CapitolBeatOK Staff Report
OKLAHOMA CITY – The financial health of Oklahoma’s pension system improved by more than $800 million in 2015, according to the legislator who has guided a wave of significant reforms during his years in the Legislature.
Over the past five years, the unfunded liability in Oklahoma's pensions were reduced by $7.3 billion, according to the latest actuarial reports.
At a meeting this fall, during the Legislature's interim study process, the official reports were presented by system directors to the House Committee on Business, Labor and Retirement Laws. The review included a discussion of the new, more stringent Government Accounting Standards Board rules used in financial reporting.
“The pension reforms are working,” said Rep. Randy McDaniel, R-Edmond, chairman of the committee. “For the many Oklahomans whose retirement benefits rely on the strength and durability of the pension system, the substantial improvement provides more peace of mind and economic security.”
From 2000 to 2010, the state’s unfunded pension liability climbed from $6 billion to $16 billion, an average increase of a billion dollars a year.
According to the major rating services, Oklahoma’s pension system ranked in the bottom five nationally. Moreover, the annual funding gap was more than $500 million, despite record levels of total contributions.
Over the past five years, major pension reforms have been approved that have produced billions in savings. Rep. McDaniel, often working with state Sen. Mike Mazzei, R-Tulsa), was the sparkplug for the reform process.
Combined with good-to-superior investment returns and steady funding, the reforms steadily caused Oklahoma's unfunded pension liability to decrease from over $16 billion in 2010, to $9.6 billion last year, to $8.8 billion in 2015.
The combined funded ratio improved from 56 percent in 2010 to 76 percent in 2015. Additionally, the $500 million a year funding deficit has been closed.
“The recovery is the product of teamwork, leadership and resolve,” McDaniel said. “Without a steadfast commitment for results, the unfunded liability would have continued to climb, causing the future funding needs from the state budget to soar.”
Next session, lawmakers are expected to face a significant budget shortfall, perhaps similar in size to the pension system gains achieved this year.
Attempts to raid pension funding to fill other budget holes were not supported last year, but could come up again during the 2016 session.
“Providing adequate funding is critical,” McDaniel said. “We must be prepared for market corrections and other risks in order to achieve our shared goals of keeping promises, improving the state’s bond rating and protecting the future generations to come.”
NOTE: Editor Patrick B. McGuigan contributed to this report.