This year we have taken a look at the history of pensions in Kansas and Kentucky. Fraught with years of underfunding, legislative tax breaks, and subsidies to corporations, both Kansas and Kentucky’s pension systems are underfunded. Oklahoma was in a similar situation, and much like Kansas and Kentucky, the state government made the wrong move by closing a pension plan.
Today, we take a look at the Sooner State and its history with public employee pensions.
Background on Oklahoma’s Pension Systems
Oklahoma has seven different pension plans. The two largest plans according to the National Association of State Retirement Administrators (NASRA) are the Oklahoma Public Employees Retirement System (OPERS) and the Oklahoma Teachers Retirement System (OTRS). The other plans are the Oklahoma Firefighters Pension and Retirement System (FPRS), the Oklahoma Police Pension and Retirement System (OPPRS), the Oklahoma Law Enforcement Retirement System (OLERS), the Uniform Retirement System for Justices and Judges (URSJJ), and the Oklahoma Wildlife and Conservation Retirement Plan (OWCRP). These seven pension plans have over $33 million in assets, 150,000 active members, and 127,000 retirees. According to the National Institute on Retirement Security (NIRS), Oklahoma’s public pension systems supported 24,160 jobs in 2016 which paid nearly $1.1 billion in income in Oklahoma. Additionally, each dollar paid out in pension benefits created $1.39 in total economic activity totaling $3.5 billion in economic output across the state.
2011 COLA Reform
In 2011, faced with rising unfunded liabilities due to the Great Recession and years of underfunding by the state legislature, lawmakers decided to take away cost-of-living adjustments (COLAs) from retired public employees. The change saved the state millions of dollars in contributions into their pension funds, but this was accomplished on the backs of retired public employees. Over the last two years, retired public employees have been fighting for their first COLA in over a decade because they can’t keep up with the cost of inflation.
2014 OPERS Reform
In 2014, Governor Mary Fallin and legislative leaders passed major changes to OPERS. Becoming one of only a handful of states to do this, Oklahoma closed OPERS for all future hires. The legislation, HB2630, exempted all teachers and those folks who qualify as hazardous employees, such as police officers and firefighters. All newly hired public employees in OPERS were moved to a defined contribution 401(k)-style plan. HB2630 and the 401(k) plan it created took effect on November 1, 2015.
Recent Years and Looking Ahead
In the last decade, the Oklahoma legislature has been doing its due diligence and appropriately funding all seven of the state’s pension systems. In fact, in 2010, OPPRS was funded at 74.9 percent and it’s now funded at 102.5 percent. This is a direct result of diligent funding by the state legislature and good management by the system itself. The six other systems have seen their unfunded liability decrease as well.