- Associated Press - Wednesday, April 2, 2014

JUNEAU, Alaska (AP) - An effort to pull a plan for addressing the teachers’ retirement system from a broad-ranging education bill failed on a 5-5 committee vote Wednesday.

Rep. Cathy Munoz, R-Juneau, said the proposal contained within the House Finance Committee’s rewrite of Gov. Sean Parnell’s education bill, HB278, has not been adequately vetted. Lawmakers said they still had not received an actuarial analysis of the plan for addressing the teachers’ obligation. The plan was publicly unveiled in a draft of the bill on Tuesday.

The House Finance proposal calls for $1.4 billion going toward the teachers’ retirement trust fund and $100 million toward a new pension reserve fund. It anticipates starting with lower annual payments than Parnell proposed, with payments spanning a longer period of time than he proposed. Legislative Finance Division Director David Teal has said the plan was designed to draw down the trust fund, but not prematurely. He has said benefits would not be at risk.

Lawmakers have not yet proposed a plan for addressing the public employees’ system.

Munoz said she did not support the committee plan, which is expected to exhaust the retirement trust fund over a period of decades and require contributions, potentially from state general funds, to pay future benefits. She said it would burden future generations and called the approach morally wrong.

Committee co-chairman Bill Stoltze, R-Chugiak, said he wasn’t absolutely certain about the plan’s approach. But he said he also had questions about an alternative proposal by Parnell.

Voting to remove the retirement piece from the education bill were Munoz; Rep. Steve Thompson, R-Fairbanks; and Democratic Reps. Bryce Edgmon of Dillingham, Les Gara of Anchorage and David Guttenberg of Fairbanks. Voting against were Stoltze and Republican Reps. Lindsey Holmes and Mia Costello of Anchorage, as well as Mark Neuman of Big Lake and Tammie Wilson of North Pole.

The committee late Wednesday advanced the bill, which also includes proposed increases to the per-pupil funding formula known as the base student allocation and provisions related to things like charter schools.

Parnell proposed putting $3 billion from the constitutional budget reserve fund toward addressing the financial needs of the teachers’ and public employees’ retirement systems. About $1.9 billion would go toward the public employees’ system and the rest to the teachers’ system. Earnings from the funds would go toward paying benefits.

Parnell has said his plan would allow for annual payments of $500 million, easing pressure on the state budget. The state currently is on a payment schedule that is on pace to exceed $1 billion before dropping.

The difference between the House Finance Committee and Parnell proposals has been billed as a difference in philosophy. Deputy Administration Commissioner Mike Barnhill on Tuesday called the committee plan a fairly radical change, and Revenue Commissioner Angela Rodell said it could have implications for the state’s bond rating.

But supporters of the committee plan question the affordability of Parnell’s approach in light of other state obligations, and they say its reliance on earnings is risky. Some, like Costello, also have taken issue with the fact Parnell didn’t propose his plan as a bill.

Barnhill said it was a budget proposal, so a bill wasn’t needed. He said an actuarial analysis has been done on Parnell’s plan.

While members of the majority caucus typically vote together on budget bills, Munoz said members have not yet discussed whether that rule will apply on a vote to appropriate money from the constitutional budget reserve.

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