Alaska's pension woes grow

Retirement Board told state now short $11 billion for future payments

Alaska’s public pension gap grew by nearly $1.4 billion last year, bringing the public employee and teacher plans’ “unfunded liability” to more than $11 billion, according to new numbers made public last week.


The unfunded liability is the difference between what it will cost to provide retirement payments and benefits and what the state expects to have available to make those payments.

The increasing unfunded liability comes despite hundreds of millions of extra state dollars deposited into the retirement savings accounts during last year

The numbers are casting a cloud over the state’s otherwise strong financial picture, although Alaska has funds available in a variety of accounts, including the Constitutional Budget Reserve, which currently holds more than $10 billion.

The new actuarial estimates were reviewed by the Alaska Retirement Management Board, which oversees multiple public retirement systems in Alaska, at a meeting in Anchorage last week. The Public Employee Retirement, Teacher Retirement, and other public system cover tens of thousands of active and retired employees of state and local governments in Alaska.

The actuarial analysis they reviewed is updated annually by Buck Consultants, and guides how much employers must set aside in each year’s budget to meet future costs.

That number is getting so high that the state has capped it for school districts and local governments, and picks up a big share of the cost itself.

That extra annual cost to state government is expected to continue to rise, and Buck told the ARM Board that it will soon be more than $1 billion a year, which legislators say could threaten future budgets.

Sen. Bert Stedman, R-Sitka, and a co-chair of the Senate Finance Committee has closely watched the growing impact on state finances and said the state needs to do more to ensure the plans are sound.

“Clearly we need to step up, maybe in the form of a several year plan,” to strengthen the retirement systems.

He said his and other committees are expected to hold hearings on what options are available to the state.

He called the new numbers distressing, but not unexpected.

One of the reasons for the increase is the ARM Board several months ago made a decision to reduce the amount it expects to make from its $17 billion in savings over then next 30 years. It had been projecting returns on its stocks, bonds and other investments of 8.25 percent, but feared that was unreasonably high and reduced it to 8 percent late last year.

Buck told the ARM Board that was the biggest impact, the growing deficit.

Stedman called the reduction a good move to ensure the long-term health of the systems.

“I’m glad they lowered the return expectations, that’s something I’ve been asking for 3-4 years,” he said.

Last year, Buck said, the ARM Board’s investments actually made more than 10 percent as the stock market climbed back from its 2008 decline.

Over the longer term, however, the investments haven’t even met the new 8 percent return expectation, Buck told the board.

“The last 10 years have been a difficult period in asset values,” Buck’s David Slishinsky said.

Stedman said he fears future years will be difficult as well.

“Frankly, very few people think we’re going to go back to a robust market like the 1980s,” he said.

Buck told the ARM Board that there was additional potential bad news and good news in the reports they presented.

Alaska uses an “actuarial value,” rather than real market value to determine the size of its savings from which it calculates contribution rates. That actuarial value is calculated by using a rolling average of returns over five years, he said.

The current market value is below the value on which its unfunded liability number was calculated.

Alaska is doing better than many other public pension plans in preparing for the future he said. It sets money aside for future health care costs, something only a few other states do.

Slishinsky was asked by the board how Alaska compares to other states, but was unable to give a definitive answer.

“Those numbers aren’t readily available for most states,” he said.

• Contact reporter Pat Forgey at 586-4816 or


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