Legislators mull plan for retirement

Governor proposes cost-sharing among municipalities, state

Posted: Wednesday, March 21, 2007

Gov. Sarah Palin is advocating changes to the state's retirement programs to deal with as much as $10 billion in unfunded liability.

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One proposal includes moving the Public Employee Retirement System to a cost-sharing system, in which every municipality would pay the same rate. Under the current system, each city's rate is calculated based on its individual experience.

With cost-sharing, the state would be responsible for 65 percent of the PERS liability, said Annette Kreitzer, commissioner of administration, which includes one of the teams developing the administration's proposal.

Some have suggested that percentage is too low. Kreitzer disagreed.

"We have reasons why we think 65-35 is fair," she said.

Any more, she said, would result in unfair treatment of communities that don't have an employee retirement liability.

Hearings on the proposals began in both the House and Senate this week.

Rep. Mike Kelly, R-Fairbanks, has introduced a bill of his own calling for the state to pick up 80 percent of the cost, and the Alaska Municipal League is seeking 85 percent.

Juneau supports the Municipal League's 85 percent, said City Manager Rod Swope. The capital has about $77 million in unfunded liability.

"That's the position we're holding," Swope said. "We feel the state has a large responsibility here because they were managing it on our behalf."

Sen. Bert Stedman, R-Sitka, said the Legislature is already working on the issues. Palin's proposals could keep communities from being hit with crippling retirement bills, he said.

"The end result is the state is looking forward to share the burden with cities and boroughs with respect to the unfunded liabilities to minimize the burden on their general funds," said Stedman, co-chairman of the Senate Finance Committee.

Sen. Kim Elton, D-Juneau, said he was willing to look at cost-sharing.

"It can be one of the ways we help reduce the cost to employers," he said.

In some cases those employers are small cities with few financial resources, he said.

"I think what the governor is trying to do is get us to a predictable rate here, and we certainly applaud her efforts," said Sen. Gene Therriault, R-North Pole.

"Whether they've made the correct split, I don't know," he said.

Rep. Beth Kerttula, D-Juneau, said cost sharing was "a reasonable thing to look at," but she had yet to be shown that it wouldn't raise rates for some small communities.

Palin's bill promises extra money to hold down rates for communities whose retirement programs are now adequately funded, but only for a year.

The Teacher Retirement System is already a cost-sharing system, meaning every community shares costs equally. Palin is also looking at ways of boosting its finances, including using a cash infusion and pension obligation bonds to fully fund the system.

The Legislature is also considering a lengthy technical fix to address problems in last session's Senate Bill 141, which replaced the state's retirement system with a defined-contribution plan, instead of a defined-benefit plan.

Elton opposed that change, and still does.

"I find it stunning that we pass SB141, and it takes 50 pages to fix what we did," he said.

Elton said he doubted there were votes in the Legislature to reopen that battle, but he was still looking for information to show that it improved the state's financial situation.

• Pat Forgey can be reached at patrick.forgey@juneauempire.com.

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