As revenue picture brightens somewhat, pension clouds remain
By Patrick B. McGuigan
State Treasurer Scott Meacham today (Tuesday, March 9) unveiled a modestly better state government revenue picture. For the first time since December 2008, revenue collections in February exceeded the official estimate. However, in an exchange with reporters, Meacham made it clear the unfunded liabilities in Oklahoma’s pensions and retirement programs remain a major challenge for the state.
A report from the Pew Center on the States issued last month was very critical of Oklahoma, and in fact of most of the states, in terms of unfunded liabilities and obligations in the various state retirement and pension programs.
The Pew analysis criticized all of Oklahoma’s programs, but was particularly focused on the state Teacher Retirement System.
Another national organization, the Institute for Truth in Accounting, has been even more pointed in its criticisms of Oklahoma’s systems.
Addressing the pension and retirement issue was a priority earlier in the Henry administration. When CapitolBeatOK asked about the Pew report, Meacham said:
“We made this a priority and in fact started … on a 20-year plan to get the Teacher Retirement System to an 80% base. You actually want to be stronger than that, but the actuaries and others strongly would prefer that you get it to 80%. We started that process and I’m sure the state will continue it because it has to.”
Meacham continued, “Right now the return on investment is the problem.” Half in jest but making clear the problem was serious, Meacham said, “The collapse of the stock market and investments has led some to conclude that the teacher retirement system doesn’t get fully funded until ‘Infinity’ – and that means never.’’
Meacham stressed, “It’s something we have to get to as a state. I am worried about my own mother on this, a retired teacher who needs that system for her monthly income.”
Another reporter observed that retired state teachers were “working the halls” seeking a 1% increase in COLA (cost of living adjustment) from the teacher retirement system. Meacham observed, “The hole in the teacher retirement system is so big that I’m not sure the state can justify doing that .”
CapitolBeatOK asked the treasurer about comments made recently by Tom Spencer, executive director of OPERS.
Spencer said that although the Pew study was useful, it was not fair or accurate to lump the other state retirement and pension programs in with the Teacher Retirement System.
Meacham responded, “By far the worst of all our systems in terms of unfunded liability is the teacher retirement system, and in fact it is one of the worst in the entire country. It absolutely does pull down our overall numbers. So, on the one hand, yes, Tom Spencer has a point. On the other hand, if you are a financial analyst your job is to look at the entire state, to look at them [pension/retirement programs] as a group because they are all, put together, a long-term obligation. These are long-term obligations of the state and there’s really no choice but to consider them together.
At last week’s regular briefing with the Capitol press corps, House Speaker Chris Benge was asked about the pension and retirement quandary. He replied, “When it comes to the pension and retirement liabilities, it’s really frustrating. It’s a really serious problem. Those of us at the Capitol now are having to deal with decisions made decades ago. We need to try to stop the bleeding.”
Benge continued, “No more unfunded mandates, that’s a really good place to start. We made that decision in the Legislature 4 or 5 years ago and we’ve stuck to it. We also set the objective to get to an additional $60 million a year in direct deposits into the retirement system. After 16 years for example that would ring the system to 80% funding, but that was before the crash. Bottom line is we have to be committed — to be, and to remain, disciplined.”
Benge was asked specifically about House Bill 3108, a proposal co-sponsored by state Rep. Sally Kern and state Sen. Steve Russell, both Oklahoma City Republicans.
Benge replied he was still studying the issue.
Opposition to the bill emerged late last week when lobbyists for the Oklahoma Education Association (OEA) began to work about HB 3108. In a series of talking points the teachers’ union said only the president and vice president currently participate in the state retirement program. In another talking point, the union said local OEA presidents and vice president had participated.
The OEA talking points reported, “HB 3108 would also affect employees at the Oklahoma State School Boards Association (OSSBA), the Cooperative Council for School Administrators (CCOSA), the Oklahoma chapter of the American Federation of Teachers (AFT), and some full-time released presidents at larger local OEA affiliates.”
Genesis of controversy over the association executives participating the state retirement system began last fall when Steve Anderson, a certified public accountant and former classroom teacher, criticized the practice in an essay for Perspective magazine, the monthly publication of the Oklahoma Council of Public Affairs (OCPA).
NOTE: Patrick B. McGuigan, editor of CapitolBeatOK, operates the online news site independently under a contract with OCPA to provide incisive and accurate reporting on state government news.