State Sen. Jesse Kiehl, D-Juneau, right, asks Ajay Desai, director of the Alaska Division of Retirement and Benefits, about the assumptions used to calculate pensions earned by state employees under a fixed-amount plan in effect until 2006 and a subsequent 401K-type plan during a Senate Finance Committee hearing Thursday at the Alaska State Capitol. (Mark Sabbatini / Juneau Empire File)

State Sen. Jesse Kiehl, D-Juneau, right, asks Ajay Desai, director of the Alaska Division of Retirement and Benefits, about the assumptions used to calculate pensions earned by state employees under a fixed-amount plan in effect until 2006 and a subsequent 401K-type plan during a Senate Finance Committee hearing Thursday at the Alaska State Capitol. (Mark Sabbatini / Juneau Empire File)

Opinion: Legislature dives into perilous waters with state workforce issues

We should not assume that what worked 20 years ago will work today.

  • By Win Gruening
  • Thursday, March 2, 2023 1:42pm
  • Opinion

The Alaska Legislature’s Senate Finance Committee met on Feb. 23 to begin examining issues around state retirement systems and workforce recruiting and retention. The public hearing was prompted by concerns that state and municipal governments are experiencing high employee turnover rates. Furthermore, attracting qualified applicants has become increasingly difficult and many positions remain unfilled.

Some legislators and employee unions are promoting the idea of reintroducing an expensive legacy state pension plan in hopes this will magically fix the problem. But promising public employees a guaranteed lifetime income upon retirement under this plan would introduce major financial risk to state government, municipalities, and local taxpayers.

Employee retention and hiring is a nationwide problem, not just one peculiar to Alaska. Furthermore, it is not limited to public employees but exists in the private sector as well.

The COVID-19 pandemic triggered enormous turmoil in the U.S. labor market, in both the public and private sectors, with repercussions that will be felt well into the future. Widespread job losses early in the pandemic created tight labor markets that still persist today.

It’s fair to ask the question, though, should Alaska return to an enormously costly retirement system that will have long-term financial implications to fix a problem that may not exist five years from now?

In 2006, the State of Alaska moved from one type of retirement system (defined benefits pension — DBP) for state and municipal employees to a 401(k)-style retirement plan (defined contribution retirement — DCR). The reason for the change was the large accumulation of unfunded liabilities caused by structural under-funding of retirement plans and the stark realization that Alaska’s defined benefit plan, as designed, was unsustainable over the long term.

In the first meeting of what will be a lengthy process, Senate Finance Committee members listened to a presentation by the Division of Retirement and Benefits that compared Alaska’s current state retiree plans with its legacy plans that were discontinued 17 years ago.

Today, proposals to re-institute a similar DBP system for some or all government employees would be extremely risky, considering the private sector has moved steadily away from this model and more state governments are eyeing reforms that limit risk.

Alaska’s experience with the previous plan should be warning enough. No new employees have been enrolled in Alaska’s discontinued defined-benefits-plan for the last 17 years. Yet the plan has required and will still require massive infusions of government cash for decades to make it financially solvent enough to pay out benefits to existing employees and beneficiaries for another 70-plus years. (Alaska’s accumulated unfunded pension liability estimates range anywhere from $7.8 billion to $31 billion depending on interest rate assumptions used).

Consequently, state and municipal level officials are looking at other options. At a recent Senate Labor & Commerce Committee hearing on workforce challenges, Jeff Rogers, City and Borough of Juneau finance director, summarized some of the actions Juneau has implemented or is considering for its employees:

— $5,000 annual stipend for childcare

— Hiring bonuses up to $40,000 for critical positions

— Enhanced employer match for employee retirement contributions

— Expansion of retention bonus program

— Work from anywhere 3 weeks/year – work from home 2 days/week

— Bring infants under 6-months-old to work

— Allow pets in employee offices

— Student loan or tuition assistance

These incentives or policies might have been unthinkable five years ago. Some may view them as unworkable or too expensive, but they have one significant advantage. They address hiring and retention issues without increasing current unfunded pension liabilities and re-exposing state and municipal governments (and local taxpayers) to the obligation to pay ever-increasing retiree benefits in perpetuity.

In the modern world of work, the idea of a ‘job for life’ is becoming increasingly outdated and irrelevant. Millennials and Generation Z have different ideas about what benefits they value in the workplace. There are many reasons why an applicant might accept a job offer or why a current employee would leave their job. But we should not assume that what worked 20 years ago will work today.

In the coming months, Alaskans will hear about ideas under deliberation. In considering changes, the Legislature would be wise to include those that share the financial risk equitably between employer and employee.

After retiring as the senior vice president in charge of business banking for KeyBank in Alaska, Win Gruening became a regular Opinion Page columnist for the Juneau Empire. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is involved in various local and statewide organizations. Columns, My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire. Have something to say? Here’s how to submit a My Turn or letter.

More in Opinion

Web
Have something to say?

Here’s how to add your voice to the conversation.

Deena Bishop, commissioner of the Department of Education and Early Development, discusses the status of school districts’ finances during a press conference with Gov. Mike Dunleavy at the Alaska State Capitol on Thursday, April 17, 2025. (Jasz Garrett / Juneau Empire)
Opinion: The fight to improve public education has just begun

We owe our children more than what the system is currently offering

The author and her husband carry an American flag during the Fourth of July parade, Friday, July 4, 2025, in Juneau, Alaska. (Photo courtesy Kate Troll)
My Turn: Claiming the flag on the Fourth of July

Now, here cheering the flag were other immigrants with an uncertain future. What were they cheering about?

Doug Mills/The New York Times file photo 
President Donald Trump and President Vladimir Putin of Russia at a joint news conference in Helsinki, Finland, July 16, 2018.
Opinion: Mistaking flattery for respect

Last Monday, Israeli Prime Minister Benjamin Netanyahu nominated President Donald Trump for… Continue reading

Win Gruening (courtesy)
My Turn: The millions add up. CBJ, get a grip on spending.

Ignoring essential basic services while spending money on projects and services that few want or need doesn’t make Juneau more affordable

(Juneau Empire file photo)
My Turn: Murkowski bought time for a new governor to do better

The senator said she added a provision that delays new federal penalties on Alaska for its high error rate in processing SNAP benefits.

Alexander B. Dolitsky
My Turn: When a writer’s courage against antisemitism shook a nation

Courage is doing what is necessary even when it’s difficult or scary.

Juneau Empire file photo
My Turn: At least you feel bad about the bill

Sen. Murkowski, you cannot say you voted with Alaskans in mind.

Cynthia Fancyboy (Courtesy photo)
My Turn: Cutting Medicaid hurts Alaska’s small villages and our children

Without Medicaid, I couldn’t afford the doctor visits, surgeries, medications, and hospital stays that have kept me healthy and working for Alaska’s kids over the years.

From left, Senators Lisa Murkowski (R-Alaska) and Susan Collins (R-Maine) head to the Senate chamber at the Capitol in Washington on Tuesday morning, July 1, 2025. Senate Republicans were racing on Tuesday morning to lock down the votes to pass their sweeping tax and domestic police bill, after an all-night session of voting and negotiating with holdouts left Trump’s agenda hanging in the balance. (Tierney L. Cross/The New York Times)
My Turn: Murkowski’s moment of shame

She has no excuse for not following the model Sen. Joe Manchin, D-W.Va., set when he killed Joe Biden’s biggest initiative in 2021.

Gov. Mike Dunleavy speaks about his decision to veto House Bill 57 during a press conference at the Alaska State Capitol on Monday, May 19, 2025. (Jasz Garrett / Juneau Empire file photo)
Opinion: Governor deposits a veto to help predatory lenders

Thousands of Alaskans get so squeezed on their finances every year that… Continue reading

Deven Mitchell is the executive director and chief executive officer of the Alaska Permanent Fund Corp. (Photo courtesy of the Alaska Permanent Fund Corp.)
Opinion: The key to a stronger fund: Diversification

Diversification is a means of stabilizing returns and mitigating risk