Alaska is projected to owe public workers more than $6 billion more in pensions than it has in assets. So state officials are looking for ways to save money.
They planned to sell $2.3 billion to $3.3 billion in bonds last fall. But Gov. Bill Walker paused the effort after some Senate Finance Committee members expressed concern that the bonds would be too risky.
Committee co-chair Sen. Anna MacKinnon of Eagle River worked with Walker’s office to craft a bill she sees as a compromise on how to handle bond sales when the legislature isn’t in session.
“From my perspective, the legislature responded and felt a bit flat-footed without a process that was established last fall,” MacKinnon said at a hearing Thursday on the bill.
By law, Walker has the ability to issue up to $5 billion in bonds to pay for public employee pensions. But the legislature controls whether the state spends money to pay off the bonds.
MacKinnon has written a bill that would cut Walker’s pension bond authority in half, to $2.5 billion. It also gives the Legislature more oversight authority, by requiring the administration to give the Legislative Budget and Audit Committee 45 days to weigh in on the sale.
“In no way am I advocating that this is endorsement for issuing pension obligation bonds, but in working with the governor’s office, this strikes a balance,” MacKinnon said.
The bonds are essentially low-interest debt. The state would use that money to invest. If investment returns are higher than the bonds’ rate, then the state would save money.
MacKinnon noted that if the state had issued the bonds last fall, it would have saved money so far.
“Just to underscore, Alaska would have received a positive number. We would owe less in our unfunded liability,” MacKinnon said.
MacKinnon introduced the measure, Senate Bill 97, but plans to reintroduce it Friday with the entire Senate Finance Committee sponsoring it.