The Enid News and Eagle, Enid, OK

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October 5, 2013

GOP looks to change state pensions

OKLAHOMA CITY — Republican leaders in Oklahoma who have made major changes in recent years to the state’s pension systems say they aren’t finished with their work, and plan to push next year to put an end to the traditional pension for new state workers.

Switching to a 401k-style retirement account for newly hired state employees, long a top goal of many fiscal conservatives, has been endorsed by the governor and legislative leaders in the House and Senate, although a battle undoubtedly will ensue with resistance from rank-and-file state workers.

Gov. Mary Fallin has endorsed a switch for state workers out of a traditional pension system, but isn’t yet married to any single proposal, and wants to make sure any change keeps the state’s financial obligation to current pensioners, said her spokesman, Alex Weintz.

“I think there are multiple routes to meaningful pension reform,” Weintz said. “We want to pick one that will be successful.”

The head of the Oklahoma Public Employees Association, Sterling Zearley, said he’s not opposed to discussing the idea of a pension change, but not without a commitment from the Legislature to increase pay for state workers.

“Until we address state employee pay, it doesn’t matter what retirement system we’re in,” Zearley said. “Salaries are low, and it doesn’t matter what kind of pension you have if your salaries are so low, because that affects how much goes into their retirement.”

Zearley said he was eager to see the results of a market-based pay study commissioned by Fallin, who said she wouldn’t endorse state worker pay hikes until it was completed. But, he said he was open to changes from a traditional pension system, as long as current retirees are protected.

“I’m not opposed to looking at the concept, but I’d have to see how it would be structured,” Zearley said.

The proposed switch would not apply to pension systems for firefighters, police and Oklahoma Highway Patrol troopers, which are different because of the nature of those professions, and teachers also won’t be included in the proposal being put together by Rep. Randy McDaniel, a point man for House leaders on pension negotiations.

McDaniel, R-Oklahoma City, a financial adviser and stock broker, said he proposes a shift to a 401k-style retirement account for state workers, in which the state would match employee contributions in a range from 6 to 7 percent. A system like that, which would utilize the infrastructure already in place for the SoonerSave retirement system for state workers, would realize savings for the state that would then be redirected by statute to continue shoring up the unfunded liability of the existing pension system.

Among the key changes already enacted to the state’s pensions was a bill pushed by McDaniel in 2011 that prohibited automatic cost-of-living adjustments, or COLAs, for retirees without funding. That change alone immediately dropped the unfunded liability of the state’s seven pension systems by $5.5 billion, from $16.1 billion in 2010 to $10.6 billion in 2011. But that number trended back up to $11.6 billion in 2012, a sign McDaniel said suggests more work is needed.

“That’s a billion dollars. That’s real money,” McDaniel said. “No one can say that we don’t have a problem.”

McDaniel also is looking to close the asset-to-liability shortfall of some of the state’s pension systems through other changes, including a change to the pension for state troopers that allow retirees to continue to receive COLAs based on pay raises given to active-duty personnel.

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