Oklahoma has seven public employee pension systems. The legislature has been working hard in recent years to improve the funds and decrease their unfunded liability.
Many bills were introduced this year to do this as well as provide much-needed Cost of Living Adjustments (COLA’s). These are provided to retirees based on the determination rate of economic inflation. Oklahoma retirees haven’t received a COLA since 2010.
In 2011, the legislature passed HB 2132, a statutory restriction known as the Oklahoma Pension Legislation Actuarial Analysis Act (OPLAAA) that prevents the Oklahoma legislature from providing a COLA within the state’s seven retirement systems without funding it. In 2010, at least half of the funds didn’t have the money to provide for its actuarial liability. This bill was lauded as it lowered the state’s collective unfunded liability from $16 billion to around $11 billion.
Some criticized it as an accounting trick but it wasn’t supposed to be. However, that depended on the legislature keeping its commitment to insist all pension enhancements be fully funded.
While the funding for all of the pension funds has increased, the actuarial liability of at least two of the systems remains a concern for many in the legislature.
Ironically, the first unfunded COLA since the passage of HB 2132 was the stipend bill last year that created a new legislative sleight of hand where a bill that violates OPLAAA inserts language that provides an exception from OPLAAA in the bill itself.
Another bill this year has me concerned. House Bill 2304, by Sen. Dewayne Pemberton and Rep. Avery Frix, seeks to provide a four percent increase in retirement benefits effective January 1, 2020, for the Oklahoma Firefighters Pensions and Retirement System, Oklahoma Police Pension and Retirement System, Uniform Retirement System for Justices and Judges (URSJJ), Oklahoma Law Enforcement Retirement System (OLERS), Teachers’ Retirement System of Oklahoma (OTRS) and the Oklahoma Public Employees Retirement System (OPERS).
Just like the stipend bill last year, this bill also amends OPLAAA to include a safe harbor clause that allows the bill to be treated as a non-fiscal retirement bill in the legislative process; thereby, surpassing the 2011 statute. The authors of HB 2304 provided no revenue source for the COLA increases.
After working for years to lower the unfunded liability of the state’s pension funds, HB 2304 will increase it. However, our state’s retirees desperately need a COLA as they’ve been attempting to survive on a fixed retirement when all of their medical and personal expenses continue to rise. Do you see the dilemma?
Providing a four percent COLA will create a liability of $486 million for OTRS, $228 million for OPERS, $58 million for firefighters, $48 million for police, $24 million for OLERS and $6.8 million for URSJJ.
I’m hopeful that as this bill continues to work its way through the process that a permanent funding source is added. I believe a Pension Actuarial Revolving Fund should be created using part of the new revenue generated from the medical marijuana and alcohol taxes to provide these COLA’s based on an index of inflation within Oklahoma’s economy.
Our state’s unfunded pension liability was $16 billion in 2010, which put Oklahoma’s pension system in the bottom five nationally. Fortunately, a strong economy, sufficient funding and several major reforms like HB 2132 have cut the unfunded liability nearly in half.
While there were many COLA bills introduced this year, none of them provided additional funding to pay for the increased cost. We must be fiscally responsible and find funding sources for COLAs to protect our state pension systems and our future retirees so they can rest assured their investment is protected and their retirement will be there when they get ready to leave public service. I want to thank Tom Spencer with the OTRS for helping me with the history behind the state’s pension systems and COLA funding.
To contact me at the Capitol, please write to Senator Ron Sharp, State Capitol, 2300 N. Lincoln Blvd. Room 412, Oklahoma City, OK, 73105, email me at firstname.lastname@example.org, or call (405) 521-5539.