The City Sentinel

Leaders express tempered enthusiasm for watered-down pension reform

Patrick B. McGuigan Story by on June 2, 2014 . Click on author name to view all articles by this author. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

Randy McDaniel

Randy McDaniel

By Patrick B. McGuigan


OKLAHOMA CITY – With unfunded liabilities on government pensions somewhere between $11.5 billion and $44.1 billion, the Legislature watered down and passed a bill that took small steps at reform.

House Bill 2630 is directed at maintaining full pension benefit for government worked hired in late 2015 and thereafter.

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.

SBS has estimated as much as 44.1 billion in unfunded liabilities for the state – with $41 Billion of that from pensions.

( The total is $11, 574 per capita).

What H.B. 2630 does achieve — and all voices within and outside of the Sooner State agree on this, — is a defined contribution (DC) system for new state employees in the largest of the programs, the Oklahoma Public Employees Retirement System (OPERS) – so long as they are not designated hazardous duty employees, i.e. firefighters and law enforcement officers.

Those future employees will be able to control their own investments, and take their retirement fund with them if they leave public service.

In sum, Williams says, the measure deems it “a step forward which is very limited in its application because it applies only to future hires.” And further, those hazardous duty employees and public school teachers will stay in the defined benefit (DB) program that is based on assumptions of high investment returns and long-term public debt.

Jonathan Small, vice president for fiscal policy at the Oklahoma Council of Public Affairs (OCPA), is somewhat more enthusiastic than Williams in his analysis, because those hired after November 1, 2015 will enter jobs that constitute 40 percent of the projected state workforce.

In his press statement after House approval, state Rep. Randy McDaniel, R-Oklahoma City, principal author of the law, was more muted in his enthusiasm than the governor, but still upbeat as the House bill cleared the Senate and headed to her desk: “The new law means future employees will be offered enhanced mobility and the opportunity to create greater personal savings.”

McDaniel’s tempered rhetoric includes this observation: “Towering costs associated with paying for the unfunded promises of the past influence all other priorities of the state.”

Like Small and some public worker advocates, Rep. McDaniel says the slow motion impact of the shift to DC — in a 401 K style plan, fully portable for future state workers — is the most redeeming feature of the new law.

McDaniel told Oklahoma Watchdog,  “Future employees will be offered enhanced mobility and the opportunity to create greater personal savings. The state will have a retirement system that will be sustainable because the costs are predictable.”

An analysis prepared for OCPA put the time frame for sustainability in the new program between 12 and 18 years in the best scenario, or as much as 30 years as the current workforce retires and new workers are hired.

Among those who have long encouraged the shift in policy embodied in H.B. 2630, — albeit in slow motion rather than next year – the Williams camp sees the glass as half empty, while Small’s cadre considers it half full.

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