State Representative Asks for Alaska Pension Systems Audit

September 7, 2005 ( - Alaska State Representative Mike Kelly has called for a legislative audit of the state's Public Employees' Retirement Systems to rule out criminal misconduct in connection with the system's shortfall of at least $5.7 billion.

The Fairbanks Daily News Miner reports that Kelly requested the audit in a letter to the chairman of the State’s House Ways and Means Committee, which is currently conducting public hearings around the state on ways to address the shortfall.

Kelly said he requested the audit after a number of voters expressed concern that there was possible criminal misconduct in connection with the systems’ unfunded liability, the Miner reports.   He also said an audit would help decide whether the systems should replace their financial consultants, Mercer.

Pat Wellington, former PERS board member, said there was no misconduct, but a declining stock market and increasing health care costs were the causes of the shortfall.   According to the Miner, he added that the systems had been in this situation before in the mid-80’s, but invested their way out of it.

Wellingtonalso said the real problem was the rising cost of health care and pointed out that the state is paying $50 million a year for prescription drugs.   According to the Miner, he said the state could save $1 million a year by increasing the use of generic drugs.

Kelly said he would like the audit to begin as soon as possible so the legislature might have an answer by the time it returns to work in January.

Alaska governor, Frank Murkowski signed into law a bill that would switch the Alaska’s Public Employees Retirement System and Teachers Retirement System to 401(k) type defined contribution plans effective in 2006 (See  Alaska Public Pension Plans Switching From DB to DC ).