Feb. 2—A measure to create a new pension plan for public safety employees passed its first hurdle in the Alaska House on Thursday, in a telling step for the legislation's fate in a divided chamber.

The House Community and Regional Affairs committee advanced the bill in a 4-2 vote. Conservative Republicans Rep. Kevin McCabe of Big Lake and Rep. Tom McKay of Anchorage opposed the measure, citing fears of ballooning costs for the state. But two members of the House majority — including one Republican — joined members of the minority in supporting the bill, which still must pass three other committees in order to reach floor hearing.

The bill in question would create a new defined benefits pension plan only for firefighters and certain law enforcement officials in the state, constituting around 7% of the state's public employees. The measure, sponsored by Anchorage Democrat Rep. Andy Josephson, aims to address lagging recruitment and retention of critical state workers without committing the state to a plan it cannot afford.

[Alaska public worker shortage fuels renewed interest in pension plan]

Facing billions of dollars in unfunded liability, Alaska lawmakers voted in 2006 to eliminate the state's defined benefits pension plan, which promises public sector employees set retirement payments based on their career wages. At the time, driven by the specter of the state's looming unfunded commitment, lawmakers replaced the secure defined benefits plan with a riskier defined contributions plan, which allows employees to make contributions to a 401(k)-style account.

In the change, Alaska public employees were left without access to Social Security, making them less likely to save enough money to enter retirement with a secure plan or have a fallback option if the stock market is slow.

At the time of the 2006 decision, lawmakers were driven in part by incorrect actuarial information provided by a firm contracted by the state, to the tune of around $2.5 billion. A lawsuit ensued, resulting in a $500 million settlement payment to the state. But by some accounts, the damage was already done: Many lawmakers were left with the impression that the state simply could not afford the risk of providing public employees with a defined benefit option.

Since then, public pension advocates have been sounding increasingly urgent alarms over a looming worker shortage caused by Alaska's lagging benefits package, which they say pushes some workers to leave the state in search of better options elsewhere. This year, lawmakers are paying close attention to the issue, amid shortages that are contributing to the state's inability to pay public benefits and attract qualified teachers.

A bill nearly identical to the one that advanced in the House committee on Thursday already passed the House in 2021, only to stall in the Senate. Josephson, who sponsored the previous measure as well, calls the public safety bill a "conservative" option that includes safeguards to ensure the state does not promise payments it cannot afford to deliver.

But that assertion wasn't enough for McCabe and McKay, the two Republican lawmakers who opposed the measure. McCabe said on Thursday he and others were surprised to see the major piece of legislation "jammed" through the Community and Regional Affairs committee so early in the session, and instead urged the committee to wait on voting and gather additional cost studies.

Proponents, in the meantime, said the necessary studies had already been done.

"The Legislature is right to be concerned about entering a defined benefits retirement system," Justin Mack, a member of the Alaska Professional Fire Fighters Association, told the committee Thursday. But real-world examples of successful defined benefits plans that don't leave the state in debt already exist, he said, in places like Washington state. Their plan is fully funded, and relies on premises similar to those in Josephson's bill.

Mack said that as a firefighter with no access to Social Security and an underfunded retirement account, his likelihood of having enough money in retirement is slim. A new defined benefits plan would create "a shared risk solution" where some of the risk that currently falls to the individual employee would be shared with fellow employees and the state, so no single person's bad investment decisions could take away that person's ability to retire "with dignity."

McCabe proposed amending the bill to limit the calculation for pension payments to be derived only from base pay — rather than including workers' overtime — suggesting that law enforcement workers take on overtime in an effort to beef up their retirement payments, at a risk to public safety. Some workers, McCabe said, "are working their fingers to the bone continuously for three years just to plus up their retirement."

That amendment failed in a 4-2 vote, with only McKay joining McCabe in support, amid concern among other committee members that McCabe was tarnishing the reputation of public safety workers.

"Some of the comments around the amendment are that our police or public safety employees would potentially willingly put people in danger in order to personally benefit or get more money in retirement," said Justin Ruffridge, a Soldotna Republican who has in the past spoken in favor of revamping the state's retirement system. "I'm not certain what others' experiences are with our public safety employees throughout Alaska, but I want to say that my experience with them is that these are the ultimate professionals. They would not put the public at risk in order to personally benefit."

Ultimately, Ruffridge and Committee Chair CJ McCormick, D-Bethel — both members of the majority — joined minority members Rep. Rebecca Himschoot, I-Sitka, and Rep. Donna Mears, D-Anchorage, in voting to advance the bill, which has also been referred to the House State Affairs Committee, Labor and Commerce Committee and Finance Committee.

That first committee vote could be a sign of what's to come, with the possibility of agreement between moderate majority members and minority members to advance the bill through the legislative process despite concerns raised by the House's rightmost wing.

Meanwhile in the Senate, members of the bipartisan majority have broadly voiced support for a pension plan that would encompass all state employees, including teachers. A bill along those lines has been introduced in the chamber but has not yet been considered in committee.

"This is not going to stop with fire and law enforcement. The teachers are going to want to be in, and there will be lawsuits," McCabe said Thursday.