Speaker-Designate Steele promises focus on major pension reforms

CapitolBeatOK Staff Report

Published: 17-Sep-2010

Modernizing and stabilizing state pension systems will be a major focus of House Republican lawmakers in the 2011 legislative session, state Rep. Kris Steele announced this week. The push for reform comes in the midst of increasing national discussion and focus on government pension systems and likely crises in solvency.

“We must have a financially sound retirement system to keep our promises to past retirees, and we must modernize the system if we want to attract top talent in an increasingly mobile, global marketplace,” said Steele, a Shawnee Republican who is the House Speaker-designate. “That’s why House Republicans are committed to improving and solidifying state pension systems.”

State Rep. Randy McDaniel, who has nearly 20 years’ experience in the financial services industry, will lead the House effort, Steele said.

“I am pleased we are making this significant problem a top priority,” said McDaniel, an Edmond Republican who also serves as vice-chair of the Oklahoma State Pension Commission. “For decades, solving this problem has not been a priority and passed on to future generations. The time has come for creative solutions to address one of the state’s most significant financial challenges.”

“The poor funding status of our state pension retirement plans requires attention,” he continued. “When decade after decade the unfunded liability increases exponentially, the fact is reform is necessary and important to the future of Oklahoma. For example, ten years ago, the state’s unfunded pension liability was just over $6 billion. Today, it is nearly $15 billion – more than twice the size of the entire state budget.”

Failure to address Oklahoma’s pension problems will result in growing budget challenges in the future, McDaniel said, noting the problem is already near the crisis point in other states.

CapitolBeatOK has previously reported estimates from the Institute for Truth in Accounting that the combined debt from unfunded retirement/pension plans and other state government obligations is at least $14,600 per Oklahoma family.

The Pew Center for the States has estimated Oklahoma’s pension/retirement plans are, at best, around 60 percent funded. Actuaries contend systems must be at least 80 percent funded to assure solvency.

The Oklahoma Teacher Retirement System has been tagged the second or third worst in the United States.  Non-teachers who are association executives are eligible in the state system, a source of controversy in the last legislative session.

While a wide range of solutions will be considered, McDaniel and Steele said this week, reform efforts will focus on increasing employee flexibility and long-term stability.

“Today’s workforce is more likely to have many employers compared to the workforce of previous generations,” McDaniel said. “The state needs to overhaul our retirement system to meet the needs of a more mobile 21st Century workforce.”

Potential reforms would grant workers more mobility, McDaniel said, ensuring employees do not lose retirement funds if they change jobs. He said reforms should also provide increased worker control over investment decisions.

The push for reform comes as analysts throughout the United States are focusing on the pension issue as one of the most significant facing state and local governments, and the national economy. The Mercatus Center at George Mason University in Virginis sponsoring a national seminar on the subject on September 24, with live streaming for those unable to attend in person.

Mercatus officials said, in an email this week to CapitolBeatOK, that information on the seminar is available from Kathleen O’Hearn at kohearn@gmu.edu or at (703) 993-8426. Options are available to attend or join the event via live stream.

Here in Oklahoma, McDaniel said, “I believe each individual should have the ability to pursue his or her own financial freedom. If we offer greater control and personal choice, workers can determine how much they want to invest, what investment choices meet their needs and risk tolerance, and when they want to retire.”

“We can no longer continue doing business as usual,” Steele said. “We must address the growing unfunded liabilities of our pension plans and create a modern retirement system. We are committed to developing creative solutions and meaningful reform measures that will make a real difference in the lives of current and future retirees.”

The next legislative session will convene in February 2011.

Note: Editor Patrick B. McGuigan contributed to this report.