Unanimous vote allocates $3 billion toward pension system

Sen. Pete Kelly addresses the Alaska Senate on April 7, 2014. (Photo by Skip Gray/Gavel Alaska)

Sen. Pete Kelly addresses the Alaska Senate on April 7, 2014. (Photo by Skip Gray/Gavel Alaska)

After wrestling with how to approach the state’s massive unfunded liability for months, the Legislature unanimously agreed to put $3 billion toward the public employee pension system just hours after their plan was released.

The retirement bill was introduced by Gov. Sean Parnell last week, with the objective of shoring up the retirement trusts funds because the state’s unfunded liability is $12 billion. The House passed the legislation with no changes, but the Senate made two major modifications.

While Parnell’s bill originally put $2 billion toward the public employee retirement system and $1 billion toward the teacher retirement system, the Senate version swaps those numbers because the teacher system is facing a proportionally larger funding gap.

The Senate also adopted a pension payment plan that involves smaller annual contributions in early years, with those contributions stretched out over a longer period of time. Parnell had proposed putting $500 million toward the retirement system each year for the next two decades.

The Senate instead elected to go with funding plan that’s more responsive to how many state retirees are collecting benefits at any point in time. Under the Senate plan, the Legislature is expected to appropriate $350 million to the retirement fund next year, with those payments growing some each year as more retirees begin collecting benefits.

Senate Finance Co-Chair Pete Kelly, a Fairbanks Republican, said the pension plan should allow investment bond raters to experience a “sigh of relief” and help the state maintain a high credit rating. The bill also earned praise from Democrats, who have previously attempted to increase payments in to the retirement system.

The bill passed 20-0 in the Senate, and the House concurred with their version without opposition.

The legislation will now be sent to Gov. Sean Parnell for his signature. In a press release, Parnell offered support for the new version of the bill.

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