Alaska State Legislature’s House Finance Committee
Ghilarducci presented the following research for the Alaska State Legislature Finance Committee on February 11, 2025 titled, “How Pension Reform Affects Alaska's Economic Performance.” View her presentation here.
Executive Summary
Alaska’s workforce is vital to economic growth.
Shift from DB to DC pensions increased turnover (Doonan, 2023).
DB pensions improve retention and service quality (NIRS, 2014).
Restoring DB plans can boost economic stability.
Economic Impact of DB Plans
$3B in lost GDP due to stagnant growth (BEA, 2023).
Private investment thrives with strong public services (Bartik, 1991).
DB plans reduce turnover costs by $76M/year (Ghilarducci, 2024).
Alaska's Population Decline Puts Pressure On Public Workforce
Population shrank by 0.57% (Alaska Beacon, 2023).
Outmigration of teachers & workers is a major factor (DeFeo et al., 2017).
States with better pensions retain more residents (NIRS, 2014).
Public Services & Business Growth
Infrastructure, education, and safety cut business costs (Fisher, 1997).
Alaska lags in business formation (St. Louis Fed, 2024).
DB plans support service stability, boosting investment (Glaeser & Saiz, 2000).
DB vs. DC Pension Systems
DB: Predictable benefits, lower costs over time (Naff & Crum, 2000).
DC: Higher turnover, lower long-term savings (McWhirter, 2023).
DB reduces recruitment/training costs (Doonan, 2023).
Cost-Effectiveness of DB Plans
DB plans yield higher returns (Ghilarducci, 2024).
DB systems lower administrative costs (NIRS, 2014).
DB pensions reduce reliance on social services (Finan et al., 2015).
Policy Recommendations
Reinstate Reformed Defined Benefit (DB) pensions for public employees.
Adopt funding safeguards to prevent shortfalls (SB88, 2024).
Create a Developmental State which improves public services to attract private investment and skilled workers.(Wright, 2024).
Conclusion
Public workforce stability is key to economic growth (Acemoglu et al., 2015).
DB pensions improve services, business climate, and retention (Bartik, 1991).
Investing in DB plans secures Alaska’s economic future (Ghilarducci, 2024).