Retirement questions still confronting state leaders

Legislature expects early review of $11 billion unfunded liability question

With the state facing billions of dollars in future retirement costs that it doesn’t know how it will pay for, the Alaska Retirement Management Board is urging action on the issue by Gov. Sean Parnell and the Alaska Legislature in the session beginning next week.


The biggest issue is how to deal with an the fact that the board expects to need $11 billion more to pay for pensions and retiree health care than it thinks it will have in the future. That amount is known as the state’s “unfunded liability.”

“Addressing the unfunded liability is very important, it’s a very large figure,” said Mike Barnhill, deputy commissioner for the Department of Administration.

The board, which oversees retirement trust funds of about $20 billion dollars, doesn’t have the authority to decide itself how it should be addressed.

The ARM board did, over the last several months, develop positions on some of the actions it considers possible solutions, as well as those that should be ruled out.

One of those it ruled out was extending the period over which the unfunded liability would be “amortized,” or planned to be paid off, over a longer period of time. That could lower annual costs, but greatly increase the total cost, the board concluded.

“The board does not recommend any funding scenario which fails to amortize the unfunded liability over a reasonable time frame,” according to the resolution it sent to the governor and Legislature in late 2011.

The board and its consultants developed the resolution, accompanied by dozens of pages of detailed spreadsheets of funding scenarios, over the last several months.

They are expected to be reviewed in legislative hearings early in the legislative session, particularly in the Senate Finance Committee, which has taken the lead on pension issues.

The ARM Board is expected to appear at those hearings to explain members’ thinking, he said.

Other options for dealing with the unfunded liability include changing earnings assumptions for what the money already in the pension trust funds will earn and appropriating more money from state savings into the trust funds.

Some legislators are already proposing kicking some of the state’s billions in savings into retirement savings.

One proposal by several state senators would use some of the more than $10 billion in the state’s Constitutional Budget Reserve to reduce the pension debt. Senate Bill 142 would put $2 billion in a newly created pension trust to be used to cover future costs.

Barnhill said the Parnell administration’s first goal is to discuss with the legislature at the upcoming hearings what had already been done.

“The first thing is to get this information before the Legislature,” he said, so that everyone was able to discuss the issue with the same background information.

He said it was too soon to say whether the administration would introduce its own legislation, developing something with legislators, or taking some other tack entirely.

• Contact reporter Pat Forgey at 523-2250 or


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