The House Pension Oversight Committee met October 4 at the Capitol to review the health of Oklahoma’s pension systems. Rep. Randy McDaniel, chairman of the committee, reviewed recent reforms and the gains in funding ratio for the state systems.
“While financial conditions of the major pension plans have improved, some annual shortfalls still exist,” McDaniel said. “We moved up 11 percentage points in one year, which is enormous.”
Previously, the Oklahoma Public Employees Retirement System had an unfunded liability of $3.3 billion and negative cash flows. This trend has been reversed with the funding restored to 80.7 percent and the cash flow situation reversed.
McDaniel discussed the possibility of continuing to address the health of the retirement systems with the “Oklahoma Debt Reduction Act,” which would assign spillover funds to pay off pension debt. Spillover occurs when the state collects more in revenue than anticipated and the Rain Day Fund has been filled to the maximum allowed in the Constitution.
House staff reviewed employee contributions of the different systems, indicating that state employees pay 3.5 percent of their income, while teacher’s members of other systems pay twice as much. A 50-state survey reported that contributions vary widely from zero to 12.25 percent, with the average at 6.19 percent.
McDaniel pointed out that teachers, police and firefighters often persuade their employers to pay their contribution in collective bargaining agreements.
“It is an issue of fairness,” he said. “I will not advocate increasing the amount state employees pay out of pocket for retirement contributions because they don’t have the same opportunity to have employers pay their contributions. I will not be going there this session. State employees haven’t had a pay raise since 2006.”
“We appreciate Rep. McDaniel’s recognition that state employees can’t pay more for their retirement,” said OPEA Policy Director Trish Frazier. “We look forward to working with him to find additional funds to continue to restore the health of the retirement system.”
In addition to pursuing additional funding for OPERS, OPEA will be working on legislation to allow retirement systems to fund cost of living adjustments (COLAs) from the system’s assets as long as the system remains 80 percent funded after the COLA is paid.
“The OPERS system is healthy enough to provide retirees with a COLA,” Frazier said. “Retirees are challenged to survive on their pension. Since the last COLA, the cost of health insurance, food and fuel has increased significantly.”
Because retirement benefits are based on low state salaries, OPERS retirees receive the lowest benefit checks of all the systems, an average of $15,000 per year. The average benefit for retired teachers is $18,000.
