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Dear Friends and Neighbors,
Taxes?
The Governor is now advocating for a broad sales tax. The 2% sales tax the Governor talks about would have no exemptions for purchases of food, medical services, winter clothes, etc. But he has not written any legislation to move it forward. Representative Carpenter (Nikiski) has also proposed a 2% sales tax, also with no exemptions.
What are the Senate’s thoughts? Generally: Sales taxes are already levied by countless communities around the state. Anchorage is a huge exception, with no sales tax (largest city, highest property tax on homeowners…but that’s another story).
For the state to pile on even 2% on top of Dillingham’s 6% or Fairbanks' 6% would not be helpful, especially since those communities have exemptions on purchases of many items.
Defined Benefit Retirement System for Public Employees
Alaska’s retention and recruitment crisis is impacting all classes of public service employment from public safety, troopers, police and fire, teachers, healthcare workers, staff to process food stamps, business and professional licensing, Marine Hwy employees, DoT&PF engineers, Pioneer Home staff, Office of Public Defenders, Office of Public Advocacy and more.
Alaska’s hiring and retention challenges have been accelerated and exacerbated by the 2006 change to our state retirement system to a Defined Contribution system. Alaska used to offer public employees the opportunity to work a career in Alaska and to retire with a pension and provide an adequate retirement.
Vacancy rates in the municipal and state departments across Alaska show that we are struggling to hire, desperately offering unsustainable bonuses and just treading water when it comes to moving Alaska forward. Bonuses, salary increases are great but don’t buy the security of retirement income later in life.
What are the costs of staff losses: lost knowledge and skills = increased costs to replace in dollars and years of experience.
There’s clear evidence that our lack of a reliable, solid retirement system for public employees is a profound factor.
Today’s retirees find themselves in a much more uncertain situation, with a host of spending needs – some foreseeable, some coming out of the blue – all needing to be funded out of a volatile & unpredictable retirement portfolio.
Senate Bill 88 represents a retirement approach that is not only affordable for the state, but gives public employees a secure and also a livable retirement. It represents 10 years of hard work by stakeholders.
SB 88 employs “best practices” utilized by other states, combined into this one bill. Costs are shared by employers, employees and retirees. As I’ve said, it’s a brand new system, not your grandma’s defined benefit system. Focus is on viable costs, and offer of dignified retirement.
Goldman Sachs Survey: 45% of current retirees (54% of women) said they found entering retirement to be somewhat or very stressful in terms of financial anxiety. The #1 unexpected financial challenge in retirement is understanding what your income will be.
But the most important feature of retirement income is that it be consistent & stable, month over month.
When your retirement relies on a fixed pool of money like a 401K, it becomes almost impossible to answer the simple question: “How much income do I have?” The retiree must ask the impossible question: “How many more months will I live? How much do I risk spending today?”
The current Defined Contribution Plan doesn’t provide adequate funding for retirement.
90% of individuals don’t have the expertise or time to manage the Defined Contribution funds to maximize earnings. They are falling behind. If their funds run out…they face poverty and becoming wards of the state.
I believe that this Defined Benefit System saves the state and local governments money over the Defined Contribution Plan. This is only one lever, but likely the most significant one, to address the crisis in recruitment and retirement of our public sector workforce.
We need to solve this workforce challenge through this balanced, modest, fiscally sound new Defined Benefit system. I believe SB 88 will do this.
There are some opponents saying that this defined benefit system will cost too much, resulting in no future Permanent Fund dividends. This is completely false and intended to incite fear that isn't justified. This pension system will not affect the dividend at all.
Defined Benefit Bill Hearings
SB 88 text
Summary Document
May 2, 2023 morning
May 2, 2023 afternoon
Items in this Newsletter:
· SB 107 PFD 75/25 Split Update
· Senate Floor and Committee Meetings
· Alaska Economic Trends May Issue
· Alaska Trails Newsletter
· Current Topics, Economy, Health Care, Energy
· Hillside Firewise Saturday Flyer
· Alaska History
· Oil and Permanent Fund Resources
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