Senate Republican Minority Endorses Use of Pension Obligation Bonds

Juneau – The Senate Republican Minority today united in their support of paying down the State of Alaska’s mounting retirement and pension system debt using a combination of pension obligations bonds and cash.

Pension obligation bonds, also referred to as “POBs,” are issued by a state or municipality to help the government pay down its obligation to a pension and retirement system. In Alaska that debt has reached a staggering $8.6 billion.

“The State of Alaska Department of Revenue has shown that a mixture of cash from our surplus and POB arbitrage is a way to reduce future general fund requirements for our pension obligation for the next 25 years. We should have the courage to spend some of our available cash and incur positive debt.” Sen. Gary Wilken, R-Fairbanks said.

The long term savings would be enjoyed by both the state and municipalities because both pay into the retirement fund for employees who are part of the PERS/TRS system.

The State of Alaska’s Constitution mandates that the State’s PERS/TRS benefits be paid to all eligible state and municipal workers. “This is a debt that cannot be avoided” Sen. Gene Therriault, R-North Pole, explained. “What we are endorsing is not unlike what any one of my constituents might do when refinancing a home. You first look for a mortgage with a better interest rate, pay down as much as you can on the previous debt in cash, and then refinance the remaining balance with a lower interest loan. That’s exactly what we’re endorsing here.”

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