By Patrick B. McGuigan | Oklahoma Watchdog
OKLAHOMA CITY— With unfunded liabilities on government pensions somewhere between $11.5 billion and $44.1 billion, the Oklahoma Legislature watered down and passed a bill that took small steps at reform.
House Bill 2630 is directed at maintaining full pension benefits for government workers hired in late 2015 and thereafter.
Gov. Mary Fallin, who is expected to sign the bill, and its principal author, Rep. Randy McDaniel, R-Oklahoma City, were tempered in their assessment of the bill’s ability to reduce the threat to future pensions.
Bob Williams, president of State Budget Solutions, a national pension watchdog group, said the new law does nothing to provide assurances for current and retired workers.
The measure, Williams said, is “a step forward which is very limited in its application because it applies only to future hires.”
Current employees, including those with hazardous duty and public school teachers, will have to hope their defined-benefit program performs to expectations of high investment return and reductions in long-term public debt, he said.
Assuming high returns, Oklahoma sets its unfunded liabilities across six government pension plans at about $11.5 billion. State Budget Solutions, using estimates drawn from actual performance of pension funds through and coming out of the recession that began at the end of 2008, said Oklahoma has $44.1 billion in unfunded liabilities.
“Towering costs associated with paying for the unfunded promises of the past influence all other priorities of the state,” McDaniel said.
McDaniel said the shift to a fully portable 401K-style plan for future state workers in the largest of the programs, the Oklahoma Public Employees Retirement System, is a step toward sustainability, albeit in slow motion.
An analysis prepared for the Oklahoma Council of Public Affairs put the timeframe for sustainability for the new program between 12 and 30 years, as the current workforce retires and new workers are hired.
Those future employees (excluding teachers, firefighters and law enforcement officers) will be able to control their own investments, and take their retirement fund with them if they leave public service.
“The state will have a retirement system that will be sustainable because the costs are predictable,” McDaniel told Oklahoma Watchdog. “Future employees will be offered enhanced mobility and the opportunity to create greater personal savings.
Jonathan Small, vice president for fiscal policy at the OCPA, said those future state workers included in the bill will eventually make up 40 percent of the projected state workforce.
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