How killing pensions rousted teachers in Alaska
“What politician in their right mind,” I thought, “would want to strip Alaska public employees of their pensions, especially since they have already been denied Social Security?”
At first, I didn’t take it seriously. “What politician in their right mind,” I thought, “would want to strip Alaska public employees of their pensions, especially since they have already been denied Social Security?” It was 2005, and conservative legislators were pushing to do just that. Moreover, this was way beyond a strictly local effort. As the National Education Association affiliate NEA-Alaska has observed:
In 2006, educators, public employees and many Alaskans warned of the harm that this transition would have on retirement security, retirement costs and expenses, and competitive benefits for recruitment and retention of public employees. However, there was a major national push for privatizing retirements, that included pressure from the White House. Alaska’s legislators succumbed to the false promise of savings, which have never been achieved – while shifting all the risk to individual employees to navigate the stock market and individually manage their retirement security.
A statewide coalition was forged to fight this shoot-yourself-in-the-foot idea. We were labor unions, nonprofits, legislators and others who could plainly see all the reasons why this was a very bad idea. We brought in outside experts from national organizations to provide testimony at key hearings, paid for local experts to do their analysis, held educational sessions for the public and the media, and conducted public hearings where distraught teachers explained why new teachers would be forced to leave their jobs if they did not include a pension.
But it was all for naught. Our analysis and protestations were swept away by a powerful ideological tsunami. The pensions were terminated for new hires. And now, all these years later, we have the definitive report, Alaska Teacher Recruitment and Retention Study. It was meticulously researched by the National Institute on Retirement Security (NIRS), which is widely considered the gold standard for this type of analysis. We were right. The ideologues were wrong.
The retirement security of Alaska public sector workers was decimated. The 2023 study notes that “During the past 15 years, there has been much customization of benefit offerings, but there are few examples of states following Alaska’s lead and completely abandoning DB (“defined benefit,” e.g., a classic pension for life) offerings.” In fact, as the study points out, there is no other state in the nation where public workers have neither Social Security nor a classic pension. Apparently, legislators in every other state recognize that total economic retirement insecurity is short-sighted and destructive. An NEA-Alaska study elaborates,
The change to a DC (“defined contribution,” similar to an Individual Retirement Account) system was particularly damaging to TRS (Teachers’ Retirement System) employees, all of whom currently don’t participate in Social Security through their school districts, and some PERS (Public Employees’ Retirement System) employees who have neither Social Security or SBS (Supplemental Benefit Savings). A recent analysis by the Chief Investment Officer of the State of Alaska shows that after working a 30 year career, as many as 75% of TRS members could run out of retirement savings after 20 years of retirement – with no Social Security as a safety net.
This has not been lost to teachers and other public sector workers in Alaska. The NIRS study found that “In both the TRS and PERS plans, the number of workers quitting (excluding retirements, deaths, and disabilities) from the DC plans is between 4.5-4.7 times greater than the number quitting in the DB plan.” There may be some confounding demographic issues, but still, the findings are dramatic. Eliminate the pension and drive the teachers out.
And here’s a finding discussed in the study that should warm the cockles of the heart of every legislator – fiscally conservative or not: “If these plans were re-opened, one would expect a more balanced cashflow going forward. If there is another period of serious market turmoil in the coming decades, reopening the plans may very well make financing the obligations that were earned by those hired before 2006 more manageable.”
Take a look at the NIRS study. There are a lot of eye-opening facts in the full study which do not fit into this short article. For example, the author presents a series of pension plan alternatives in theory, and proceeds on to illustrate several actual case studies of how other states have used these techniques to construct pension plans that benefit both the state and public employees. A special callout to Alaska legislators: Now is the time to right this wrong and make it good for public sector employees and for the state’s bottom line.
