By SUZANNE DOWNING
April 30, 2026 – Start yawning now, because this column is about Alaska public employee pensions, which is arcane enough to put any reasonable person to sleep. But here we go…
By the time House Bill 78 reached final passage this week, supporters were eager to highlight what they called a major improvement for state workers: lawmakers restored “choice” in their retirement.
Instead of having all new public employees in the current defined benefit pension, the bill would allow both new hires and current workers to choose between the existing defined contribution plan and the new pension option.
Step back from the late-session rewrite, and a more important reality comes into focus: The fundamental concerns about HB 78 were never about choice alone, but the cost, and the long-term risk of returning to a pension system Alaska has already struggled to afford.
An independent analysis by the Equable Institute cuts through much of the rhetoric. Looking at the actual design of the proposed pension, the report found that it would deliver lower overall retirement value than the current defined contribution system across the board.
“Equable’s assessment finds that retirement benefits would be moderately worse overall for workers under the current proposal,” the report concludes.
For full-career workers that means tens of thousands of dollars less in projected lifetime benefits, and substantially more for teachers. Even shorter-term workers would see reduced value compared to what the current system can provide under reasonable market assumptions.
That finding alone complicates the central argument from supporters. If the pension produces less overall value, then its appeal rests almost entirely on one feature: guaranteed income. For some workers, predictability is important, but comes with a tradeoff of less flexibility, less portability, and ultimately less upside.
And that tradeoff also has a second, more consequential shift: risk.
Defined contribution plans share the investment risk between employer and the individual. Defined benefit pensions place that risk on the system, and ultimately on state treasury. Alaska learned this lesson the hard way. The state is still paying down billions of dollars in unfunded pension liabilities from the pre-2006 system, a $7.5 billion burden that continues to consume hundreds of millions of dollars each year.
HB 78 reintroduces that model, even if in a more modest form.
Democrats and turncoat Republicans say there are built-in safeguards intended to prevent runaway costs. But they do not eliminate the core vulnerability: the reliance on long-term investment assumptions that may not hold. If returns fall short, the gap has to be filled by the state, and that could lead lawmakers to press for income taxes or sales taxes, or even strip more from your Permanent Fund dividend. They already do, even without this bill.
The late-session changes do nothing to address that fundamental issue. Allowing workers to choose between plans may limit how many enter the pension system, but it does not change the financial mechanics for those who do.
Nor does it eliminate the potential for new unfunded liabilities, particularly with provisions allowing current employees to opt into the pension. If those buy-ins are not priced with precision (and pension history suggests that is easier said than done) the system can accumulate costs that only become truly known years down the line.
Even some of the bill’s newer features raise questions. Local governments, for example, are now allowed to opt out of offering the pension altogether. That provision was intended to reassure municipalities worried about long-term obligations. But it also shows that irony: If the pension is the strong, stable solution they say it is, why provide a pathway to avoid it?
The pro-pension people also argue the bill will help with recruitment and retention, a persistent concern in Alaska’s public sector. A pension, they say, encourages workers to stay. That may be true at the margins. But the evidence is far from definitive, and the Equable analysis suggests the benefit itself is not especially generous by historical standards. The state may end up assuming long-term financial risk in exchange for gains that are speculative at best. Many young workers do not want to stay for a pension — that’s not how the current workforce is wired. They want mobility.
Meanwhile, the price tag is real. The plan is expected to cost tens of millions of dollars annually, with the expectation that improved retention and workforce stability will offset those costs over time. That is not a guarantee. It is a projection layered on top of other projections, such as investment returns, employee behavior, actuarial assumptions, all of which must align for the math to work.
HB 78 is a reintroduction of a system Alaska once abandoned for good reason. The Legislature’s Democrat-led majority softened the edges by allowing choice, but it did not change the underlying bad math. The pension still offers lower projected value than the current system, still shifts financial risk back toward the state, and carries long-term liabilities that may not be fully understood until years from now.
That leaves the governor with a familiar question: To veto or not to veto.
For a state still paying for its last pension experiment, vetoing is not an unreasonable response.
Suzanne Downing is founder and editor of The Alaska Story and is a longtime Alaskan.
One thought on “HB 78 has a new dress, but is the same old pension risk for the State of Alaska”
Creating the pension system creates nice, new patronage opportunities with the potential for side deals on the investments . any chance to game the system and extract a,little more sweet public money to line your pocket.