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The state must not delay paying back a $6.9 billion unfunded liability in its state retirement systems or it will risk paying much more in the future, representatives of the Alaska Retirement Management Board said Tuesday.
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The board presented a legislative committee with its long-awaited recommendations for repaying the state's debt.
"It's a problem that will never go away if we don't pay this now," said board member Larry Semmens. "It's like your home mortgage. If you pay now you will save a great deal of money in interest over the life of the loan."
The board was created last year under legislation that switched retirement benefits for public employees and teachers hired after July 2006 from a guaranteed pension, or defined benefit plan, to a 401(k)-type defined contribution plan.
The much disputed reform plan was touted as a way to stem the growth of the unfunded liability but it did nothing to repay existing debt.
The retirement board is recommending the Legislature establish a liability account, and as of 2008, begin appropriating a specific amount every year to pay down the debt within 30 years.
The board developed a method of calculating the yearly amount to be appropriated.
For 2007, the board recommends the state pay half of the $37.2 million increase in the cost of municipal pension plans and fully fund the public employee system at $110 million and the teacher's system at $98 million.
The Legislature would have to appropriate money for the 2007 budget by the end of the session this year.
"We understand these are large numbers and this is late in the session but it's important to convey to you the magnitude of the problem," Semmens said.
House Ways and Means Committee Chairman Bruce Weyhrauch, R-Juneau, said he would recommend legislation be introduced to implement the board's recommendations.