Pension Attacks

Image of Oklahoma State Capitol

Republican lawmakers and leaders this legislative session are pushing for retirement benefit cuts for newly hired state employees.

They have declared yet another false crisis, pointing to the state pension programs’ total unfunded liability of $11 billion, but they aren’t talking about how that liability has declined from $16 billion since 2011. Why not just stay the course until the pensions are solvent? There’s no real emergency.

The first GOP gambit is to no longer offer new state employees under the Oklahoma Public Employees Retirement System a defined-benefit pension plan. Instead, they would be placed in a 401(k)-style retirement benefit plan.

Both a Senate and House committee have passed measures that would essentially reduce pension benefits for new hires starting in 2015, but that is only the first step in the GOP’s attack. For now, teachers and public safety employees have been spared, but that will change unless people speak out.

Gov. Mary Fallin is an enthusiastic proponent of the so-called “reform,” arguing that it’s fiscally sound given the unfunded liability and will allow new employees more flexibility in managing their retirement benefits, but she and other state leaders have not offered a clear financial analysis of its impact on those who remain in the old plans.

Here’s the bottom line: The GOP leadership obviously wants to cut retirement benefits for state employees, but they won’t come out and admit it in those clear terms.

State Rep. Dick Morrissette, an Oklahoma City Democrat, is one of the few political leaders in the Republican-dominated Legislature standing up for state employees, many of whom have gone without a raise for seven years. In response to a House bill cutting pension benefits for new hires, Morrissette said:

The proponents of pension reforms are crying that the sky is falling and that these reforms will make vast improvements to the pension system. What they are not showing is the fiscal impact of these reforms. The documents associated with the bill actually say that no fiscal impact is necessary. They are making a fiscal argument without really setting out the numbers for us. I think these bills are bad policy and I think their proponents have not even attempted to make a good case for their approval.

Why are we trying to fix a system that isn’t broken? There are examples of failed reforms in other states that should serve as a clear warning to us. Taxpayers and state employees are better off with the current system than the system these bills will create.

I have long made the argument that many highly skilled and talented state workers don’t seek jobs in the private sector that offer much higher wages because of guaranteed retirement benefits, which aren’t even necessarily that generous. The state will have a difficult time recruiting and retaining such workers in the future if the changes are signed into law.

Meanwhile, Fallin is pushing for an income tax cut even though the state faces a $170 million budget shortfall. The wealthiest Oklahomans would benefit the most under Fallin’s plan to reduce the top rate from 5.25 to 5 percent.