Oklahoma Senate advances pension reform measure
Published: April 19th, 2011
Today (Tuesday, April 19), the Oklahoma state Senate passed House Bill 2132, characterized as a significant step toward pension reform at a time that analysts of all stripes agree taxpayers face approximately $16 billion in unfunded liabilities across the state’s systems. That gap is more than twice the size of the entire state budget. A decade ago, the funding gap was about $6 billion.
H.B. 2132, sponsored in the Senate by President Pro Tem Brian Bingman of Salpulpa and Sen. Mike Mazzei of Tulsa, gained approval on a vote of 33-13 in the upper chamber.
Bingman was enthusiastic for the measure, saying in a statement, “The most important thing this measure does is to require the legislature to fund any cost of living increases (COLAs) instead of leaving them to be absorbed by the pension systems. This reform alone should reduce our unfunded liability by more than $5 billion.”
Mazzei, chairman of the Senate Select Committee on Pensions, pointed to the recent decision by Moody’s Investment Services to begin including unfunded pension liabilities when determining credit ratings. That decision has the practical effect of moving Oklahoma from one of the best credit ratings to one of the worst among the American states.
Today, Mazzei commented, “Failing to reduce our unfunded liability could result in massive tax hikes, lower bond ratings, and even more budget cuts to keep our pension systems functional. Making these decisions today means avoiding those scenarios, and ensuring the long-term stability of public pensions.”
After changes in the measure, it will now return for new consideration the House of Representatives.
Soon after the Senate, Speaker Kris Steele said, “We are making history with passage of House Bill 2132. This reform measure will drastically improve the state’s pension plans and fulfill our obligation to retirees.”
Rep. Randy McDaniel of Oklahoma City has fought for pension reform in the House and dubbed H.B. 2132 the Truth in Funding Act. He says the bill is “one the most important pension reform bills in the country. It will greatly improve the financial condition of our pension plans.”
CapitolBeatOK, in continuing research on the issue, has found Oklahoma consistently falls somewhere among the worst 15 states, depending on the criteria used by analysts. In no benchmark other than recent investment return does Oklahoma as a whole, across its government pension programs, look strong. The average for adequacy of government pension funding is 61%, according to state officials. The industry standard for the private sector is 80%.
In a recent analysis focused on pension issues, even a comparatively healthy state like Florida came up short. Jed Graham, writing in Investors Business Daily (March 25) called attention to concerns expressed by that state’s new governor, Rick Scott, who called pensions a “ticking time bomb.”
Graham’s point was that if investment returns fall short of the hopes of managers – as low as 6% rather than the hoped-for 7.75% annual return – the state’s unfunded liability could triple.
Here in Oklahoma, pension reforms have been discussed with increasing passion over recent months. Deputy state Treasurer Regina Birchum characterizes the state’s unfunded pension debt as a “looming crisis.”
Today, Birchum’s boss, Treasurer Ken Miller, announced he was preparing a range of recommended reforms for discussion with Governor Mary Fallin and with colleagues on the Pension Oversight Commission, of which he is chairman. Some of Miller’s changes echo those being prepared for passage in the Legislature.
Miller has said in public meetings the situation is at “crisis level.”
His colleague on the state Pension Commission, Auditor & Inspector Gary Jones, says the problem has been caused by “a lack of responsibility.”
Sen. Mazzei has previously told CapitolBeatOK pensions are “the one that could implode us.”