JUNEAU - The state Senate has passed legislation to help municipalities and school districts pay their retirement costs while assigning the burden of tackling a multibillion dollar unfunded liability in the retirement system to the state.
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Lawmakers voted 14-3 Friday in favor of a bill that would level out municipalities' widely disparate contribution rates to 22 percent of payroll and slice school districts rates from more than 40 percent to 12.5 percent of payroll.
The state would pick up the remainder of the retirement costs.
School districts and communities have seen their contribution rates skyrocket in recent years as the state has struggled to get a handle on a massive shortfall in its public employee and teacher retirement systems, the result of soaring health costs and a market downturn several year ago, among other factors.
Senate Finance Committee co-Chairman Bert Stedman, R-Sitka, said the cost share plan for communities, first proposed by Gov. Sarah Palin, would provide local governments with stable predictable rates.
"This is a burden that is affordable at a local level but it does put sufficient pressure on that it is not a free walk at the local level," Stedman said.
Municipalities have endorsed the Senate's compromise, which is more generous than the administration's proposal.
Beside making up the difference in the contribution rates, the state also would pay an extra $7.2 million into the account for municipalities that have already put money into paying down their unfunded liability. And it would provide for a yearly rebate to those communities whose rates are lower than 22 percent.
The total cost would be an extra $193 million dollars paid into the system by the state this year. That amount is expected to rise to $236 million by 2010 before the rates begin to decline.
Stedman said lawmakers still must find a way to pay down the estimated $8.5 billion unfunded liability.
"The next step is to take the liability and isolate it and come up with the tools to get the cash burden down," said Stedman who added that he hoped a final solution could be arrived at next session.
Lawmakers are also considering pension obligation bonds and a large cash infusion into the teacher retirement system.
Senate Minority Leader Gene Therriault, R-North Pole, said he was concerned the solution was not contained in the bill.
"I bet you a couple years down the road we will be back and the municipalities will want us to step in even further," Therriault said.
Finance co-Chairman Lyman Hoffman, D-Bethel, said he hoped the Senate also would be voting soon on a bill that would allow communities to share in the state's surplus revenues from high oil prices.
A revenue sharing bill scheduled to be heard in Senate Finance Committee on Saturday was delayed.
The retirement bill now goes to the House.