Alaska Legislature Approves Plan to Pay Down Pension Debt

The Alaska Legislature has agreed to give the state another financial tool -- a somewhat risky one -- to help pay down a massive debt in its retirement systems.

The mechanism allows the state to borrow money to refinance a portion of the $8 billion to $10 billion unfunded liability in its Public Employee Retirement System and Teacher Retirement System. The state would invest the proceeds in international capital markets.

The plan's success relies on earning a higher investment return than the interest cost of the bonds. The difference would go toward paying down the debt.

Several other states and local governments have issued such bonds.

The unfunded liability is the gap between the retirement systems' total assets and the amount in benefits needed to pay all the public employees in the system.