Pension Paranoia

Oklahoma State Capitol

I’m glad that at least one statewide Republican leader has publicly asked for an actuarial study to determine the specific financial impact of a proposed and radical change to one state pension plan.

Oklahoma State Auditor and Inspector Gary Jones, writing in The Oklahoman/NewsOK.com, argues, “Any changes to the pension systems must be verified by an actuarial study to provide the impact those changes will have to the fiscal stability of the plan. It only makes sense to give the pension experts, CPAs and actuaries a chance to fix this problem. Working with these experts, legislators would be able to make the necessary, tough, informed decisions to find an actuarially sound solution.”

Jones’ point makes perfect sense, but some Republican leaders, such as Oklahoma Treasurer Ken Miller and Gov. Mary Fallin, both Republicans, are simply relying on reductionist rhetoric to move some new state employees into 401(k)-styled pensions without defined benefit payments and thereby putting one pension plan at risk.

Senate Bill 2120 and House Bill 2630 would require that new state employees under the Oklahoma Public Employees Retirement System (OPERS) go into a new 401(k)-styled plan. One major question that hasn’t been addressed fully by Miller and Fallin, according to some opponents of their plan, is how the old plan would still remain solvent without new participants.

Instead, we only hear dire cries of a pension crisis from them and the editorial board of The Oklahoman and how the new plan will be portable if employees leave their jobs. (Of course, that wonderful portability has nothing to do with how well the 401(k)-styled plan performs.) While it’s true that all of the state’s pensions face an $11 billion liability that liability has been reduced by some $5 billion just in recent years, and it will be reduced even more if state leaders simply provided appropriate funding and made wise financial decisions.

Jones, of course, who writes that the pension problems were created by “irresponsible, reckless and self-serving actions by the Legislature,” isn’t the only one calling for a financial study of the proposed change. David Blatt, director of the Oklahoma Policy Institute, has been raising this concern for months. How can you make such a major change within a financial system without calculating the impact in specific dollars? As state treasurer, Miller, in particular, should get behind conducting such a study.

Blatt has also pointed out that the change would harm the pension plan for current employees. He writes:

. . .the proposal to close off the system for new employees and shift these workers to defined contribution plans risks weakening OPERS and increasing the system’s unfunded liabilities. The reason is that pension plans depend heavily on investment earnings to grow their assets so as to be able to meet their obligations. As long as plans remain open to new employees, investment managers can invest for the longer-term because they have a mix of young, mid-career and retired workers.

In other words, if there’s less money to invest, there’s going to be smaller returns. Think of employees, in particular, who have been hired in the last ten years or so and are under the old plan. Think of employees hired under OPERS this year. Will the lack of new participants create a huge liability? Will political leaders, then, declare yet another emergency?

It becomes clear when viewed from a larger perspective that Republicans here and in other states simply want to reduce retirement benefits for government employees. They want to force a crisis. Of course, most Republicans won’t address the issue with that basic language.

Here’s the GOP game plan at the state level here and elsewhere: Cut taxes for rich people, give huge tax breaks to corporations, keep wages stagnant for rank-and-file state workers and cut their benefits, making them financially insecure.

The only thing that will stop the execution of that plan is if people stand up, voice their concerns and vote differently. But the neoliberalism (i.e., “free market” principles) model pits people against one another. If I don’t have guaranteed retirement benefits then why should you have them? The right-wing emphasizes the point. Consequently, no one gets decent retirement benefits. Meanwhile, the wealthiest top 1 percent snicker away from above.

The growing income inequality in this country is the only thing that’s not sustainable, not one pension program in one relatively small state.

Joe Dorman, Mary Fallin and Storm Shelters

Image of Joe DormanImage of Mary Fallin

Barring a major scandal or a sudden seismic change in the political landscape here, it appears Gov. Mary Fallin should coast easily to victory in her reelection bid.

At least that’s the prevailing view among national and local pundits, even though it might be difficult to handle for some Democrats, but there’s little to no evidence to dispute this basic political argument.

Fallin’s approval ratings, according to SoonerPoll, have gone over 70 percent in a red state that remains deeply hostile to President Barack Obama by a majority of voters. The anti-Obama hysteria alone, fueled by a complicit corporate media here, means any Democrat would have a difficult time defeating Fallin or winning any statewide office.

The governor also has a well-funded campaign along with political expertise and experience in running for statewide office. She has deep political connections and the ability to use her office to serve constituents in ways that could generate loyalty and support.

This doesn’t mean Democrats should just give up, of course, and state Rep. Joe Dorman, a term-limited Rush Springs Democrat, has declared his candidacy for his position. But can Dorman really make a dent in Fallin’s popularity? Does he have a chance?

Dorman faces two apparent obstacles right now.

One, he has to be viewed as a conservative Democrat, a legislator who, for example, has consistently opposed reproductive rights for Oklahoma women. While Dorman might capture the lesser-of-two-evil votes from Democrats, he’s unlikely to generate enthusiasm from progressives or even some moderates. This could hurt him in campaign fund raising efforts and voter turnout. If he turns to the right even more in his campaign, he risks losing any opportunity to show how he would lead the state any differently than Fallin.

Second, Dorman has now made his effort to build storm shelters in every Oklahoma school a major part of his political campaign. Dorman wants the state to use money from a business franchise tax to fund the shelters, a position that seems reasonable enough given last year’s devastating tornadoes. But now Fallin has announced an initiative to allow individual school districts to raise their bond debt capacities, if approved by voters, to fund the shelters, thus co-opting what has now become Dorman’s signature issue. The arguments between the two approaches probably rest on an extremely fine line for most voters, but that hasn’t stopped Dorman from pressing his point.

The Oklahoman editorial board calls Dorman’s arguments about the storm shelters “class envy,” which is supposed to mean something I guess, especially to its low-income conservative readers, but here’s the main issue: Every Oklahoma school needs a storm shelter. There are two plans to address this issue. Either plan could conceivably work.

I have long been a vocal proponent of getting storm shelters in our schools and other buildings, and I do agree that the franchise tax would be the easiest way to do it. But I can’t just dismiss Fallin’s approach. Even if Dorman’s proposal made it to the ballot, for example, the business community here, along with basic Republican support, would probably unite to try to defeat it. Imagine some prominent Oklahoman in a television advertisement arguing, over and over ad nauseam on our screens, to “just say no” to this state question. It has happened before.

Dorman still has time to mount a feasible campaign. He should reach out to progressive and moderate Democrats on issues such as education and health. Fallin’s proposed budget calls for a nearly $50 million cut in higher education, which could lead to higher tuition rates. Her budget also calls for a nearly $48 million cut to the Oklahoma Health Care Authority. Dorman should vehemently oppose such cuts as well as Fallin’s proposed tax cut that would primarily benefit the wealthiest people in the state. Voters want a champion, not a whiner.

There’s no particular reason for Dorman to drop the storm shelter issue, but I don’t think it’s a stretch to say that Fallin has politically out-maneuvered him on the issue, which was easy enough to do as an incumbent governor. That alone won’t win her the election, of course, but Dorman needs to shore up the support from his potential base, and that’s going to entail more than just talking about storm shelters.

Let The Lege Begin

Image of Mary Fallin

I found Gov. Mary Fallin’s State of the State speech Monday somewhat less ideological than last’s year address, but it still contained the tired GOP tropes about cutting taxes and government that have decimated education funding here and prevented thousands of people from getting health insurance.

To her credit, Fallin didn’t overly stress this year how much Oklahoma had to teach Washington, an argument filled with holes and backed by no real evidence. In fact, if not for all the federal money and disaster aid flowing into this place, Oklahoma might not even be a viable entity.

Towards the end of her speech, which opened the 2014 legislative session, Fallin did claim:

Washington is leading this country in the wrong direction, but Oklahoma isn’t about to follow.

In fact, we can offer a model to the rest of this country of what sound, common sense, conservative governance looks like.

“Sound . . . conservative governance”? What about the 22.8 percent decline in per-student funding since 2008? What about our teacher shortage? What about the dilapidated state Capitol building? What about the state’s high incarceration rates? We actually lead the nation in female incarceration on a per capita basis, a dubious distinction. What about all the studies showing Oklahoma is an unhealthy state with medical access problems?

Of course, State of the State speeches are often little more than a rah-rah spectacle, filled with superlatives and applause lines, and, as we’ve seen in the past, they don’t necessarily lead to changes. What you hear in a State of the State speech is often what you don’t get at the end of a legislative session.

Perhaps, the most controversial element of Fallin’s speech was her support for cutting the income tax rate from 5.25 to 5 percent. This cut, if passed, would come as the state faces a $170 million budget shortfall. To pay for the cut and make up for the shortfall, Fallin wants more targeted agency cuts.

“Any business worth its salt can find five percent costs savings without crippling the services it provides,” Fallin said, but that statement ignores cuts to agencies in previous years. At some point, no business or family or government agency can perform effectively without adequate resources.

Fallin made the point that she wants to raise common education funding by $50 million, but her budget also calls for a $49.4 million cut to higher education and a $47.7 million cut for the Oklahoma Health Care Authority. The education systems’ increase and cut negate each other when viewed from a larger perspective about the state’s future. The cuts in health care and Fallin’s stubborn refusal to expand Medicaid under the federal Affordable Care Act lack basic compassion, especially given the amount of money the oil and gas industry is given in tax breaks here.

Let me be clear that I think the proposed income tax proposal, even though it’s small, is irresponsible at this time. The tax savings will be primarily accrued by the wealthiest people in the state while our education systems go underfunded and people go without medical care. College students, working families and those without health insurance would sacrifice so the richest people here could get richer.

The GOP tax cut plans fell apart last legislative session and resulted in a bill that obviously wasn’t going to pass constitutional muster. It may well be that Fallin’s proposal and other tax cut proposals are simple political posturing in an election year. We can at least hope that is the case and that it all implodes again this year.

Fallin’s speech gave state employees, many of whom have gone without raises for seven years, little to cheer about. This is what she said:

First, we should begin offering targeted salary increases to some state employees paid below market value. I have included money to do so within my budget.

Second, we should reform our current pay system to one that rewards performance over time served. Doing so will encourage better productivity and services.

And finally, new hires within the Oklahoma Public Employees Retirement System should be moved from an outdated, mid-20th century pension system and to the more portable and flexible 401k-style benefits used in the private sector.

Let me parse those sentences. Note that only “some” employees will receive raises. Why? State employees with long years of service should be especially wary of so-called performance-based pay. There are complicated state jobs that require a high level of education and a practiced skill set. Long-time employees should be appropriately compensated and that should include adequate financial recognition for years of service. Fallin and the GOP seem intent to demonize, at least subtly, employees with long-term service to the state.

The pension issue, which is expected to be a heated one this upcoming session, boils down to this point: Some key members of the GOP leadership, including Fallin and Oklahoma Treasurer Ken Miller, want to reduce retirement benefits for state employees. The only way they can probably do that politically is to only target new employees, but that will eventually put stress on the current system, and then all state employees could eventually face cuts unless the political landscape changes. Note that Fallin only said 401(k)-style pension plans are “more portable and flexible.” What she can’t say, of course, is that they pay better than standard pension plans.

Fallin did call for a bond issue to repair the Capitol building, which is a good idea. Most Democrats are in favor of this approach, but it was a dud last year among certain GOP factions.

The symbolism of a dilapidated and crumbling place of government seems lost on many Oklahoma Republicans, which hold commanding majorities in the House and Senate, along with all the statewide offices. Is this the year it all comes crashing down on them, literally and figuratively?

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