Workers' salaries targeted to bridge gap in retirement funds

State employees would pay more for the same benefits

Posted: Tuesday, March 01, 2005

The state is looking to fill a $5.6 billion hole in Alaska's retirement system, and some lawmakers are eyeing the paychecks of teachers and public employees as a partial solution.

The House bill by Rep. Mike Kelly, R-Fairbanks, would allow administrators for the Public Employees Retirement System (PERS) and Teachers Retirement System (TRS) to increase the amount taken out of employees' checks by up to 5 percent each year to help pay the costs of providing the programs' benefits.

Workers would pay more to the programs but receive the same level of benefits.

Current state law provides a set employee contribution rate of 8.65 percent for teachers, 7.5 percent for firefighters and peace officers and 6.75 percent for other public workers such as municipal employees.

Kelly argues that the set rates are no longer appropriate with the PERS and TRS facing a massive gap between how much money the programs have and the amount needed to pay benefits to retirees. Most recent estimates put that unfunded liability at $5.6 billion, two times the amount of Alaska's annual budget.

PERS and TRS administrators have relied on municipalities, school districts and other employers to help pay for that liability. The administrators have been annually increasing the PERS costs for many employers by 5 percent in recent years, the maximum increase allowed by law. Employees should also be chipping in, Kelly said.

"I think that's a reasonable requirement that they share in these increases," he said.

The unfunded liability in the PERS and TRS is largely attributed to a poor run on the stock market for the program's funds and skyrocketing costs for the medical benefits provided by the programs.

Kelly introduced a separate bill that would change the membership requirements for the boards that oversee the PERS and TRS. That bill would require three of the five members of both boards to have never worked for an employer covered by the systems. Additionally, at least two of those three members would need "significant private sector experience in administration, financing, accounting or economic development."

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