FAIRBANKS — Lawmakers are developing a way to restore a guaranteed monthly pension for state employees that won’t cost the state more money, according to financial experts who testified in Juneau on Thursday.

The proposal would shift some one-time costs to employees and make minor increases in the monthly amounts employees pay into the Public Employees Retirement System.

The state stopped offering a monthly guaranteed pension to newly hired public employees in 2006 and instead began offering set contributions to their retirement accounts. The change outraged public employee groups, which have been fighting to restore the “defined benefits” system ever since.

William Fornia, an actuary who is working with the bill’s sponsors, testified that the proposed revisions, which still are going through financial analysis by the state, won’t increase the government’s costs.

“We’re pretty confident with the goal of the sponsor to be cost neutral,” Fornia said. “Based on some preliminary calculations, we think we should get there.”

Introduced by Sen. Dennis Egan, D-Juneau, the measure would give employees the option of enrolling in a defined-benefit system. The system would pay guaranteed retirement benefits linked to the length of employment, similar to what was in place for much of Alaska’s history, Egan said.

Worried by $11 billion in unfunded liabilities from older defined-benefit programs, the state shifted to defined-contribution system in 2006.

Under the defined-contribution system, employees pay into a 401k-style plan, which has some investment options but no guaranteed payout. The plan saves the state money because it shifts risk of investment to the employee, but without guaranteed retirement benefits, employees have little incentive to stay in the state, opponents argue.

According to some testimony, the changes caused an exodus of young teachers, firefighters and police officers to better retirement packages in the Lower 48.

Egan said the goal is to give Alaska-trained employees a reason to stay in Alaska.

“Defined benefits take a long time to earn but requires service to the state,” he said.

The most recent iteration of Egan’s legislation would reduce the costs incurred by the state if employees under the current defined-contribution system upgraded to the proposed defined-benefit system.

Originally, Egan’s bill would have had the state cover an increased costs, estimated to be as much as $120 million.

Under the latest revision, the employees would have to pay that difference or start with a smaller accounts and work to make up the difference.

There is also a slight bump up in the percentage of salary that employees would have to pay into their pensions.

Deputy Commissioner of Administration Mike Barnhill, who has overseen the state’s analysis of the proposed changes, said the changes do a lot to reduce costs.

Those costs have drawn resistance to the proposal from the administration. During an October hearing in Fairbanks, Barnhill stressed that even if a plan could be cost-neutral, an unfunded liability could be introduced at a later date.

On Thursday, however, Barnhill said, while he still had work to be done, he was optimistic about the progress made on the measure.

“I believe we’re very close,” he said. “I believe they’re on the right path — I believe there are some things we need to discuss — I believe we’re closing in on it.”

Contact staff writer Matt Buxton at 459-7544.