Senate majority pauses retirement bill after new estimates

JUNEAU — The Alaska Senate majority announced Monday that legislation calling for increased local contributions to the public employees’ retirement system was on hold given new actuarial estimates. The GOP-led majority, however, said it plans to continue discussions on legislation that would increase local contributions for the teachers’ retirement system.

Under the numbers provided by an actuarial consultant, the estimated state contribution for the public employees’ system for fiscal year 2018 falls from the previous estimate of $114 million to $35 million and for the teachers’ retirement system, from $129 million to $91 million, said Legislative Finance Division Director David Teal. Teal wasn’t clear on the reasons behind the numbers. He called the change in state assistance for the public employees’ system in particular “pretty massive.”

Department of Administration Commissioner Sheldon Fisher said a $3-billion infusion to the systems and a “favorable trend” in health care costs have had an impact on the estimated state assistance payment. The infusion was approved by legislators in 2014 to help address the state’s unfunded pension obligation.

The numbers are based on a preliminary analysis conducted by the consulting actuary that hasn’t been formally adopted by the Alaska Retirement Management Board yet, Fisher said. He couldn’t immediately say why the estimated contribution level for the two systems changed at such varied levels.

The Senate Finance Committee last week introduced bills calling for increased local contributions for both systems as lawmakers grappling with a multibillion-dollar budget deficit looked to further cut state costs. The committee also introduced two bills linked to the retirement bills. One would phase out a program for state-sanctioned scholarships and financial aid grants and another would change the community revenue sharing program.

Senate Finance co-chair Pete Kelly has said that money from the scholarship and the financial aid programs would be used to ease the initial impact on districts from the proposed increase in teachers’ retirement system contributions. Meanwhile, provisions in the community assistance bill would make certain property tax exemptions optional. That was cast as a way for communities to offset the proposed increase in their contribution to the public employees’ system.

Laura Cramer, chief of staff to Senate Finance co-chair Anna MacKinnon, said the community assistance bill would continue to move forward but it was her understanding that the property tax exemption provisions would be removed.

Kelly, in a Senate majority release, said the state has paid “multiple billions on behalf of local governments to keep the teachers’ retirement system from bankruptcy. Now we are asking them to help shoulder some of the costs, and we are even willing to pay a portion of those costs for the next five years.” Even with the large state deficit, “we are still going the extra mile to protect local governments,” he said.

The bills have prompted concerns from a major teachers’ union and a municipal group. The committee had been scheduled to take public testimony on the bills Monday but cancelled that to allow time to review the numbers.

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