Tahlequah Daily Press

October 8, 2013

ONLINE EXCLUSIVE: Hearing suggests pension fund privatization move afoot

From Staff reports

TAHLEQUAH — On Monday, the Oklahoma House Economic Development and Financial Services Committee held a hearing about the structure and management of state retirement systems. The study was requested by Rep. Joe Dorman, D-Rush Springs, and Donnie Condit, D-McAlester.

The following information about the hearing was provided by Rep. Mike Brown, D-Tahlequah.

The state has 7 state retirement systems:

•    Oklahoma’s pension plans for teachers, public safety workers and other state employees were only 56 percent funded in 2010.

•    In 2012, the plans were 65 percent funded.

•    The combined unfunded liability of the state’s pension systems is currently $11.6 billion.


Comments from Rep. Randy McDaniel:

•    The unfunded liability of the state’s pension systems poses a major financial challenge to state government

•    Lawmakers must do more to secure pension plans for public employees because people are living longer and more retirees are receiving benefits

•    Oklahoma’s pension plans for teachers, public safety workers and other state employees were only 56 percent funded in 2010. In 2012, the plans were 65 percent funded

•    The size of a state’s unfunded pension liability can affect its bond rating, making it more or less expensive to borrow money for public infrastructure projects like roads and bridges

•    Major credit rating agencies like Moody’s Investors Service are looking in more detail at unfunded pension obligations because pension liability poses more risk for investors


Comments from State Auditor Gary Jones:

•    Our pension problem is not because pensions pay too much or because of investments

•    Pension managers are doing a great job

•    From an accounting standpoint “if it ain’t broke, don’t fix it”

•    The problem is that legislature has not funded what they promised

•    We need to continue to make improvements in systems – and not scrap it

•    Believes consolidation would be a move in the wrong direction


Comments from Dr. James Wilbanks, Executive Director, Oklahoma Teacher Retirement System:

•    We have 150,000+ members in our retirement system, with around 55,000 retirees

•    OTRS covers all public K-12 educators and support staff, CareerTech educators, Higher Ed educators. Charter schools may participate in Teacher Retirement if they choose

•    The average benefit is higher than OPERS retirees

•    OTRS revenue: Institutions pay a portion of employee retirement, employees pay 7 percent of their salary into the system

•    The funded ratio/unfunded liability are just a snapshot - look at the funding period instead - it shows OTRS will be 100 percent funded in 22 years


Comments from Amanda Ewing, Associate Executive Director, Oklahoma Education Association:

•    Treasurer Miller is quick to refer to our current system as one that provides “rich benefits” to our public employees

•    After a lifetime of serving the state of Oklahoma, these public servants earn a modest retirement

•    The average public pension in this state barely keeps you above the poverty line ($1,500 a month, or less than $20,000 a year)

•    And yet, we should maintain this current system as future employees will not do as well under a defined contribution system

•    If you are concerned for the citizens of Oklahoma, you should be concerned for their retirement security

•    These pension reform plans are sold as quick fixes for our economy, but they are a lose/lose proposition for public employees and taxpayers

•    You cannot expect to improve the long-term health of our economy or create a sustainable future by slashing retirement security

•    When workers are forced to retire into poverty, they’re more likely to use government-supported programs, such as Medicaid/food stamps

•    Proponents of this change tout state’s unfunded liability as primary cause for concern - but our pensions are in good shape

•    When you look at our state’s 7 retirement systems, five of them are either above or within just a few points of that 80 percent funding level

•    The two systems with the highest unfunded liability, firefighters and teachers, have made major reforms to their systems in recent years

•    We’re moving in the right direction and need to give these reforms time to work - it’s no time to undertake risky overhaul of entire system

•    We have a nation of private sector employees struggling to retire with a 401k savings - let’s not condemn public employees to the same fate

•    We’re told not to worry, that these changes will only affect new employees, but that’s just unrealistic

•    None of the OEA members have expressed a desire to move from the defined benefit plan to a defined contribution plan

•    If new employees don’t pay into the old system, it increases the likelihood that benefits for current employees will have to be cut in the future

•    If we’re creating a new system for new employees and maintaining the old system for current employees, how does doubling systems saving money?


Comments from Robert Jones, Executive Director, Oklahoma Firefighters Pension and Retirement System

•    New firefighters can draw a pension after 22 years of service – recent increase from 20

•    Must also be at least age 50 to draw

•    The average age of retirement is lower because we don’t want to have 60 year-old firefighters carrying people out of burning buildings

•    Firefighters have 11,115 retirees drawing pension - both full time and volunteer

•    Our retirement system is a lot better than most. Most firefighters also have side jobs

•    Phil Ostrander, speaking on behalf of retired firefighters, said they were concerned about talk of a plan to consolidate the retirement systems’ administration

Legislation scheduled to go into effect on Nov. 1 will change guidelines of the Oklahoma Firefighters Pension and Retirement System to increase its funding level, which was about 61 percent last year. Per Mr. Jones, the system will only be about 80 percent funded in 30 years with the changes. Changes include:

•    Increasing firefighter contributions from 8 percent to 9 percent

•    Increasing municipality contributions from 13 percent to 14 percent

•    Increasing state dedicated revenue from the insurance premium tax from 34 percent to 36 percent


Comments from Steven Snyder, Executive Director, Oklahoma Police Pension System

•    Police can retire after 20 years of service.

•    Average police benefit is higher than OPERS and teachers

•    All officers have to be CLEET certified and follow their guidelines

•    Officers who work 25 hours a week receive benefits


Comments from Tom Spencer, Executive Director - Oklahoma Public Employees Retirement System

•    Average OPERS payout is the lowest of all the state pensions

•    OPERS investment return in 2013 was 12 percent with a conservative strategy

•    Only 66 percent of state employees participate in SoonerSave (the state gives participants $25/mo to participate)


Comments from Sterling Zearley, Executive Director – Oklahoma Public Employees Association

•    You can’t discuss pensions without discussing salaries

•    State employees have not received a raise in 7 years

•    The morale of state employees is not good - you have people making different salaries, doing the same job, working for different agencies

•    In 2012, we had 15 percent turnover rate in state employees

•    Pension changes cannot occur without state employees’ salaries being improved and a pay philosophy being developed & implemented


Oklahoma Teachers Retirement System

•    According to a recently released Oklahoma Pension Commission report, the OTRS is performing better than 99 percent of all public funds in the U.S.

•    The OTRS had a 16.3 percent return on investments in the first nine months of fiscal year 2013

•    Over the past decade, OTRS has ranked in the 1 percent of all public funds in the U.S., with a performance of an average 10.2 percent return


The Oklahoma State Pension Commission consists of seven members:

•    Treasurer Ken Miller, Chairman

•    Doug Lawrence, Vice Chairman - Governor Appointee

•    Senator Rick Brinkley - Senate Appointee

•    Gary A. Jones, Oklahoma State Auditor and Inspector

•    Preston L. Doerflinger, Director, OMES

•    Louis F. Trost - Governor Appointee

•    Vacant - House of Representatives Appointee


The Oklahoma State Pension Commission was formed to provide guidance to public officials, legislators and administrators in developing public retirement objectives and principles and recommending pension reform programs.


They analyze the performance of the following 7 state retirement systems on an individual and consolidated basis:

•    Oklahoma Firefighters Pension and Retirement System

•    Oklahoma Police Pension and Retirement System

•    Uniform Retirement System for Justices and Judges

•    Oklahoma Law Enforcement Retirement System

•    Teachers’ Retirement System

•    Oklahoma Public Employees Retirement System

•    Wildlife Conservation Retirement System