RPEA Executive Vice President Ted Moninski and I attended the Alaska Retirement Management Board August 8th work session to “…discuss the state retirement systems’ unfunded liability, and identify options to reduce the impacts of that liability on the state budget.” The daylong session included representatives from the legislature, OMB, DOA, DOR, APEA, NEA, RPEA, city governments, the private sector, and others, as well as the ARM Board trustees. Ted graciously volunteered to draft some notes about the high points of the discussions which I hope you will find interesting and hopefully enlightening. Options for addressing the unfunded liability included: • “Level dollar pay” amortization which tends to “front end load” the UL pay down vs. “level per cent of pay” which shifts a lot of the payback to the out years and also costs the state a lot more in the long run. Everyone understands that even though the ARMB has adopted Level Dollar to compute annual contributions, the Gov. and Leg may not go along come budget time. • Pension Obligation Bonds: $5B currently authorized by the Leg, but never issued. Window may be closing. • Up front infusion of cash into the Trusts: Previously attempted by the Senate, but failed; recommended by the ARMB last year, but never included in the budget. o Question of whether $$ should all go in at once or phased in over a series of budgets (which was the ARMB recommendation last year); group seems to favor all $$ going it at once. o Source of funds: group considered the Constitutional Budget Reserve vs. the Statutory Budget Reserve. CBR has a lot more $$, but requires approval of ¾ of the Leg to make it happen. Could be structured as a loan to the retirement system trusts, or a direct appropriation. Group did not seem to have a clear preference for the CBR or the SBR. • Brief discussion of using General Obligation Bonds to fund capital projects that would otherwise have been paid with cash; redirecting cash to PERS/TRS; this is probably not a politically acceptable option. • Strong preference (by most if not all of the group) to target 2032 as the outside date to fully amortize the UL. • OMB Dir., Karen Rehfeld, seemed to suggest that the Gov. might be willing to discuss an option where an up-front infusion of cash would drive the Level Dollar annual contribution below the current Level % contribution. She did not offer a clear explanation of this option or much in the way of detail. The ARMB plans to do research necessary to compute the up-front contribution needed to make this work. There was no clear resolution for the ul issue, but none was expected, and this was a really good start for serious discussions with policy makers and stakeholders.
Posted on: Thu, 22 Aug 2013 19:19:43 +0000
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