Alaskans: Rainy enough for ya?

Editorial

Posted: Friday, May 05, 2006

It’s hard not to worry about the future and finances as the second session of the 24th Alaska Legislature prepares to adjourn next Tuesday.

Across the state, including the Kenai Peninsula, municipalities are sagging under the weight of public employee and teacher retirement programs. The borough, for example, will pay 22.81 percent of its total payroll into PERS, the public employees retirement system, during fiscal year 2007, which runs from July 2006 through June 2007.

It is likely to jump significantly the following year, perhaps as high as 32 percent of the payroll. With such a large percentage of municipal budgets forced to go to the retirement debt, tough decisions lie ahead. How will municipalities raise the money to fund the services that citizens have come to rely on? What will become of small communities already running a deficit budget? There’s likely only one place for taxes to go, and that’s up.

Lawmakers last year passed a law creating a new, defined contribution retirement plan, which would apply only to new employees. An amendment would delay implementation of the plan for a year. Lawmakers should skip the delay. Every day without a change leaves a bigger debt. A new system, however, doesn’t erase the old debt. And if state and local economies are going to grow, that debt burden has to go.

There’s no simple solution, but it’s worth remembering Alaska is not a poor state. As of May 2, the state’s permanent fund was valued at $34.9 billion. Alaska doesn’t need to touch the fund’s principal, and shouldn’t, but citizens should tell their lawmakers it’s time to use the earnings of the fund to get rid of this retirement debt. The rainy day that the permanent fund was created for has arrived. Earnings should be used to help move the state forward into a dynamic future. It just doesn’t make sense for the state to have this incredible savings account, while its municipalities are being strangled by debt.

There’s another cause for which tapping the earnings is worthwhile and that’s equalizing the formula that determines how much money school districts get from the state. It appears the Legislature will adjourn this year without addressing the area cost differential, one of the key factors to the school funding formula. That factor has penalized Kenai Peninsula Borough schools for years. Lawmakers can’t defend the formula, and they need to change it — unless they believe some students should be treated like second-class citizens.

Sooner rather than later, Alaskans need to define the point at which it’s raining hard enough to spend some of the earnings from the state’s savings account. If they absolutely don’t want to tap the fund’s earnings, then they need to be prepared to pay a lot more in taxes and user fees or see services decline.

Is that the Alaska we want to give to future generations?



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