Alaska editorial: A jumping-off point for retirement debt discussion

Posted: Monday, January 29, 2007

This editorial appeared in the Anchorage Daily News:

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By now most Alaskans know the state-run retirement system for public employees is about $8 billion short of what it could need over the next 25 years to pay out pension checks and health insurance benefits. And by now most Alaskans probably also know there is no easy - certainly no painless - answer to the problem.

The state, cities, boroughs and school districts are paying a lot more into the retirement system than ever before and, eventually, after enough years of higher employer payments, they will cover the shortfall. But the higher employer contributions are straining school district and municipal budgets and costing the state several hundred million dollars a year. High oil prices are providing the cash to pay the bills, but what if prices drop even more? Then what?

House Bill 12 is a start at one possible answer. It's not perfect, but it is worthy of serious discussion.

The measure, sponsored by Anchorage Republican Mike Hawker, would set into state law a plan to cover the shortfall at a faster pace. Essentially, the bill directs the governor's administration to figure out how much should be deposited into the retirement system each year to fill the gap in seven years. No law can require such future payments, but at least it would force the question each year.

Paying down the shortfall in seven years would be costly, and who knows whether the state will have the extra cash available each year to make the big payments. There's no immediate crisis - the retirement system has billions on hand to pay benefits - but making the fund whole would allow the state, cities and schools to reduce their contributions, helping everyone's budget. Figuring out what it would take to bring the retirement system current in seven years would be a productive exercise, and having the legislative debate would be useful.

The debate should focus on trade-offs between the state's immediate needs for any extra cash - be they prisons, schools, roads or whatever - and the option of paying down the retirement shortfall. Paying it off more quickly with extra state money would be better for school districts and municipalities, which would rather not worry about covering higher employer contribution rates over the next 25 years. But paying the bill quicker means the money would not be available for more immediate needs.

Pay now or pay later. Either way, the retirement bill must be paid. The debate over House Bill 12 is a good place to start that debate.

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