By Patrick B. McGuigan

Published: 20-Oct-2010

A government retirement system intended for teachers, administrators and support personnel in public schools has included a total of 80 non-educators at one point or another since the 1970s, according to information provided at a House interim study.

During the same hearing, the head of Oklahoma Teacher Retirement System said OTRS is assuming a 2 percent cost-of-living adjustment (COLA) for retired teachers, although the Legislature has only approved a 1% COLA in the present cycle.

Steven Anderson, a Certified Public Accountant now in private practice who worked for former Gov. Frank Keating, believed that 56 non-educators had participated in the system, but James Wilbanks, who runs OTRS, said the number was actually 80.

Anderson detailed what he had learned about the history of a controversial loophole in eligibility requirements, noting that it had developed from federal legislation in the 1970s but required state-by-state enabling legislation.  Anderson provided his critical analysis of the situation at a Tuesday, October 19 House interim study.

While much of the testimony was technical in nature, Anderson at one point observed, “People don’t do things like this in the light of day.” While access to the system for non-educators began in 1976, the issue only came to light in the last year.

Anderson said wording in federal law that allowed access to non-educators was “an inside job,” and noted “words matter. When you get into the IRS code, they matter a lot.” Anderson added that even under the controversial provisions examined at the interim hearing, some participants might not have been eligible. He said the Oklahoma Education Association, one of the private groups whose employees have accessed the OTRS, was a labor organization, not a true association.

In the 2010 legislative session, Rep. Sally Kern, an Oklahoma City Republican who asked for this week’s interim study, sponsored House Bill 3108.

That measure would have prohibited former public school teachers who become executives at private associations or unions from continuing to participate in the OTRS. To put it another way, the proposed law would have ended the special status given to association executives of certain non-government groups in the Sooner State’s underfunded teacher retirement program.

Rep. Kern pulled her bill voluntarily to allow more detailed study of the issue. Assailing Kern’s legislation during the session, but silent during the interim hearing, were officials with the OEA and other private groups that have had non-educator employees who retained OTRS coverage.

Dr. Wilbanks said that of the 80 non-educators who have accessed OTRS, 16 are still in the system. Nine have returned to teaching, while seven are employed with private groups. Estimating the net cost of the 80 is probably irretrievable, both Anderson and Wilbanks said. However, they agreed the average annual salary of the non-educators who are or have been in the system would typically be higher than for educators, meaning the calculation for retirement benefits would also be also higher.

Oklahoma Treasurer Scott Meacham, the Pew Center on the States and many other authorities have described the Oklahoma teacher retirement system as among the nation’s worst.

State Rep. Ken Miller, an Edmond Republican seeking to become state Treasurer, pressed Wilbanks on the fiscal implications of the OTRS decision to assume a 2% COLA rather than the 1% the Legislature has approved. At 2%, Wilbanks said, the system is about 49.8% solvent; at 1% it would be about 52%.

In a prepared statement, Anderson said, “The coming explosion of Oklahoma’s pension bomb is going to be ugly enough as it is. The taxpayers are already on the hook for all this debt. We shouldn’t be making matters worse for the taxpayers by forcing them to fund the retirement of union employees.”

Anderson had some good words for Wilbanks, observing the system’s investments have performed comparatively well in recent quarters. Anderson is a research fellow at the Oklahoma Council of Public Affairs (OCPA), a nonpartisan think tank is calling attention to some of Anderson’s conclusions.