Alaska withdraws plan to privatize state employees’ payroll system

The Alaska Department of Administration has canceled a request for proposals that could have led to the privatization of the state’s payroll system for 14,000 public employees.

In an Oct. 29 memo, DOA Commissioner Paula Vrana wrote, “The procurement process has now concluded and the State has cancelled the RFP. Instead of pursuing a contract for these services, we will continue to move forward with the payroll structure as it is and will focus our efforts on process improvements and system enhancements within the existing structure.”

Vrana’s memo came weeks after the Department of Administration said it was considering whether to outsource the state’s payroll system to a private contractor.

DOA has struggled for years to pay state employees accurately. In fiscal year 2025 alone, according to a state study, employees filed more than 1,500 “notice of pay problem” reports with DOA. A state feasibility analysis suggested that privatization could cost $4 million per year. The state currently spends $10 million per year on its payroll program.

In a letter to the state’s public employee unions, labor relations manager Matthew Jendrusina cited three reasons for canceling a request for proposals from companies interested in working as a payroll contractor — “ambiguous or otherwise inadequate specifications were part of the solicitation; the solicitation did not provide for consideration of all factors of significance to the state; and the award is not in the best interest of the state.”

Public employee unions had opposed the privatization effort and filed grievances seeking to stop it. Members of the Alaska Legislature expressed concerns about the proposal and wrote letters asking the state to pause it.

Danelle Beck is president of Confidential Employees Association Local 6133, which represents 75 payroll employees and others across the state. She praised the move in a statement published Oct. 29.

“What we saw today is the power of working people standing together. CEA members stood up and fought back against a rushed and opaque move by the Dunleavy Administration on its way out the door” she said.

“Our members were not going to sit quietly while decisions were made that threaten our livelihoods, and the public services Alaskans depend on.”