Alaska Pension Revival Bill Heads to Dunleavy After Historic Passage

JUNEAU — Alaska's Legislature achieved a milestone Wednesday, passing House Bill 78 to reinstate a defined benefit pension system for state, municipal and school district employees, the first such measure to clear both chambers since lawmakers shuttered the plans in 2006 due to a multibillion-dollar unfunded liability. The Senate approved the bill Tuesday on a 12-8 vote, with Sens. Bert Stedman, R-Sitka, and Lyman Hoffman, D-Bethel, joining the Republican minority in opposition. The House then voted 21-19 along caucus lines to accept Senate amendments, dispatching the legislation to Gov. Mike Dunleavy, who has not publicly indicated his stance.

The bill allows current and new hires to opt into the pension or stay in the existing Tier IV Public Employees’ Retirement System or Tier III Teachers’ Retirement System, both defined contribution plans akin to 401(k)s. A key Senate amendment sets the employer contribution rate at 22.5%, slightly above the current defined contribution rate, while non-state employers like cities and school districts can opt out. Backers, including Anchorage Republican Sen. Cathy Giessel, argue the $89 million annual cost pales against turnover expenses from vacancies and lost experience, exacerbated by Alaska's exclusion from Social Security.

Opponents highlight fiscal risks for local governments already cash-strapped in rural areas like Bethel and Sitka, where opting in could strain budgets. The narrow margins — mirroring last year's House passage — make a veto override unlikely without a two-thirds majority. Dunleavy's office stated Friday he would review the bill upon receipt, thrusting the issue into the gubernatorial race spotlight as public sector retention woes persist statewide.