Gov. Sean Parnell introduced his public employees’ and teachers’ retirement system fix in bill form Thursday — a move lawmakers say will expedite the process with only 10 days left in the session.
It’s the same plan the governor announced in December and included in his recommended budget — infuse the Retirement System Trust Fund with $3 billion from savings now so the state can cut ongoing annual payments down to $500 million.
If the Legislature were to take no action on the approximately $11.9 billion unfunded liability this year, the state would be on the hook for somewhere between $700 million and $975 million in this budget.
“It gives certainty,” House Finance Committee co-chair Bill Stoltze, R-Chugiak, told the Empire. “We didn’t have the certainty of legislation and the framework to follow the appropriations.
“That’s really what the Legislature was looking for,” he added.
When asked earlier in the session about why there weren’t hearings on the governor’s proposal, Stoltze cited the lack of a bill containing the details. He said this bill, HB385, will be scheduled for a hearing in the finance committee “as soon as possible.”
In a letter informing House Speaker Mike Chenault, R-Nikiski, that he was introducing the bill, Parnell said the lump sum payment would increase funding to the retirement systems by almost 10 percent instantly.
Lawmakers on both sides of the aisle have been supportive of a large infusion of cash throughout the session, but there has been a divide over how much annual payments should be going forward.
“It’s a vehicle that’s needed to move legislation,” Chenault said of the governor’s bill.
A “pay-as-you-go” plan drafted by Legislative Finance Director David Teal was attached to the governor’s omnibus education bill, HB278, but lawmakers rejected it after an actuarial analysis indicated it carried substantial risks.
That plan would have called for smaller annual payments than the governor’s proposal, but those payments would have continued until the last benefit was paid out — sometime around 2073.
The governor’s plan calls for just 20 years of paying $500 million annually, and then paying off the remaining balance using the interest and balance from the trust fund.
The proposal immediately gained the support of the Alaska Retirement Management Board, which oversees the retirement accounts, at the board’s December 2013 meeting.