Senate Finance rewrites HB 78, advances defined pension bill to Senate floor for Monday

By SUZANNE DOWNING

April 25, 2026 – The Alaska Senate Finance Committee on Friday advanced House Bill 78,  a proposal to reopen a defined benefit pension option for public employees. The committee sent the measure to the Senate floor for a fast-moving process expected to start Monday.

But the version that cleared Finance is not the one that left the House.

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In a series of amendments adopted over multiple hearings culminating Friday morning, the committee reshaped the bill in ways aimed at controlling long-term costs while still restoring a pension-style option for teachers and public employees.

At the center of the Finance rewrite is a new cap structure and expanded authority for the state’s retirement board, reflecting ongoing concern about the severe financial exposure that comes with returning to a defined benefit system. The old defined benefits program still owes $7 billion, and it hasn’t been functioning since it was discontinued in 2006.

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Among the key changes:

The committee increased the employer contribution cap for non-state PERS employers (municipalities) from 22% to 24%, a move designed to reduce the amount of cost that could be shifted to the state if liabilities grow faster than expected.

It also built in flexibility for employees, allowing contribution rates to adjust within a set range, generally between about 8% and 12% or more, rather than locking in a fixed rate in statute. That authority would rest with the Alaska Retirement Management Board, which was given broader discretion under the amended bill to manage the system’s financial health.

Another change adds a minimum service requirement before medical benefits vest, requiring at least 12 months of employment before eligibility begins. The Finance version also includes technical provisions governing how employees may move between retirement “tiers” while preserving accrued benefits.

Taken together, the amendments reflect an effort by Senate Finance majority members to make the bill palatable to conservatives: responding to union demands while trying to avoid a repeat of the unfunded liability problems that led the state to close its pension system to new hires two decades ago.

After adopting the committee substitute incorporating those changes, the committee voted to move HB 78 out of Finance with a “do pass” recommendation and accompanying fiscal notes.

HB 78 now heads to the Senate floor at a time when lawmakers are facing mounting pressure to address budget shortfalls.

Even with the Finance Committee’s cost controls, the bill could expose the state to long-term financial risk if investment returns fall short or actuarial assumptions prove overly optimistic.

The Monday floor session will start with introduction of the bill and testimony about whether the state is willing to return, even partially, to the pension model that nearly bankrupted the state nearly two decades ago.