(December 6, 2013) — The Governor of Alaska has urged the state to transfer $3 billion from a savings account to help remedy the shortfall in some of its public pension funds.
Sean Parnell announced a plan yesterday that would effectively remove the funds’ deficit and lower the costs paid annually from state coffers.
“State pension contributions represent the single largest cost driver in the state’s operating budget,” Governor Parnell said. “This year’s budget contains an unfunded pension liability contribution of more than $600 million, and the payment plan requires an increase to more than $700 million next year. Soon, the operating budget would be required to contribute more than $1 billion annually to this one line-item.”
The Governor said current projections put Alaska’s Public Employees’ Retirement System and Teachers’ Retirement System with a combined unfunded liability of $11.9 billion.
“If left unaddressed, the annual state pension contribution will increasingly burden the state and hamper our ability to meet the people’s constitutional priorities,” said Parnell. “Paying down the debt now is this generation’s responsibility that we will not leave to the children of Alaska to deal with in the future.”
The governor will seek legislative approval for a one-time $3 billion appropriation from the Constitutional Budget Reserve into the retirement trust funds. A savings infusion in the fiscal year 2015 budget would enable the annual state pension contribution to drop to $500 million a year, Parnell said, and would increase the funded status of each retirement system by 10% almost immediately.
Elsewhere in the US, last week a group of lawmakers in Illinois’ state legislature called for increased state contributions as part of a proposed pension reform plan. Its five public pension plans are currently underfunded by over $100 billion.
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