The 2013 legislative session has the opportunity to be a defining one—one that could position Oklahoma to lead the nation for years to come.
One of the most important things policymakers can do is enact real pension reform. Real reform establishes a plan to keep its benefit promises to current employees and structures future benefit plans in a way that is fair and secure to both future employees and taxpayers. Current systems face staggering amounts of debt that must be addressed to make sure that we can keep our promise to current employees and adequately fund other core areas of government in the future.
News that lawmakers are considering further pension reforms is encouraging. OCPA has recommended pension and employee compensation reforms that can help secure what is owed to employees and provide for a sustainable future that attracts talented and fairly compensated future state employees.
Numerous states and cities are reforming their pensions, and defined contribution plans are a key and promising feature of many reforms. A number of Oklahoma cities with rural and urban characteristics have functioning and employee-appreciated defined contribution plans—and their cities are more secure because of them.
The case for further pension reform was made well in a recent op-ed by one of Oklahoma’s champions of pension reform, state Rep. Randy McDaniel:
“The new year brings a renewed sense of opportunity. Resolutions are abundant. As legislative resolutions are made for the coming session, the impetus for more pension reform is building.
The need is clear. The new actuary reports are completed. The unfunded liability of Oklahoma’s public pension system increased by a billion dollars last year. Moreover, several structural deficiencies still exist, especially regarding the firefighter retirement plan.
Pension obligations are one of the most challenging fiscal issues confronting every state government. For decades, decision-makers authorized more benefits without providing the necessary funding. As a result, most state governments were struggling to meet their pension funding requirements prior to the economic downturn.
[W]orthy goals of financial sustainability and intergenerational fairness necessitate legislative action.
Illinois provides an example of the economic consequences of inaction. The state is on track to spend more on its government pensions than on education by 2016. “Under current actuarial assumptions,” Illinois Gov. Pat Quinn said, “required state pension contributions will rise to [more than] $6 billion in the next few years if no comprehensive pension reform is enacted, which will continue to result in significant cuts to education.”
Illinois’ massive unfunded pension liability has led to credit downgrades and tax increases. Poor credit leads to higher borrowing costs. ...
These byproducts of a poorly funded pension system are avoidable.
This session, I will author legislation intended to strengthen the state retirement system. The coalition for more pension reform is becoming larger, enhancing the probability of success. Many positive developments are transpiring throughout Oklahoma. Support for greater financial responsibility is strong, while the opportunities for economic prosperity continue to grow.”
Let’s enact real pension reform and keep our promise to current employees and establish a promising and secure future for all Oklahomans.