On November 15, 2019, the Oklahoma House of Representatives held an interim study committee meeting on why retirees need a cost-of-living adjustment (COLA). Rep. Avery Frix, the sponsor of the study, previously led a push to grant public employees a COLA during the 2019 legislative session.
What is a COLA, and why does it matter in the state of Oklahoma heading into the new year?
As we’ve previously covered, a COLA “is an occasional increase in the amount of a retiree’s or beneficiary’s pension payment in order to account for inflation”:
For convenience’s sake, let’s say a retiree receives a $24,000 annual pension, or a monthly amount of $2,000. This benefit is guaranteed for the rest of the retiree’s life. However, without a COLA, the value of that pension benefit will erode over time. Why? Because of inflation.
The price of almost everything is constantly going up. According to the U.S. Bureau of Labor Statistics, the average inflation rate in the United States has hovered around 2 percent for the past decade. This means that if you bought something for $100 this year, the same item would cost $102 the next year. However, inflation does not increase at the same rate for all expenses. For example, the rate of inflation for health care is consistently higher than the general inflation rate (about 70 percent higher).
Returning to the example of our retiree with a $2,000 monthly pension, that retiree’s pension will stay the same year after year, even as the cost of monthly expenses goes up each year. Over time, this retiree will be able to buy less and less with their monthly pension because the cost of food, health care, and other items will have increased since their retirement.
In Oklahoma, retired public employees have not received a COLA in 12 years. Adjusting pension benefits will not only increase retirees’ purchasing power, but it will also support the Oklahoma economy at large. According to Tyler Bond, Research Manager for the National Institute on Retirement Security, “A four percent COLA for all beneficiaries of Oklahoma’s public pension systems would mean an additional $100 million in benefit payments. These larger benefit payments would support $139 million in additional total economic output in the state. Furthermore, they would support 966 additional jobs in Oklahoma.”
For retirees like Mary Branchich, a former teacher, a COLA would make a difference in many parts of her life, including which prescription medications she can afford and how she can best support her family:
“I retired twelve years ago under the impression I would receive a COLA every year in retirement. Since then, I haven’t received anything. When my husband passed away and I fell into bad health, I was forced to sell my home and move into a small one-bedroom apartment. At the age of 72, I work part-time at a non-profit teaching literacy to adults. I’m still working because Medicare and my retirement benefits are not enough and each and every month, I need to choose which medications I can afford that month, often forgoing the treatment I need. I have no savings and as the mother of three children, I fear that I won’t be able to leave anything for my family. It’s hard to make ends meet and this COLA would help me tremendously.”
If you live in Oklahoma and care about retirement security for public employees, sign up to be a part of our email list to join us in the fight this coming year: http://protectpensions.org/states/oklahoma/