Not unlike other Alaska municipalities, the amount of unfunded pension liabilities facing the city of Kenai is on the rise.
Kenai City Council members were told Wednesday night that the city’s Public Employee Retirement System (PERS) unfunded liability is now $16.9 million, up 46 percent from last year.
City Finance Director Larry Semmens told the council the PERS rate also has gone up for the coming year, to 45.71 percent of payroll. The Kenai rate for fiscal year 2007 was 18.67 percent.
The city will have to pay 45.71 percent of the total it pays to all its employees, as directed by the Alaska Retirement Management Board, according to Semmens.
In a statement he read to the council, Semmens said Gov. Frank Murkowski is recommending the next governor use state funds to cover the total cost of the increase for PERS and for the state’s teacher pension plan.
Semmens said Murkowski “will also recommend that an additional $500 million be contributed to the system to pay down the state’s unfunded liability,” now sitting at $4.4 billion for PERS alone.
The ARM board, of which Semmens is a member, made recommendations to the Legislature last year, Semmens said, but “unfortunately the recommendations were not adopted.”
“I’m confident the pension funding will be a higher priority in the next legislative session,” Semmens said.
Mayor Pat Porter asked Semmens how much it would cost the city if the state does not bail out Kenai, and Semmens said, “The increase is about $1.5 million,” which would equate to a 3 1/2 hike in the city’s mill rate.
In response to a question from council member Rick Ross, Semmens said, even if the state fully funds the change, the city’s responsibility would climb 5 percent.
As part of its consent agenda, the council introduced an ordinance which appropriates an added $150,000 to PERS.
Ross suggested it might not be wise to go forward with the payment until the city learns what aid may be coming from the state. The measure will come before the council at its Oct. 4 meeting.
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