House sends major pension reforms to Senate
Published: February 24th, 2011
CapitolBeatOK Staff Report
The Oklahoma House of Representatives approved a measure today (Thursday, February 24) intended to shore up Oklahoma’s state pensions. The legislative sent from the House is one of several significant pension reforms advanced by Speaker Kris Steele, a Shawnee Republican, and Rep. Randy McDaniel of Oklahoma City, also a Republican, to reform state pensions.
While a leading free market think tank applauded the measure that moved forward after today’s vote, the leading public employees group has expressed concern about the envisioned changes in pensions and retirement plans.
“We are in a great position to craft solutions to prepare for our state’s future,” Speaker Steele said. “Reforms must be implemented if we are going to improve the state’s pension plans and fulfill our obligation to retirees.”
“In the past, this problem has been passed on to future generations of Oklahomans to solve,” said McDaniel. “No more. The time has come for meaningful pension reform. As of today, we are closer to solving one of the state’s most significant financial challenges. This is a great day for the taxpayers of Oklahoma.”
House Bill 2132 requires the legislature to provide a funding source when a cost-of-living adjustment (COLA) is offered. This measure requires the Legislature to pay for costs as they go.
“One of the primary causes of the current unfunded liability is that past COLAs were enacted without actually paying for them,” said Steele. “As a result, money was drained from pension systems, leaving them in an increasingly difficult position for future generations. Under the reforms we are advancing the focus is on financial stability.”
According to official actuarial reports, the unfunded liability now totals more than $16 billion – more than twice the size of the entire state budget. Steele noted that 10 years ago the state’s unfunded pension liability was just over $6 billion.
Still to come will be full House consideration of McDaniel’s House Bill 1006 which would, advocates say, stabilize state government pensions with an explicit 80% funding floor. Rep. McDaniel’s H.B. 1011 is intended to provide a COLA funding source for the troubled Oklahoma Teacher Retirement System if the 80% benchmark is reached, something that may not happen for many years.
Oklahoma’s teacher retirement system is often cited as “among the two or three worst” programs in the United States. In recent analyses from the Institute for Truth in Accounting, Oklahoma as a whole (with all pension/retirement programs examined) falls in the bottom half of 30+ states examined in detail.
After today’s House action on H.B. 2132, Jonathan Small, fiscal policy director at the Oklahoma Council of Public Affairs (OCPA) hailed the legislation:
“Now is the time for major reform to Oklahoma’s state pensions. Each of Oklahoma’s six major pension funds has experienced a significant decline in its funded ratio over the last decade. During the last fiscal year alone, the state pumped in more than $1 billion dollars to existing state pension systems, yet the systems had a combined unfunded liability of more than $16 billion.
“It’s clear the problem with our pensions is not a lack of funding but rather a combination of several factors, including irresponsible legislative action, employee union lobbying, lack of transparency in reporting the conditions of the systems to the public, and overextension of benefits to beneficiaries.”
Small continued: “Lawmakers, agency directors, employees, and beneficiaries alike need to understand that retirement is primarily the responsibility of the retiree — not the employer, the government or society at large,” Small added. “Reforms must be enacted now to bring state spending on pensions back to reality, and the measures heard today in the House do just that.”
Small praised House Speaker Kris Steele and State Rep. Randy McDaniel for their commitment on the issue:
“We applaud Speaker Steele and Representative McDaniel for their leadership in standing for fiscal responsibility rather than watching our state become engulfed in the fiscal chaos that plagues Wisconsin, Illinois and California.
“The signs are everywhere that this has become a crisis situation. And now that Moody’s Investors Service has announced that our pension liability could affect the state’s credit rating, we simply cannot afford to kick the can down the road again.”
“At the crux of this debate,” Small said, “unions are advocating that a citizen’s purpose in life is to provide public employees and government bureaucrats with a grander retirement than the taxpayer will earn for their family. It is the wrong side of history to be standing on − both philosophically and morally.”
Earlier this week, members of the Oklahoma Public Employees Association (OPEA) held their legislative day at the state Capitol. They distributed to reporters, including CapitolBeatOK, statements encouraging a “measured approach” to reform.
The group’s statement had described H.B. 2132 and other reform measures as policy changes that would “make it almost impossible for retirees to receive a cost-of-living adjustment (COLA) in the future.”
Concerning pension systems, Sterling Zearley, executive director of OPEA, said, “These systems have been in existence for decades and provide benefits for thousands of employees. These are not decisions to be rushed. OPEA favors a measured approach to pension reform with all parties at the table.”
Concerning the Republican pension changes and other issues, Zearley said, “Retirement is only part of the state employee total compensation package. In order to recruit and retain a quality workforce to provide services that the citizens of Oklahoma expect and deserve, state employees must have a competitive total compensation package, including retirement, health insurance and compensation.”
House Bill 2132 now heads to the state Senate.
Note: Editor Patrick B. McGuigan contributed to this report.