Alaska Grapples With Pension Reform

April 5, 2005 ( - Following the lead of other states, Alaska is grappling with its defined benefit pension system, with multiple reform proposals sitting in a stalled legislature.

The state House and Senate both have proposals to overhaul the state’s defined pension system, but linkage to other issues and calls for second opinions are slowing any changes down, according to the Anchorage Daily News. The state pension system, which provides retirement funds to public employees and teachers, is expected to have a long-term shortfall of $5.6 billion.

Both bills would attempt to create a new system for future employees’ retirement plans, with new employees having access to 401(k) plans instead of the traditional defined benefits plan. Any switch would also reduce future employer contributions to the retirement system, according to the Daily News.

However, the Senate bill, still in the state Finance Committee, would do nothing to fix the underfunding issue, the paper said. Instead, the bill would simply create a new pension management board to look into the issue further.

The House bill would address the underfunding issue, with the state covering about half of the $5.6 billion price tag. It has yet to state where the money would come from, however.

Movement of the bills has been stalled by attempts at issue linkage. The House voted on Monday to unanimously reject a Senate proposal to link the pension reform to state aid for schools, a tactic the Senate believes will get school district support for the reform.

Some parties in both camps are calling for a second opinion on the ultimate changes, however, calls that are slowing down the process and potentially forcing it to be solved next year, the Daily News reported. Partisan calls of a right-wing movement forcing the retirement burden further onto employees’ shoulders has also come into play, according to the paper.

Other states have grappled with this issue as of late, with California being the most prominent. Multiple bills have been put forth in the Golden State legislature calling for reform, and Governor Arnold Schwarzenegger has said he will support any such move. The massive state pension fund, not surprisingly, is opposing any such reform (For the latest on the California reform issue, please see Golden State Analysts: Pension Reform Could Save More than $1B ). Illinois has also started discussing the pension reform issue (See Illinois Pension Leader Calls Reform Proposal ‘Very Risky’ ).