Budget & Tax
Curtis Shelton | June 2, 2020
Lawmakers begin to roll back historic pension progress
Oklahoma state lawmakers voted last month to approve “an unfunded increase in state workers’ retirement benefits,” Ray Carter reported, “a step that accelerates the ongoing financial deterioration of Oklahoma’s state pension systems and reduces current workers’ future retirement security.
“HB 3350 provides a 4 percent ‘cost of living adjustment’ (COLA) to most retired state government workers, but provides no funding to cover the cost, instead draining the pension systems’ corpus for the cash.”
After a decade of replenishing the state’s retirement system, this new law is estimated to add nearly $1 billion in unfunded liability to the retirement system and does so at the worst possible time. This is why OPCA has given it such a heavy weight on our legislative scorecard.
After years and years of benefit increases with no funding support during the Gene Stipe era, Oklahoma’s pension system was near crisis levels with pensions at a 56 percent funding ratio. Thanks to the hard work of state Sen. Mike Mazzei (R-Tulsa) and state Rep. Randy McDaniel (R-Oklahoma City), major reforms were adopted in 2011 and now that funding ratio has grown to 81 percent. The most prominent of these reforms was HB 2132, requiring all COLAs to have a funding source. This reform was attempting to stop exactly what the 2020 legislature just did. Lawmakers this year simply dubbed HB 3350 a “nonfiscal retirement bill”—despite hundreds of millions of dollars in costs.
Even in normal economic years, providing a guaranteed benefit without a way to pay for it is a bad idea. It’s an especially unwise idea during the type of downturn the state and country are experiencing right now. Just look to states like California and Illinois to understand the slippery slope of bloated pension programs.
[This is one in a series of articles about legislation included on OCPA’s 2020 legislative scorecard.]
Policy Research Fellow
Curtis Shelton currently serves as a policy research fellow for OCPA with a focus on fiscal policy. Curtis graduated Oklahoma State University in 2016 with a Bachelors of Arts in Finance. Previously, he served as a summer intern at OCPA and spent time as a staff accountant for Sutherland Global Services.