The Alaska Senate Labor and Commerce Committee held the first hearing on Senate Bill 81 on April 4, 2025, in Beltroom 105, Juneau. The bill would remove the statutory 22% cap on employer contributions to the Public Employees' Retirement System (PERS) and give the Alaska Retirement Management Board (ARM Board) flexibility to adjust the contribution rate to address the system's unfunded liability.

Senator Bert Stedman, sponsor of SB81, told the committee the bill targets the long-running unfunded liability in the state's retirement systems and would allow the ARM Board to increase or decrease the non-state employer rate instead of leaving 22% fixed in statute. "To aid in reducing the unfunded liability, the Alaska Retirement Management Board in this bill would have the flexibility to adjust the 22% rate," Stedman said, adding the change is intended to encourage a broader discussion with municipal employers and other participants.

Stedman and his staff described the scope of the liability during the presentation: the unfunded liability rose from about $5.3 billion in FY2013 to about $5.7 billion in FY2023, and the state has contributed roughly $2.5 billion in recent years to reduce the liability. Committee discussion included questions about how contributions are set, the ARM Board's role, and the budgetary mechanics. Stedman said the state's contribution to the past-service cost is paid from general funds and that the ARM Board sets contribution rates.

Public testimony included comments from John Rangstad, a member of the Fairbanks City Council, and Lisa Parker, president of the Alaska Municipal League (AML). Rangstad described the issue as a high priority for Fairbanks and stressed that municipal participants need to be included in any solution; he said initial estimates suggested the city could face roughly $1 million annually if the state changed contribution responsibilities. Parker testified for AML and told the committee she was "seriously concerned" that removing the 22% cap without transition mechanisms or state assistance would force local governments to absorb unpredictable pension costs, potentially leading to layoffs, service cuts, delayed projects, or tax increases in smaller communities.

Stedman emphasized that the bill would not itself set a higher rate but would remove the statutory cap and leave rate-setting to the ARM Board, with municipal input expected at ARM Board discussions. The committee did not take a final vote on SB81; the chair set the bill aside for further consideration at an upcoming meeting.

Why it matters: PERS unfunded liabilities affect state and municipal budgets. SB81 would change statutory constraints on who sets contribution rates and could shift budget pressure among the state and municipal employers depending on future ARM Board decisions.

Next steps: The committee set SB81 aside for further consideration at a future meeting. Stakeholders asked for continued dialogue and municipal inclusion in any rate-change discussions.