According to a report by our network partner, Tax Foundation, Alaska ranks 31st out of 50 states for how well-funded the public pensions are. As of 2020, one year after the Tax Foundation report, Alaska’s public pensions are only 66 percent funded, with $5.4 billion in unfunded benefits. Thankfully, that number has improved over the last decade and Alaska’s pension funds can continue to grow, as long as poor policy changes are not made.
The Tax Foundation report shows the funded ratio of public pension plans by state, including Alaska. The ratio is calculated by “measuring the market value of state pension plan assets in proportion to each state’s accrued pension liabilities.” The ratio is a comparison of how much money a state has in its pension fund to how much money the state has promised to workers. Alaska’s public pensions are funded at 66 percent, meaning the state has 66 cents set aside for every dollar of pension benefits it has promised workers.
As of 2020, Alaska has $10.3 billion in assets but owes a total of $15.7 billion – $5.4 billion short. Being less than fully funded is a problem because large contributions will be required to address the debt, and because smaller assets generate less in investment earnings.
In comparison, as of 2020, Wisconsin’s public pension system was 103 percent funded and South Dakota’s was 100 percent funded. While Alaska at 66 percent is not as well-funded as a top state, Alaska’s pension funding has grown considerably since the early 2010s. In 2012, the state’s pension system was only funded at 55 percent.
Because Alaska’s pension funds have experienced significant growth over the last decade, any changes to how the system works must be made with extreme caution. A full actuarial analysis needs to be done of any proposed changes to Alaska’s public pension system, to see the long-term fiscal impacts of those changes. While there are many ways the state could improve the pension system further, returning to pension plans that have failed in the past would be devastating for both Alaskans and the state budget.