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Day 30: Death Tier
"The only way to guarantee you'll have sufficient funds in retirement is to work until you die or die before your fund dries out."
Good morning, Alaska! It’s Day 30 of the legislative session.
In this edition: To address the state’s ongoing workforce shortage, Gov. Mike Dunleavy has ordered the state to review whether four-year degrees are really needed for state jobs. While the news was relatively well-received by state organized labor groups, they warned that it’s not a fix-all for the revolving door of a state that’s struggling to recruit and retain its employees and that the durable solution remains the same: A fix for the state’s “death tier” retirement system. Also, Gov. Dunleavy and other state executives are in line for a pay increase, but the bipartisan House Minority has staked out its opposition to the increase, arguing it shouldn’t come before schools.
Current mood: 🏴☠️
Programming note: I’m down in the Lower 48 visiting family this week. While I always like to pretend that I can manage the usual coverage of Alaska politics while away, it’s probably better for everyone involved if I pull back a little bit and take real break for once. I’ve got a few things in the notebook I plan on getting to, but won’t be tracking the blow-by-blow of the week. I’ll be back early next week in full, though!
Coming soon: U.S. Rep. Mary Peltola delivers her first address to the Alaska Legislature at 10 a.m. on Friday (I do plan on tuning in for that). It’ll be the first time in a very long time that a U.S. Representative will deliver an address as the late U.S. Rep. Don Young felt it wasn’t his business to bug the Legislature.
‘Death Tier’ retirement
On Tuesday, Gov. Mike Dunleavy issued an executive order to review state jobs where a four-year college degree isn’t needed. It’s a largely welcome change to address the state’s ongoing high vacancy rate, which has also drawn efforts like $20,000 bonuses for new state troopers and a 20% pay increase for state attorneys.
“If a person can do the job, we shouldn’t be holding anyone back just because they don’t have a degree,” Dunleavy said in a prepared statement.
According to recent budget presentations, about 17% of budgeted state jobs are currently vacant with some departments facing much higher vacancy rates.
Organized labor groups that spoke with the Anchorage Daily News said the move was a good one, opening up a greater number of jobs to more people, but warned that it shouldn’t come along with pay cuts or other changes. They also stressed the importance of finding a fix for one of the biggest complaints facing employees working in Alaska’s public sector: The retirement system.
Alaska is the only state where new public employees—whether they’re state employees, local firefighters or school teachers—don’t have access to pension or Social Security benefits. The state moved to a 401(k)-style defined contribution plan in 2006, following the state being misled into a multi-billion dollar shortfall for the previous pension plans, that not only has far greater long-term uncertainty for employees but makes it easier for employees to relocate to states with better retirement systems (most of them) after becoming vested after five years.
The issues with the retirement system have been ongoing since the change, but gained newfound attention this year as part of the Alaska Senate Majority’s key issues as they put retention and recruitment near the top of the session priorities. That’s included several hearings in Senate committees this session, including Monday’s meeting of the Senate Labor and Commerce Committee where they heard from NEA-Alaska, the Alaska Council of School Administrators and the Association of Alaska School Boards.
The takeaway message from all three groups—which don’t often see eye-to-eye on labor issues—was that the state’s retirement system is a significant problem for teacher recruitment and retention. NEA-Alaska President Tom Klaameyer said teachers call the current retirement pension tier the “death tier” because there’s a good chance you’ll be working until you’re dead.
“The only way to guarantee you’ll have sufficient funds in retirement is to work until you die or die before your fund dries out,” he said.
And that wasn’t just talk. He highlighted modelling done on Alaska’s retirement system in 2019 that showed most teachers wouldn’t have enough money under the current system—the 401(k) defined contribution combined with the lack of social security—to successfully retire, which is defined as being able to maintain about 70% of your working income into retirement while keeping up with inflation. Only the top quarter of earners would be expected to meet that mark.
Why it matters: Changes like the one proposed by Dunleavy, if done right, can be a sensible way to address the workforce shortages while opening up access to good-paying jobs to more people. That’s all good, but it doesn’t address the structural problems still facing the state’s public sector. One of the major draws of working in the public sector has been a good, dependable retirement plan and Alaska simply doesn’t offer that in any shape or form for any employee who started working for the state after the 2006 change in pension plans.
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House Minority stakes out opposition to executive pay raises amid education funding fight
Speaking of public sector employment, Gov. Mike Dunleavy, Lt. Gov. Nancy Dahlstrom and state’s commissioners are all in line for a pay raise under a recommendation from the State Officers Compensation Commission. Unless the Legislature explicitly rejects the increases by March 25, Dunleavy’s in line for his annual salary to increase to $176,000 from $145,000. Dahlstrom’s would go from $125,000 to $140,000, and commissioners would go to about $168,000 from $141,160.
We haven’t got a major signal from either chamber’s leadership on how they plan to handle the increases, but the bipartisan House Minority came out on Monday as opposing the increase at least until school funding is increased. Neither Dunleavy nor the Dunleavy-aligned Republican-led House have indicated support for increasing the state’s per-student funding.
“We shouldn’t be raising the administration's pay while our classrooms are overcrowded and students continue to suffer from years of stagnant funding and rising inflation,” said Fairbanks Democratic Rep. Maxine Dibert, a school teacher, in a prepared statement.
“We will not consider raising pay for high-level executives until we’ve passed a BSA increase to ensure Alaska's students receive a quality education,” said Minority Leader Calvin Schrage, NP-Anchorage, also said in the prepared statement.
Legislators have shown expediency in dealing with the recommendations of the State Officers Compensation Commission before. The Legislature rejected what would have effectively been a pay cut for most legislators over the course of three days in early 2022.