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My Turn: Retirement checks should never bounce

Posted: April 6, 2014 - 12:04am

The Juneau Empire has done a good job in following and explaining the largest financial problem facing public employers in Alaska. The unfunded public pension liabilities have grown from $2 billion in 2002 to $12 billion today, even as the state has paid larger and larger amounts toward this liability on behalf of every public employer, including the Juneau School District and City and Borough of Juneau. Each year the actuaries tell state and municipal employers what it would take to completely pay down this arrearage but the liability grows.

The persistence of this liability in annual growth and in exceeding estimates is a concern of every Alaskan. This liability is going in exactly the wrong direction given declining state revenues and oil production, and inflationary increases in education funding, Medicaid and other programs.

Gov. Sean Parnell clearly agrees. The Parnell budget being considered right now by the Legislature includes a $3 billion payment toward the liability on behalf of not only the state but every municipality and school district. That will not only increase retirement fund investment earnings but it will bring annual payments down to a manageable size. The retirement fund investment rate of return for the most recent fiscal year was over 18 percent; so earnings on what Parnell plans to put into the investment fund are important in solving the problem.

There are critics of the governor’s plan, however. They would extend paying down the unfunded liability until 2050 and beyond. They call their plan pay-as-you-go and believe that a commitment made to a teacher today should not be paid until 2050 when that teacher is to receive her monthly retirement check. Pay-as-you-go allows the 28th Alaska Legislature to spend general fund reserves today so that the 45th, 46th and 47th Alaska Legislature must find the money to cover that retirement check. Alaska taxpayers at that time – many of them not yet old enough to vote in 2014 — would be paying for state and municipal services received today.

If the Legislature abandon’s Parnell’s plan to pay down the liability, there is the additional risk that municipalities and school districts will be required to make up any shortfalls in state revenues or miscalculations by the actuaries. While the state is the largest employer in the Public Employees Retirement System, it’s only a minor debtor in the Teachers Retirement System. A miscalculation today in the pay-as-you-go alternative could require some school districts to double classroom size to meet their obligation to retirees, and some school districts could actually be forced to declare bankruptcy and default on writing those retirement checks.

It’s probably no surprise to you that I am urging every Alaskan to support Gov. Parnell’s fiscally responsible plan. There is no reasonable alternative. I don’t want retirement checks to bounce. I don’t want future generations to pay for commitments we made and services we received today. I hope my generation leaves Alaska in as least as good shape as it was when it was handed to us.

• Tom Boutin is local forester and a former official for the Department of Revenue. Tom Brice is a business representative for Alaska Laborers and Alaska Retirement Management Trustee.

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. Shannara
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. Shannara 04/07/14 - 12:09 pm
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@Karl

I am assuming you mean why HASN'T the PFD increased in value? Or am I reading that wrong?

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