Where have all the fiscal conservatives gone?
In the recent debate over Senate Bill 88, a pressing question echoed through my head: “Where have all the fiscal conservatives gone?” This question, reminiscent of the haunting melodies of “Where Have All the Flowers Gone?” and “Where Have All the Cowboys Gone?” underscores a critical juncture in our state’s financial stewardship.
Based on voters’ selections, most Alaskans expect the legislature to embody fiscal conservatism, a principle many elected officials claim to uphold. Yet, the current effort to push through SB88, which involves reinstating defined benefits (pensions) for 37,000 public employees, seems to contradict this very ideal. How can legislators, in good conscience, endorse a bill that potentially jeopardizes our state’s financial stability and risks burdening future generations with enormous liabilities?
The fiscal conservative approach demands prudence, especially in light of the staggering total unfunded pension liability nationwide, which in some estimates exceeds $2 trillion. With Alaska ranking 50th in unfunded pension liabilities per capita and still grappling with a $8-9 billion debt from our pre-2006 pension plan (of which we won’t be free until 2040), the rationale behind reverting to defined benefits defies common sense.
Alaska ranks 50th(as in the worst) in unfunded pension liabilities per capita.
Moreover, SB88 appears to have been rushed onto the Senate floor without an official and comprehensive fiscal note, raising concerns about its long-term implications. When all three Co-Chairs have not signed the fiscal note, that should give us all pause. When two of the three Senate Finance Co-Chairs did not support the bill, that should really give us all pause.
Perhaps their hesitation is because the bill claims to solve recruitment and retention challenges in the public sector, yet the temporary fiscal note before the Senate failed to incorporate the bill doing this and the resulting increased costs. It’s not possible or prudent to make an informed decision without adequate information, without a complete financial picture.
Bear in mind too that the impact of SB88 extends beyond the public sector. The private sector, struggling with similar recruitment and retention issues, risks being disadvantaged by the state’s actions. Business leaders have expressed alarm at the prospect of competing with the state for workforce, especially amidst challenges like inflation, shipping issues, burdensome regulations, and this winter, severe weather.
It’s crucial to remember that the government’s role is not to compete with the private sector but to foster a conducive environment for businesses to thrive. SB88, however, seems to shift the focus away from this foundational principle. Again I ask: where have all the fiscal conservatives gone?
As fiscal conservatives, we must be wary of rosy projections and justifications that gloss over the potential risks and costs of such a significant policy shift. The allure of appeasing short-term desires must not blind us to the long-term consequences of our decisions.
I am obliged too to point out a very interesting twist to the SB88 saga, that puts the entire notion into a spin. Data from our Legislative Finance Division questions the assertion by SB88 union-advocates that the bill will solve recruitment and retention (R & R) issues. The data shows that SB88 likely will make no difference to R & R. The retention curve over a 12-year period with defined benefits in Alaska was essentially identical to the retention curve over 12-years when we had defined contributions.
So if SB88 won’t solve R & R, what will it do? Besides putting the state at risk for another unfunded liability hole, it will simply provide a nice and secure benefit to union members. SB88 is union negotiations on steroids.
SB88 is union negotiations on steroids.
The final and most pressing concern I have, however, lies in our state’s lack of a sustainable and comprehensive fiscal plan. How can we commit to such a substantial financial obligation without a clear understanding of how to fund it? This approach is not only irresponsible but also threatens to impose heavy taxes on Alaskans. If we dig another unfunded liability hole, will it be right to tax private sector employees with 401K retirement plans to fund pensions for public employees?
In seeking solutions to help our public employees, we must instead explore alternatives that align with the preferences and needs of today’s workforce. Today’s employees value flexibility and mobility; they want portability when it comes to retirement packages. They prefer – and we can budget for – options like upward salary adjustments, larger employer contributions, and ensuring all job categories have either SBS or Social Security benefits. With these modern approaches, we can address recruitment and retention challenges predictably, without resorting to outdated and risky options.
To help our public employees, let’s prioritize viable, no-risk, predictable, planned-for solutions such as upward salary adjustments, larger employer contributions, and ensuring all job categories have either SBS or Social Security benefits.
In conclusion, as we deliberate on SB88, let’s prioritize fiscal responsibility and viable, no-risk, predictable, planned-for solutions. Voting against this bill is a step towards protecting our state’s financial future and Alaskans’ wallets, supporting the private sector, and advocating for better policies to help our public employees that reflect the evolving landscape of employment and worker preferences. Finally, let’s recognize and remind ourselves that we must commit to developing a comprehensive and sensible fiscal plan first before considering any bill with far-reaching financial implications.
