News from Hughes » February 6, 2023

Below is list of bills scheduled to be heard in various committees this week. If you’d like to provide public testimony, enter the bill number (for example “HB 22”) into the search bar here to learn the date and time. Scroll down toward the bottom of this newsletter or view the highlighted bill images to find the public testimony call-in phone numbers.

Anneliese Roberts: Chief-of-Staff

Anneliese joined our team last week and comes with strong experience in the private sector as well as local government. Before diving into the political arena, she worked for seven years as the Safety Manager for the Municipality of Anchorage. She began her career in the mining industry at Red Dog mine and later with Cook Inlet Tug and Barge. Anneliese holds two master’s degrees—one in Occupational Health and Safety and another in Business Administration; both from Columbia Southern University.

When not working, Anneliese devotes time volunteering with several animal rescue organizations throughout Alaska as well as women’s abuse organizations. Anneliese’s favorite food is sushi, and a historical figure she aspires to emulate is Queen Elizabeth because she considered her to be strong and the embodiment of boldness in what heretofore had been primarily a man’s world in the United Kingdom. The Queen’s courage, resilience, and commitment to service are an inspiration.

Stephen Knouse: Legislative Aide

Stephen has a communications background, with both a creative and technological bent. Born in South Dakota, his family moved to the Mat-Su area in Alaska in the late 80s – where most of his family still resides. He owns a media design business and holds an associate degree in Bible and Music (Platte Valley Bible College), as well as high-level certifications within the British Commonwealth to include ministry leadership, creative arts, and vocational training/assessment.

When not in Juneau, he enjoys volunteering through his church and other organizations to work with kids and teens. His down time is usually spent creating and enjoying various forms of media (which also include music, arts, and literature), with a little gaming on the side. Stephen’s favorite food is always changing as he is continually seeking new cuisine experiences from various world cultures. The historical figure he has aspired to emulate is Walter Elias Disney because of the culture he cultivated of innovation (both creatively and technically) to tell gripping stories and communicate universal truths.

Gaby Gonzalez: Legislative Staff Intern

As a senior at the University of Anchorage, Alaska pursuing a double major in Political Science and International Studies, Gaby someday hopes to work for the State Department as a Foreign Service Officer with an emphasis in diplomacy. Gaby spent her childhood and most of her teen years growing up in Japan and has enjoyed recent trips to Puerto Rico to visit with her grandparents and connect with her heritage.

She’s an avid snowboarder, plays rugby, and fixes classic air‑cooled Volkswagens. She’s owned a 1967 bus, a 1960 Beetle and a 1955 Oval, and hopes one day to acquire an air-cooled Porsche. Gaby’s favorite food is butter chicken curry, and a historical figure she aspires to emulate is Madeline Albright because she had an extensive career in foreign policy and was the first woman Secretary of State.

Since Alaska closed the door on the Defined Benefits (DB) retirement plan in 2006 to public employees due to the growing unfunded liability, and opened the door to the new Defined Contribution (DC) retirement plan, various legislators have filed bills to re-establish DB retirement plans which many public employees prefer, but not all. The 33^rd Legislature is no different with three separate bills already filed; HB 22, SB 11, and SB 35. The most noticeable difference between the three bills is SB 11, which hopes to establish defined benefits for all teachers and public employees, whereas the other two are specific to peace officers and firefighters.

A DB retirement plan pays a set pension amount each month to a retiree, rather than the retiree controlling and managing withdrawals from a 401K type account as would be the case with a DC retirement plan. Both types involve an employer contribution during the public employee’s period of employment. The DC plan requires no additional contribution post-employment, but the DB plan can depending on market returns and other factors – and herein is the risk to the employer: in this case the State of Alaska, as well as local municipalities and school districts (if the pool of eligible employees were to be expanded beyond state peace officers and firefighters to include teachers and municipal workers).

Concern over the state’s unfunded liability (debt) started in 2001 when the pension fund went from nearly $50M overfunded to over $1B underfunded in one year. The concern was validated in 2005 when the liabilities rose to more than $5B and SB 141 was passed. The bill’s intent was to address and overhaul the Public Employees’ Retirement System and the Teachers’ Retirement System underfunded status with the defined contribution plan. Again, the DC plan is similar to a 401(k) and offers flexibility to an employee who wishes to roll their PERS or TRS to another qualifying plan when they leave employment with the state. The DC plan also offers a steady and foreseeable cost to the State of Alaska as the employer as mentioned earlier, a luxury denied by the DB plan.

The formula proposed currently for the “new” tier to re-instate a DB plan (in HB22 for example) is based on the employer contributions of 22%: 12% to the employee and the remaining 10% to the unfunded liability. It’s important to note that with the current DC plan, 13% goes to the unfunded liability which still holds a balance of roughly $4B. There are levers in place with the proposed bills attempting to limit the risk to the state, including a minimum retirement age of 55 for peace officers and firefighters with at least 20 years of service, or an age of 60 with a minimum of five years of service, the ability for employer and employee contribution rates to be increased (note this would increase the annual state budget), the post-pension retirement adjustment is suspended when the plan falls below 90% funded, and the annual cost of living increase is eliminated.

The big question: are these provisions enough to keep Alaska safe from even further debt, from bankrupting the state? Other states have gone belly-up due to massive unfunded liabilities that spun out of control. We do not want to put Alaska at risk and in such a position. The Senate Finance Committee, according to Co-Chair Senator Bert Stedman, plans to take its time examining the proposals and the projections in regard to costs and risks to the state. Senator Stedman led the charge in 2006 away from DB in 2005 to DC, and is likely to be very cautious moving forward. Without making any changes, it is estimated to take 30 more years to eliminate the unfunded liability created pre-2006 by DB.

I am hearing from Alaskans on both sides of the issue. Some public employees are speaking up strongly in support. Others like the flexibility and mobility of a portable 401K type plan and are opposing the change. (Young people today often do not envision themselves staying with the same employer for 20 or 30 years.)

Many are making the case that returning to a DB plan will help with recruitment and retention of public employees. When we hear about workforce shortages in virtually all industries in the private sector, the jury is still out on how much a DB plan would actually help solve recruitment and retention challenges in the public sector.

Many in opposition work in the private sector and have DC type plans; they are concerned about their wallets and how this might impact them down the road – will the return to DB mean future taxes on individuals to pay for post-retirement contributions by the State of Alaska to meet its obligations to retirees? This is an important question that needs to be answered.

What we do know is that we need good employees to stick around. We don’t want trooper vacancies. We need firefighters. We know there’s a national teacher shortage; we must navigate this challenge and overcome it. At the same time, we should not break the bank, and it is not prudent to burden our children and grandchildren nor wise to put the private sector at a disadvantage when the strength and health of our economy depends on it. This is a complex problem; there is no silver bullet.