OKLAHOMA CITY – Most retired state civil servants would receive an increase in their pensions under a measure the Oklahoma House of Representatives endorsed unanimously and referred to the state Senate.
House Bill 3350 passed the House 99-0 on March 10 and was transmitted to the Senate, which failed to act on a similar measure the House approved overwhelmingly last year.
Instead, the Senate referred House Bill 2304 to a legislative actuary on April 11, 2019, for analysis on how the state’s pension systems would be affected by a cost-of-living-allowance (COLA) of either 2% or 4%. HB 2304 was never brought to a vote in the Senate before the Legislature adjourned six weeks later.
The COLAs proposed in HB 3350 would have a $767 million impact on the state pension systems, actuaries have calculated.
Senate President Pro Tempore Greg Treat said he personally supports the tiered approach, but cautioned that there is no consensus among Senate Republicans for a COLA.
MOST PENSIONERS WOULD GET COLA
Under HB 3350, civil servants who’ve been retired for at least two years but less than five as of July 1, 2020, would receive a 2% COLA, and those retired for five or more years would receive a 4% COLA. Pensioners retired for less than two years as of July 1 wouldn’t get a benefit increase.
Authors of the bill are Rep. Avery Frix, R-Muskogee, and Sen. Roger Thompson, R-Okemah, chairman of the Senate’s Appropriations Committee.
Approximately 85% of the state’s retirees will receive the 4% adjustment, Frix said. An estimated 113,000 retirees will see some increase in their pension checks, he said.
HB 3350 would provide the first cost-of-living-allowance (COLA) state retirees have received in 12 years, since 2008. However, state pension system members who had been retired for at least five years received a one-time stipend in 2018.
State retirees have pressed the Legislature for a COLA. Pensioners have pointed to steadily increasing health insurance premiums and prescription costs plus higher utility bills. Sabra Tucker, executive director of the Oklahoma Retired Educators Association, said health insurance premiums for retired Oklahoma teachers have climbed 42% since 2008.
But a particular sore point was the 35% pay bump the state Legislative Compensation Board approved that will boost the paychecks of rank-and-file legislators to $47,500 – just two years after cutting their base pay from $38,400 to $35,021; the salary hike goes into effect Nov. 18, 2020.
If HB 3350 passes the Senate and is signed by Governor Stitt with an emergency clause attached, the benefit increases would go into effect July 1 this year. If the bill passes the Legislature and is signed, but without an emergency clause, its effective date would be Nov. 1, 2020, but the benefit increases would be retroactive to July 1, the bill provides.
STATE PENSION SYSTEMS WERE BLEEDING RED INK
Oklahoma’s state pension systems were awash in red ink – the Teachers’ Retirement System, for example, was insolvent – when the Legislature approved a new law requiring COLAs to be fully funded. That change helped improve the status of the retirement systems but eliminated frequent COLAs that previously enabled retirees to cope with rising expenses.
Sen. John Michael Montgomery, R-Lawton, is a member of the Senate’s Retirement and Insurance Committee. “We’re seeking 100% assets to back the liabilities” of the state retirement systems, Montgomery said last December. However, the U.S. Social Security System isn’t completely asset-backed, he noted.
Some countries have pay-as-you-go pension systems, while some require a funding level of at least 105% “before they will even think about approving a COLA,” said Montgomery, who earned a bachelor’s degree in International Studies at the University of Oklahoma.
He wants the Legislature to examine the “structure” of the state pension systems, and said administrators of the retirement plans should have “some flexibility in authorizing benefit allowances.”
The state’s retirement systems represent almost 300,000 active, retired and former state, county and municipal employees, spouses, and other beneficiaries.
REFORMS ERASED $8B IN LIABILITIES
The combined funded status of Oklahoma’s state pension systems has experienced a dramatic improvement in the past decade, climbing from 56% to 81% overall.
“That’s the largest percentage increase of all state pension systems in the country,” State Treasurer Randy McDaniel reported late last year. Erasing more than $8 billion in long-term liabilities has shaved the unfunded liability of the seven state systems by more than half, to $7.8 billion, McDaniel said.
“The turnaround is due to a combination of reforms, increased funding, and superior investment performance” since the 2008-09 recession, he said.
Editor’s note: Ledger staff writer Mike Ray is a member of OPERS. He worked in the House of Representatives Media Division for 19 years before retiring at the end of the 2017 legislative session.