Legislature in gridlock over schools

Senators insist money continue to be tied to retirement plan

Posted: Tuesday, April 26, 2005

Lawmakers still can't agree on a key bill that provides funding for schools.

A conference committee rejected a motion to separate a clause in House Bill 1 that says the House of Representatives must approve a new public employee retirement plan to enact the $70 million increase of funding for schools.

The House was outraged earlier this session when the Senate created the amendment. With little more than two weeks left in the session, the chambers are in gridlock.

"We've taken a lot of flack over that decision," Sen. Gary Wilken, R-Fairbanks, told a standing-room-only crowd in the House Finance Committee room.

The debate has continued in the Capitol nearly twice a day and on weekends.

Senate Bill 141 is the plan to change the public employee and teacher retirement systems, also known as PERS and TRS, from a "defined benefit" plan to a "defined contribution" scheme.

Employees have been receiving retirement benefits based on length of employment and wages. A defined contribution plan sets up their retirement account similar to 401(k) accounts provided by private companies. Contributions would grow in individual accounts invested in the stock market.

The Senate will not approve the $70 million for school funding unless the House votes for this plan.

"The House's position I think has been a rational one," said Rep. Les Gara, D-Anchorage. "We deal with school funding as a separate issue. We've always done it, and I think we should keep doing it that way."

A $5.7 billion hole has grown in the PERS and TRS system due to forecasters not accounting for rises in medical costs and a higher number of retirees. The whole system is estimated to cost $16 billion.

The plan also requires employees to pay an additional 0.5 percent of their paychecks that will help freeze the deficit and give cities and school districts time to pay the difference.

Opponents, mostly Democrats, say the plan denies employees the option of a traditional pension and does not provide a safety net in case poor investments are made.

The lawmakers said there is still a chance for compromise and they are looking at alternative solutions.

"While it may be raining right now in this room, the sunshine will shine when we leave," Wilken said.

• Andrew Petty can be reached at andrew.petty@juneauempire.com

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