Jason Murphey, Randy McDaniel, Kris Steele unveil intensified agenda for agency consolidation, fiscal stability, pension reform

In a meeting with members of the Capitol press corps, Speaker of the House Kris Steele yesterday (Thursday, January 19) set the stage for comments from two of his conservative lieutenants, Jason Murphey of Guthrie and Randy McDaniel of Oklahoma City. 

The pair provided details on Republican plans to ratchet up state government agency savings through further information technology, agency consolidation and pension reform programs that began last year. Their presentation came on the annual bill filing day, when a flurry of work results in hundreds of new proposals for changes in law or constitutional provisions. 

Steele characterized the 2011 session as Oklahoma’s “watershed moment from a fiscal conservative standpoint.” The Shawnee Republican flatly predicted efficiencies will yield eventual gains worth “hundreds of millions of dollars as a result of last year’s reforms, and further steps this year.” Murphey said 2011 was “the year when we cleared the deck. One of our toughest jobs now will be follow up.”

Murphey has worked on government modernization for years, and has led what many analysts consider historic transformations in government use of technology, purchasing power and other reforms. The Guthrie Solon 
said he believes those laws already have “laid the basis for large-scale consolidation.” He noted that the Office of State Finance has reported savings are “exceeding the target. We are reducing the state’s footprint.”

Rep. McDaniel said the continued focus for pension reform – in fact, “the bottom line” – is that benefits must be paid for, including cost-of-living-adjustments (COLAs). In past decades, COLAs had come to be considered virtually an entitlement among state employees, yet COLA decisions were made “ad hoc” by individual pension systems or through legislative action. 

The impact of the 2011 pension reforms have proven beneficial to the state in bond ratings and assessments of the health for government retirement systems. CapitolBeatOK has listed the package of pension changes as the most significant Oklahoma government story of 2011.

In Thursday’s press briefing, McDaniel pointed to firefighter and police advocates attending and said, “I’m encouraged by the progress we’ve made. In the next round there will need to be shared sacrifice from everyone involved.” Last year’s reform packages touched primarily the retirement plans for judges, teachers and state employees; this year’s focus will be on law enforcement and firefighter systems, McDaniel said.

In a compromise that seems to have support as the session nears, in some pensions employees will pay 1 percent more (in paycheck withholding) for benefits. Further, in plans where municipalities contribute, local governments will pay one percent more for employee benefits. 

McDaniel said there will also be changes proposed in the Deferred Retirement Option Plans (DROP) benefiting some public servants. Continued progress requires “four things that are absolutely critical.” These necessary quartet, in summary form, are: 

•Actuarial analysis
•standards for future benefits
•invest wisely and insist on the highest standards of professional plans
•no diversion of assets to other purposes. 

McDaniel formally announced he is advancing a proposed state constitutional amendment to assure that pension debt is treated as debt for accounting purposes and budget planning. He explained, “The constitutional amendment contains the fundamental principles of proper pension oversight. We need a higher law that takes into consideration the future generations of Oklahomans.”

According to a House staff summary, the amendment is intended to: 

(1) Protect plan assets by prohibiting diversion of pension funds to other uses;
(2) Institute a prudent investor rule to ensure wise investments of pension funds;
(3) Reduce future debts by directing adequate funding to pension systems;
(4) Require funding standards and practices to be established before additional benefits are authorized.

In dialogue with reporters, Murphey said estimated savings from modernization exceed $6 million thus far, and another $100 million has been gained from the IT consolidation. Additional savings will evolve as Speaker-Designate Shannon’s legislation on asset sales is actually implemented. 

Murphey explained, “The first mandate is for [the Department of] Central Services to identify the 5 percent of the most underutilized resources. I think some of the assets are under-appraised but will await the information.” 

Asked about reports that some state agencies are seeking exemptions from the IT and other new rules, Rep. Murphey was blunt: “My counsel to them would be that the political environment is not favorable to a legislative exemption.”

In response to questions focused on how savings might best be utilized, Murphey said, “I’m a big fan of tax reduction as the proper use of these resources. You could look at 15 to 20 of the smallest tax revenue streams and simply eliminate them entirely and that would be less than the resources we’re freeing up through this effort. On the other hand, it could be best to take the resources and use them to finance a first step in putting the income tax rate reductions into effect.” 

He stressed that would be a choice for the entire Legislature to debate.

Responding to a question from CapitolBeatOK, Rep. Murphey commented, “There was absolutely institutional [agency] resistance to the reforms. The best case scenario, however, is the cooperative stance of the Department of Education. In the interim process I pointed to them as an example of an agency that wanted to jump to the head of the line. They believe they will achieve savings of $5 to 6 million. The website there was static and haphazard. Now it is dynamic.”

Encouraged to “name names” in terms of institutional resistance, Murphey said, “Early on it is clear there was resistance at DHS. They are vital to our success. I now believe that has improved significantly.” 

In a follow up, Murphey outlined resistance from other parts of state government: “Fifty to 60 of the agencies initially did not want to complete the assessment, did not provide the information needed. Ultimately, however, they all submitted the information needed to start this process.” 

Rep. David Derby of Owasso “will carry legislation consolidating the state’s fiber network to include OneNet,” the information system presently exclusive to Higher Education institutions. Rep. David Brumbaugh of Broken Arrow “will carry legislation on purchasing, education spending transparency and fleet reform.”

Rep. Elise Hall of Oklahoma City “will carry legislation improving transparency into the state’s bond indebtedness,” Murphey said. Rep. Josh Cockroft of Tecumseh is sponsor of “legislation creating a one-stop-shop for open records requests through the office of Chief Information Officer Alex Pettit.”

Rep. Aaron Stiles of Norman “will carry legislation building on his business licensing one-stop-shop legislation from last year.” Rep. Lewis Moore of Arcadia will lead an effort “to reform the way the state manages state agency workers’ compensation spending.” 

House Speaker-designate T.W. Shannon of Lawton “will carry legislation requiring reforms to the management of state assets.”

Murphey himself plans to sponsor carry legislation focused on purchasing reforms and transparency. In prepared comments, Murphey said, “House Bill 2197 will focus on purchasing reform and will create options for higher education to take advantage of some of the savings we have been able to enact in past purchasing reforms. The intent of House Bill 2196 will be to create online information in a dashboard-type performance matrix to aid the public and press in getting agency data and gauging agency effectiveness.”
(A government agency performance matrix can be found at track.dc.gov.)

Steele plans a follow-up to House Bill 2140, his government agency consolidation measure from 2011. Steele’s H.B. 3053 “would consolidate the Merit Protection Commission and State Bond Advisor into the Office of State Finance and rename OSF the Office of Enterprise and Management Services.” Further, the measure “would also consolidate the Oklahoma State and Education Employees Group Insurance Board and Employment Benefits Council Board into the Oklahoma Health and Wellness Board.”