Major State Pension Change Seems Certain
The Oklahoma House has now passed a plan to reduce retirement benefits for many future state employees without conducting or calling for a thorough study to determine how it will impact current workers.
On Tuesday, the House voted 57-42 to place future state employees under the Oklahoma Public Employees Retirement System in a 401(k)-styled plan that will likely result in less overall retirement money for them. What’s more, the lack of new money coming into the old pension system, which pays a defined benefit, could create a new financial crisis, threatening the benefits of current retirees and those close to retirement.
The bottom line is that legislators have cut retirement benefits for future state employees and put the retirement system of current state employees at risk. In essence, they have, in one vote, destabilized the lives of thousands of state workers.
This Republican-led assault on state employees has been done under the guise of saving the current retirement system and even enhancing benefits for new employees. That ruse has been perpetuated not only by individual legislators but by Gov. Mary Fallin and Oklahoma Treasurer Ken Miller as well. By refusing to call for or conduct a thorough actuarial study on the change, Miller, in particular, seems to be violating the actual intent of his office.
The Oklahoma Senate has also passed a similar bill. It seems certain at this point the change will become law. The legislature’s actions mirror those in other states where government employees are now under attack primarily by Republican lawmakers, who push for tax cuts for wealthy people and corporations while stripping underpaid rank-and-file workers of benefits.
For now, teachers and public safety employees, who also remain underpaid and under appreciated, have been spared, but that could easily change.
Republicans have pointed to the current and collective $11 billion liability in all of the state’s pension plans as a reason for the change, but that liability has dropped from $16 billion in recent years after financial reforms. Why change course now?
Republicans have also made a big deal over the portability of the new pension plan while downplaying the lack of guaranteed benefits. It might well be easier for future employees who work for the state for only a few years to manage their retirement money, but what about valuable, long-term employees who have dedicated their entire work life to government service?
It’s telling that an actuarial study determining the financial impact of the change on the old system has not been conducted even though some people, including State Auditor and Inspector Gary Jones, a Republican, have spoken out about it. I have written about that issue here.
What seems obvious is that such a study would show that the lack of new money coming into the old system will eventually threaten its financial investment returns and put it at risk. At that point, lawmakers and state leaders will declare yet another crisis and cut retirement benefits again.
Meanwhile, in what can been seen as a perfunctory apologia for the retirement cut, the House also overwhelmingly approved a bill to give targeted raises to some state employees, who haven’t received an across the board raise for seven years. The proposed raises would apparently go to the most underpaid state employees compared to the private sector, but it’s unclear just exactly where the money will come from because the state faces a budget shortfall.
It shouldn’t be surprising to anyone if the raises don’t make it into the final budget.