Using a quarter of your savings to pay down an ever-growing debt makes sense, but it’s hard not to pause when you’re paying $3 billion.
That’s the plan Gov. Sean Parnell has put forward to address the state’s growing unfunded liability to the public employees’ and teachers retirement systems, better known as PERS and TRS. The rationale behind the move is that by injecting $3 billion from state reserves now, future payments will be smaller and easier to manage without breaking the piggy bank. The money will go into a trust fund account so the interest along with starting balance would pay off benefits owed by 2037.
Considering the alternatives on the table, the governor’s proposal makes the most fiscal sense. Without it, the state will pay billions more over the next few decades as annual contributions continue to climb. Alaska’s contribution for this year is expected to be nearly $1 billion, according to a February report by Buck Consultants.
The retirement system has been compared by some to mortgage payments, and the governor wants to use state reserves as a lump-sum down payment. The big winners in this scenario are the employers, namely municipalities, who contribute to the retirement systems. With that said, everyone who benefits from local government — all of us — wins. Without the cash injection, municipalities will see their payments balloon out of control during a time when municipal budgets, including school funding, are being slashed.
Using a quarter of the state’s savings may put some on edge, but it’s the only way to ensure the payments don’t bankrupt municipalities in decades to come.
Some have argued that with oil production steadily declining and the state cutting back on spending, now isn’t the time to pilfer reserve funds — Alaska may need that money in the future. We believe the state needs to pursue this option to pay down its unfunded liability while it still has options on the table. Kicking the can down the road for someone else to deal with is irresponsible and places the burden on future generations.
Alaska can afford putting $3 billion toward resolving this issue. What it can’t afford is to do nothing.
— Juneau Empire,
April 3
