The Haines Borough has received a report from the Haines Sheldon Museum PERS termination study conducted this winter. Based on the study, chief fiscal officer Jila Stuart estimates the borough will remain on the hook for roughly $500,000 over the next 18 years if the museum’s board of trustees moves forward with the plan to turn the institution into a nonprofit, completely separate from the borough.

In January, the Haines Borough Assembly approved the roughly $2,500 study as a first step to assess the feasibility of divorcing the museum from the borough. The goal of the study, a requirement under state law when a municipality eliminates a department, was to tell the borough and the board how expensive it would be to transition current borough employees to a staff entirely overseen by the nonprofit. 

At present, the museum has one PERS employee, Zachary James, who has a defined contribution plan, a retirement plan where the employee and employer put away money in a savings account for retirement.

The borough’s pension liability is the difference between the amount owed to retirees and the money it has on hand to make these payments. Because James has a defined contribution plan, termination from PERS doesn’t impact the borough’s liabilities.

The only cost to the borough would be an ongoing payment to the PERS system for former, now-retired employees who have defined benefit plans, an older type of retirement plan that guarantees specific benefits based on an employee’s salary and years of service. Alaska statute requires employers leaving PERS to continue contributing to the system each payroll period until the past service liability is extinguished.

The report says calculating the amount the borough will owe is a moving target, as it’s not certain when the liability will be paid off and the contribution rate is recalculated every year by the Alaska Retirement Management Board. For the current fiscal year, the rate is 18.23% of an employee’s base salary.

Stuart said the current estimate is that the liability will be paid off in 18 years. She said based on the information in the report, she was able to give a rough calculation of how much the borough would continue to owe if the museum goes through with the separation.

“It’s in the neighborhood of half a million over the next eighteen years, roughly $30,000 a year,” Stuart said, noting that this is a cost the borough will need to pay regardless of whether the separation plan moves forward. While the borough’s financial responsibility to the museum will likely decrease if it becomes an independent nonprofit, this is one financial responsibility that won’t go away.

Until the current fiscal year, the borough routinely contributed $240,000 to support museum staffing. For the current fiscal year, the assembly cut the museum staffing budget to $150,000, citing an anticipated loss of revenue due to COVID-19. In past interviews both trustees and state museum experts have said it’s likely borough funding for the museum will decrease if the institution separates from the borough.

Stuart said PERS will do its own calculation. Her estimate is designed to give the assembly and museum board a ballpark figure so they can continue working on the separation plan.

Both assembly members and museum trustees said it’s too soon to say how the findings will impact plans to separate. It will ultimately be up to the assembly to determine whether the plan makes financial sense.

“We’ve got to see what the board wants. It’s something that will be worked out along with the rest of the budget,” assembly member Gabe Thomas said. He added that to make it through the borough’s current economic challenges, he believes it will be necessary for many services and organizations to become more self-supporting.

The board of trustees is trying to transition the museum from being a quasi-governmental organization, with attributes of both a borough department and nonprofit, to a completely separate nonprofit. 

The board’s plan involves changing municipal code and museum bylaws to reflect the facility’s independence from the borough, and transitioning staff from borough employees to nonprofit employees. Trustees have said ideally, under the new structure, the borough would remain responsible for maintenance of the building and would continue to provide financial support for the museum at a reduced level agreed upon in a memorandum of understanding.