Alaska’s Misguided Pension Gambit
Republicans are supposed to be the party of limited government and fiscal responsibility, but in recent years many of them seem to have forgotten that.
Some lawmakers in Alaska are the latest to join the ranks of those with selective-values-memory loss, quietly toying with a plan to reinstate public pensions during this legislative session.
Supporters of the plan, which unsurprisingly include members of the public-sector unions in the state, claim that they need to offer better benefit packages in order to attract talent to open positions. But this argument quickly falls apart for a few reasons.
One, Alaska is hardly the only state experiencing a shortage of people who want to work for the government. The libertarian in me admittedly sees this as a mostly good thing, a lot of government jobs shouldn’t exist and others need to innovate. It sounds like the labor market is speaking.
More importantly, people who aren’t from Alaska are highly unlikely to move to a cold, remote, frequently dark state and work for the government for 30 years just to have a better retirement. A better way to attract talent in the state to these positions would be to remove degree requirements (which they recently did for many public roles), offer a better work-life balance and remote schedules, or simply offer more competitive salaries.
For reasons we will discuss here, their plan to bring back public pensions is financially untenable, would not solve the problems they claim it would, and ultimately would lead to the growth of government—which Republicans are supposed to stop.
Financial Strain:
Fifteen years ago, Alaska made the decision to move away from their traditional pension plans (as did many other states) for one main reason: they were going underwater from their unfunded liabilities. Led by Senator Bert Stedman, they transitioned their retirement plan to a defined contribution, 401k-style model.
This model has been working well in the state, and if anything perhaps the contributions on these plans could be raised. But lawmakers are skipping right past those options, arguing that a 401k isn’t a sweet enough deal.
The general public is expected to save and plan for their retirement. The general public is subject to market fluctuations that impact their 401k (often due to government policies). Can someone explain to me why government employees should not have to live under the same expectations and systems?
Currently the state still owes about $8 billion in unfunded liabilities from their old system. While Alaska is unique in the fact that its residents do not pay income or sales taxes, that doesn’t mean they won’t pay for this in the long run. The state still has to raise money through other capacities to pay its debts, and there is still a finite number of ways that that pool of money can be used. If they use it to pay the astronomical costs of pensions, that means they simply cannot afford to pay for other things—things that would benefit all Alaskans more.
Take a recent example in Chicago. There, pension contributions are now 20 percent of the city's budget. In 2023, $1.78 billion was dedicated for the police department, and the city also paid $973.2 million to the police pension fund. That is ultimately going to mean the city won’t have funds to hire more police officers (which they desperately need to do) because it’s paying so much to keep retired police officers flush with cash.
Alaska could easily face a similar fate with the way their budget is currently shaping up.
Yet this group of Republican lawmakers in the state (and we’ll name names, the sponsors of the bill are senators GiesselI-R, Bishop-R, Stevens-R, Kiehl-D, Kawasaki-D, Tobin-D, Wielechowski-D, Gray-Jackson-D, Dunbar-D, Claman-D, and Olson-D) are not only trying to bring it back, they’re trying to retroactively apply its provisions to all of the plans that were transitioned to defined contribution plans 15 years ago.
Outdated Nature of Pensions:
Pension plans require that a person work in the same job, in the same location, for decades. They make for pretty political promises for lawmakers who want to appeal to certain sectors. And they’re at best reminiscent of a time where we could afford to give people guaranteed retirements for little input.
But times have changed, and efforts to bring back outdated concepts like pensions are just another argument for why our politicians need age limits—they’re simply disconnected from reality.
Millennials and younger generations do not want to work the same job their entire lives. They are far more mobile, have a wider range of options when it comes to their career, and are all pretty aware that spending more than two years in a job leads to a loss in income. They rank jobs that give them a higher purpose, flexible work schedules, and work life balance. They want to be able to save for retirement, but there’s no evidence they would trade in all of these other factors for a pension.
Furthermore, the growth of government alongside the Federal Reserve’s devaluation of the American dollar means the days where pensions were a realistic plan are dead and gone. There were 636,000 new government jobs added in 11 months of 2023 alone. The math doesn’t work, and pretending it does is childish—placing the burden to pay for all this debt on future generations.
This is unacceptable behavior out of Alaskan Republicans, and yet another reason why public unions should not be allowed to exist. They live off our tax dollars and then use those dollars to lobby lawmakers against our interests.
Hannah Cox is a consultant for Americans for Prosperity which works on pension reform, and the President of BASEDPolitics.
