A recent editorial column in the Tulsa World made the case for common-sense pension reform by consolidating the various boards of the state retirement systems. This reform is another example of necessary retirement reform, which will ensure that government keeps its promises to current employees and can realistically provide retirement benefits to future employees.

Currently, there are five separate boards that govern the six active defined-benefit retirement plans operated by the state. (Full disclosure: I serve on the board of trustees for the Oklahoma Teachers’ Retirement System. The views discussed here are my own.) Oklahoma’s current approach to pension governance differs from how many other states govern their pensions. Approximately 36 states’ retirement systems use some combination of a centralized structure. The reason for such a centralized structure is that it ensures more transparency and active oversight of the retirement obligations of the state. It can also yield significant administrative savings, thus allowing for more funds to be dedicated to paying retirement benefits.

As with any board or governing structure, the success and effectiveness of the board is largely influenced by the composition of the board. Currently, several state boards have differing views of transparency regarding the retirement system and even the approach to reporting the performance and actions of the board and system. This lack of uniformity and lack of transparency in the case of some boards contributes to the current unfunded liability (more than $11.5 billion) of the system and results in unequal governance. Also, board composition affects the focus of the board. Given the significant unfunded liabilities facing our pension system, it is time for a centralized board composition that is focused on the financial solvency and efficient operation of all the systems.

Given the similar nature of the governance and fiduciary responsibilities of public retirement systems, economies of scale can be achieved by consolidating governance. For example, a major function of a board of a retirement system is to employ fund managers to responsibly and successfully invest the funds of the system that pays benefits to beneficiaries. By consolidating, fees charged by fund managers can be reduced because of the larger pooling of decision making — all while keeping the individual funds intact and separate. Also, with combined governance, duplications that exist in agencies can be reduced to yield savings for the system so that operational improvements can be more actively pursued.

As with a number of issues facing government, the status quo is tempting and has a solidified constituency. The problem is that the status quo has produced an unfunded liability that exceeds current state appropriations by 69 percent and threatens the state’s ability to meet its promises to current employees. Consolidation of Oklahoma’s retirement system boards can make sure government keeps its promises, recruits a qualified workforce, and doesn’t unnecessarily burden taxpayers.