In Unprecedented Move, Alaska Pays Pension Bills in Cash

July 10, 2014

Alaska, like local governments across the U.S., is grappling with the pension costs of its retired workers. Unlike other states, Alaska opened its purse and paid a quarter of the bill in cash.

Moving to preserve the state’s top credit ratings, Republican Governor Sean Parnell signed legislation last month that takes the unprecedented step of tapping Alaska’s budget-reserve account to pay unfunded pension liabilities. It will pull $3 billion from the pool to reduce a $12 billion gap.

Home to the nation’s third-largest onshore oil reserve, Alaska gets 90 percent of its operating budget from crude-production taxes and royalties. It’s been saving oil proceeds for decades for when the wells run dry. Alaska is just one of nine states with top scores from Moody’s Investors Service and Standard & Poor’s, and it’s seen how pension deficits have hurt the credit standing of states such as New Jersey and Illinois.

“A year ago when I went to New York City and spoke with the rating agencies to make sure that we maintained our AAA financial credit rating on our bonds, they identified our unfunded pension liability as the single biggest risk,” Parnell said during a signing of the bill June 23 in Juneau.

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