By Jenny Neyman
Holly Abel and Joanne Frey are at opposite ends of the age and teaching experience spectrum, but they’re both in the same boat.
Abel is a first-year teacher, while Frey has been in education for 20 years. But both are new to the Kenai Peninsula Borough School District — Abel as of this year at Soldotna Middle, Soldotna Elementary and Tyonek schools, and Frey as of 2006 in Seward.
Both work in specialized fields that are becoming increasingly difficult for the school district to fill — Abel as a psychologist, Frey in special education with severely disabled kids.
And both are thinking about leaving the district due to changes in the state’s Public Employee and Teacher Retirement Systems.
Abel was born in Soldotna. Her parents and mother-in-law were all educators and qualify for Tier I Teacher Retirement System benefits from the state.
“We’re very grateful that both of my parents are under the Tier I retirement plan because they have health concerns. It’s much easier taking care of them knowing that some other entity is helping out,” she said.
Abel and her husband moved to Soldotna to be closer their families. At the time, being familiar with the benefits her parents receive, Abel assumed KPBSD was a good place to work, with decent benefits. She didn’t realize the state Legislature, in 2006, changed the retirement system from a defined benefits program — akin to a guaranteed pension — to a defined contribution plan — a 401(k) plan with variable returns. The change created a new Tier III for teachers and Tier IV for public employees. Those tiers operate on the defined contribution system.
Now that she knows about the change, Abel and her husband are questioning their decision to move back home.
“I guess I expected a little bit more security and predictability from the retirement system. That’s been a little bit scary realizing that’s not the case. It’s scary thinking about having a home and kids in this area and staying here,” she said.
In contrast, Frey did do research before moving to the peninsula, but it didn’t do her any good. She was living in Louisiana and decided to move after her home was destroyed in Hurricane Katrina. She consulted a financial planner and studied the retirement information on the state’s Web site before committing to KPBSD.
“Before I left, I did my homework, because being the age I am and my years teaching, I was very concerned about what would happen here,” she said.
At the time, in 2006, the Web site detailed the Tier III retirement system for teachers, which was still a defined benefits program. The planner advised that KPBSD would be a good move, so Frey hitched her trailer to her truck and headed north to Seward.
Somewhere around the Dakotas, it all fell apart. Her truck broke down, leaving Frey to buy a new one, and the state’s retirement program switched to the 401(k) system.
“While I was driving up here, lo and behold it changed and the new system took effect. When I got up here I realized, ‘This isn’t good, this isn’t what I signed up for,’” she said.
Frey doesn’t know what to do now. She’s nearing retirement, but with the stock market in sad shape, her 401(k) isn’t generating much money. She’ll qualify for Medicare in five years, but worries Alaska doctors may not continue to accept that coverage. She doesn’t know if she’ll be able to keep her house in retirement.
She’s thinking about leaving her job.
“I’ll go deliver mail in mailboxes if it gives me a good retirement,” she said. “I don’t want to leave teaching, I love what I do. … That experience and the things I can do, and the things my staff and I together can do, may be going down the tubes.”
No benefit to working here?
Those were just two of the many stories shared in a forum on retirement security Saturday at Soldotna High School, organized by the Alaska Public Pension Coalition.
The purpose was to bring teachers and public employees together to discuss how the state’s move from a defined benefits retirement program is affecting them and their fields. Similar forums were held in Fairbanks and the Matanuska-Susitna Borough on Saturday, and one was held in Bethel last week. All were videotaped and footage will be combined into a documentary that will be shown to legislators in an effort to motivate them to bring back the pension plan.
Kenai Peninsula legislators were invited to Soldotna’s forum. Rep. Paul Seaton, of Homer, was the only one who attended.
LaDawn Druce, a local teacher and president of the Kenai Peninsula Education Association (the local affiliate of the National Education Association union) organized the Soldotna event. She said she was pleased with the 50-person turnout of teachers and public employees from around the peninsula, and with the wide-ranging discussion.
Much of it included the same theme — people love their jobs educating youth, saving lives or in some other way serving the citizens of the borough, but are considering changing jobs over retirement benefits.
Several central peninsula firefighters talked about how difficult it is to recruit and retain personnel for fire departments in Alaska as it is, even before the retirement system change. Tony Prior, a Kenai Fire Department captain, said firefighters can earn three times as much working for private companies on the North Slope, and get much better support.
“They say, ‘What do you want, we’ll get it for you. We’ll get three of them.’ And here we’re begging for it,” he said.
Benjamin Simmonds, with Central Emergency Services, said he heard the same thing from recent graduates at the University of Fairbanks.
“The students said they wanted to remain but will not, and the reason for that is the retirement system is gone,” he said.
The result is Alaska is becoming a training ground for public employees, the firemen said. The state pays for their education and training, they work long enough to qualify for benefits, then they go to the private sector or take jobs in the Lower 48 with better benefits — taking all the money Alaska invested in them with them.
Alaska State Troopers alone cost $125,000 to $150,000 to train, said Tim Evans, the president of the Kenai Peninsula Central Labor Council and retired vice president of the state AFL-CIO. In the Kenai Peninsula Borough, 57 people left municipal jobs from January to October 2008, compared to 10 years ago when just 13 people left in an entire year, said Lynne Carter, with the Kenai Borough Employees Association.
Druce said the state trumpets portability of benefits as a good thing about the retirement system, meaning employees can take their retirement savings with them into other jobs. But that creates brain drain by encouraging qualified, trained personnel working in valuable, important fields to leave the state.
“How can portability be a good thing for this state?” she said. “How can you honestly believe that?”
Complicating matters is Social Security. Borough Mayor Dave Carey said that teachers and many public employees in Alaska don’t qualify for Social Security because the federal government gave states the ability to opt out of it. Alaska and 16 others did so, under the theory that public employees were already getting retirement benefits from the state. On top of that, Carey said recent events, including U.S. car manufacturers forcing unions to accept lower wages and retirement benefits, have him worried.
“If we don’t get out there and protect our rights, we will be undermined,” Carey said.
Carey is a retired teacher from KPBSD, under Tier I. He said it’s a matter of equality, with new teachers never able to get the benefits he does, even though they do the same job.
“We have to stand up for equal pay for equal work,” Carey said.
“We have to convince our legislators to do the right thing,” said Dick Kapp, with Central Emergency Services. “… I think we have to tell our legislators, I voted for you, now you vote for me. They understand that.”
Seaton, the lone Kenai Peninsula legislator who attended the forum, said it’s not that easy. The state retirement system is a matter of balancing current costs with future obligations. Adding new tiers, with successively higher restrictions on eligibility for benefits, was an effort over the years to get a handle on spiraling costs.
PERS Tier I was established in 1979, and it took 10 years before the state realized, “uh-oh, we didn’t think we were underfunding the system,” Seaton said. PERS Tier II was established in 1986, and PERS Tier III (equivalent to TRS Tier II) came about in 1996. At one point, actuaries counseled the state and local municipalities that they didn’t need to contribute as much money to the retirement system. That resulted in a significant shortfall in funding when the mistake was realized.
Another part of the problem is the growing cost of providing retirement benefits, since the amount of time for which the state provides benefits for is growing. Life expectancy in 1970 was 80.2 years, and rose to 83.7 years in 2005, Seaton said. The Supreme Court has ruled the state is constitutionally obligated to pay PERS/TRS pensions, so the only way to limit retirement costs was to limit benefits, and/or increase the restrictions on when people became eligible for benefits.
In 2006, the Legislature moved away from the pension plan altogether in creating PERS Tier IV and TRS Tier III, which involve employees contributing to their own retirement funds and managing how the money is invested in the same way most private sector employees do.
The new system doesn’t cost any less to operate, Seaton said, with the state and municipalities still paying in about the same amount to fund the plan.
“We designed it to not be cheap. We designed it to not save money,” he said.
The benefit of a defined contribution 401(k) program, for the state and municipalities, is it reduces cost liabilities down the road. Seaton said legislators didn’t want to encumber future budgets with paying for the current retirement system.
“These are the situations that you have to look at from the other side of the coin,” Seaton said. “That is the perspective that we are looking from.”
But he does recognize that having a less desirable retirement system than other states and private sector employers does hurt public sector fields, in recruitment and especially retention, so he’s open to suggestions.
“I’m hoping that the employees come to us with some better ideas,” he said. “… If there’s a way that we can get there so that we don’t generate unfunded liabilities on the budget of our kids and grandkids, I’m perfectly willing to do that.
“I’m hoping that as we go forward we’ll be able to work together on how to solve this, not just from one perspective or the other. You are the valuable people that make this state work. We just have to make sure from the other perspective … that when your kids are in these kinds of positions, that they’re not totally hamstrung.”