plan, which called for annual payments of $500 million between the systems after the infusion, and costing slightly more — about $13 billion total for Parnell’s plan compared with about $13.3 billion under the committee approach.
These are projections, not predictions, Buck and Legislative Finance Division Director David Teal have pointed out.
Though the bill now differs slightly from Gov. Parnell’s original plan, he was happy with the result.
“With this legislation, we are strengthening the state’s AAA bond rating and ensuring future generations are not saddled with this debt,” he said in a press release.
Photo Credit: SalFalko via Flickr Creative Commons License