OKLAHOMA CITY (AP) — Most retired school teachers, firefighters and other public workers would receive their first pension increase in 12 years under a bill that sailed through the Oklahoma House on Tuesday.
Members voted 99-0 for the bill to give a 4% cost-of-living allowance, or COLA, to about 85% of public retirees. Under the bill’s tiered approach, those who retired between two and five years ago would see a 2% boost, while those retired for less than two years would get no increase.
Medical insurance, prescription drugs and utilities have all increased dramatically in the last decade, said retired mental health worker Dixie Jackson of Norman.
“Other retirees have had to get other jobs to pay for these things,” she said. “That’s not retirement.”
The bill now heads to the Senate, where lawmakers have been more cautious about the impact a cost-of-living allowance will have on the solvency of the state’s pension systems.
Senate President Pro Tem Greg Treat said this week he personally supports the tiered approach, but there’s not a consensus among Senate Republicans.
Oklahoma’s pension systems were among the worst-funded in the nation about a decade ago, when lawmakers approved a new law requiring any COLAs to be fully funded. That change improved the health of the pension systems but also left retirees without a pay hike to cover rising costs.
WASHINGTON, March 3, 2020 /PRNewswire/ — As many small towns and rural communities across America face shrinking populations and slowing economic growth, a new report finds that one positive economic contributor to these areas is the flow of benefit dollars from public pension plans. In 2018, public pension benefit dollars represented between one and three percent of gross domestic product (GDP) on average among the 1,401 counties in 19 states studied.
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This new report finds that public pension benefit dollars also account for significant amounts of total personal income in counties across the nineteen states studied. For all 1,401 counties in this study, pension benefit dollars represent an average of 1.37 percent of total personal income, while some counties experience more than six percent of total personal income derived from pension dollars.
In Mississippi, for example, several less populated counties have pension benefit dollars that represent more than three percent of total personal income in the county. Oktibbeha County, home to Starkville and Mississippi State University, has one in twenty dollars in total personal income coming from a public pension plan.
The analysis indicates that less populated counties with smaller economies experience a greater relative economic benefit from the flow of public pension benefit dollars into the county as compared to more populated, urban counties. This larger relative impact helps to sustain the economies of small towns during this period of economic transition in rural America.
“America’s broader economic trends have been tough on many small towns and rural areas across America that are struggling with population declines and lagging economies. Often, the largest local employer in these communities is a public entity such as a school system or city, which employs teachers, police officers and firefighters. These public employees spend their career providing public services in their community at a time when more and more young people are leaving their hometowns to seek better job opportunities in more populated areas,” said Dan Doonan, NIRS executive director.
“Eventually, these public employees become retirees, staying in their communities and spending their pension checks in these small towns. The pension benefits serve as a stable source of economic support in these areas, with retirees spending their retirement income on goods and services like housing, food, medicine and clothing. It’s clear from our analysis that this pension spending provides a substantial economic impact on struggling small towns and rural communities across the nation,” Doonan explained.
The report’s key findings are as follows:
Public pension benefit dollars represent between one and three percent of GDP on average in the 1,401 counties studied.
Rural counties and counties with state capitals have the highest percentages of populations receiving public pension benefits.
Small town counties experience a greater relative impact both in terms of GDP and total personal income from public pension benefit dollars than rural or metropolitan counties.
Rural counties experience more of an impact in terms of personal income than metropolitan counties, whereas metropolitan counties experience more of an impact in terms of GDP than rural counties.
Counties with state capitals are outliers from other metropolitan counties, likely because there is a greater density of public employees in these counties, most of whom remain in these counties in retirement.
On average, rural counties have lost population while small town counties and metropolitan counties have gained population in the period between 2000 and 2018, but the connection between population change and the relative impact of public pension benefit dollars is weak.
This new study builds on previous research and adds a deeper level of data and analysis. This research examines data from nineteen geographically diverse states representing every region of the country. The analysis utilizes data from a majority of public pension plans in those states and the data was collected directly from those plans to guarantee its accuracy. To compare the results to those of previous studies, this report considers pension benefit dollars as a percentage of total personal income in each county.
This study also offers a major new element that is possible because of newly-available data. In December 2018, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) made available for the first time ever Gross Domestic Product (GDP) by county data. Initially, this data only covered four years, but in December 2019, BEA released a new set of GDP by county data covering the years 2001-2018. This study uses this new 2018 data as it is the most recent data available. In addition to this economic data, the report examines changes in a county’s population from 2000 to 2018 to determine if there is a connection between the economic impact of pension benefit dollars and growth or loss of population in the county.
The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. Located in Washington, D.C., NIRS’ diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @NIRSonline.
A compromise over how much to hike payments to retired public employees would provide different cost of living adjustments based upon how long individuals have been receiving benefits.
Called a COLA, a cost of living adjustment has not been approved for teacher, police, firefighter, judicial and other retired public employees in 12 years. The issue stalled during last year’s legislative session as the State Senate sought an actuarial study to analyze the financial effects of a 2 percent or 4 percent COLA on each employee group’s pension fund.
“This year we came back, and my understanding is that the House leadership has an agreement with the Senate leadership (…) to move this hopefully all the way to the governor’s desk,” said Rep. Avery Frix (R-Muskogee) when presenting HB 3350 this afternoon.
HB 3350 advanced out of the House Rules Committee by a 8-0 vote. The bill would approve a 4 percent increase in monthly pension payments for those retired for five years or more as of July 1, 2020, and a 2 percent increase for those retired at least two years but not five years. Anyone retired for less than two years as of July 1, 2020, would receive no increase in their monthly pension payments. It also would include increases for retired volunteer firefighters.
“At one time, our systems were some of the worst-funded pension systems in the nation,” Frix said. “They’ve come a long way, mainly because of the sacrifices that retirees have made, and also because of some tough decisions this body has made. Now it’s my opinion that these retirement systems can support this.”
Sabra Tucker, executive director of the Oklahoma Retired Educators Association and spokesperson for the Keep Oklahoma’s Promises advocacy group released a statement after Thursday’s vote.
“Oklahoma’s retired public employees have waited for a COLA for 12 years,” Tucker said. “Year after year, costs have gone up while our retirees have been left behind. [Our organization] is united behind HB 3350, which ensures retirees can live in retirement with dignity.”
Scott VanHorn, president of the Oklahoma City Firefighters Local 157, also issued a statement.
“OKC Firefighters greatly appreciate the House Rules Committee unanimously approving a COLA bill today. This bill would provide much needed assistance to our retirees while keeping our system’s funding ratio moving in a positive direction,” VanHorn said. “We look forward to the full vote on the House floor, and appreciate all of the support House members have shown toward our retired firefighters, police officers, teachers, and public employees.”
For the past two sessions, Mike Mazzei, secretary of budget for Gov. Kevin Stitt, has encouraged lawmakers to be conservative if they fund a COLA out of the state’s pension systems. In the governor’s proposed FY2021 executive budget, system funding rates were noted:
A summary of pensions’ financial positions was included in Gov. Kevin Stitt’s FY 2020 proposed executive budget. (Screenshot)
Advocates for the various retirement groups have argued that the funded ratios are high enough to withstand a 4 percent COLA, and it’s possible the compromise within HB 3350 could become a litmus test for determining the impact of future COLA proposals.
(Editor’s note: The Oklahoma City Firefighters Local 157 is a sponsor of NonDoc’s Oklahoma public resources page. This story was updated at 3:55 p.m. Thursday, Feb. 27, to correct reference to the Keep Oklahoma’s Promises organization.)
CHICAGO (Reuters) – Former U.S. senator Alan Simpson summarized the argument well: seniors fighting Social Security benefit cuts were nothing more than “greedy geezers” stealing from young people “who are going to get gutted.” The Wyoming Republican’s memorable phrase from 2012 is a good example of the colorful language of so-called intergenerational warfare – pitting generations against one another with zero-sum-game economic arguments.
That kind of rhetoric might be useful for some politicians, but it is economic nonsense. Families do not live in economic silos, separated from one another, and some recent evidence shows that a large segment of the senior population is anything but greedy. In fact, they are struggling to meet basic living expenses – and the economic pain also affects younger family members.
Consider the results of a recent survey by AARP. (bit.ly/38hFuTn) It found that one-third of midlife adults with at least one living parent (32%) are providing financial support to them, usually for living expenses such as groceries and medical costs. More than half of midlife adults (54%) provided $1,000 or more to their parents in the last year; within that group, 34% provided help ranging as high as $5,000, and 13% provided help as high as $10,000.
“I think some people have an image of the older generation living high on the hog, draining America’s coffers by spending their Social Security on cruises to the Bahamas,” said George Mannes, senior editor of the AARP magazine. “But a lot of older people are really living close to the bone.”
The AARP survey results are disturbing – but really only hint at the number of older households coping with financial stress.
A more detailed measure is the Elder Index, produced by the Gerontology Institute at the University of Massachusetts Boston (bit.ly/2SyIbcE). The index measures the cost of living for older people living as couples or alone – but independent of children. It is built around the typical budgets of seniors.
“It’s very stripped down – it doesn’t include anything anyone would remotely consider unnecessary,” said Jan Mutchler, a professor of gerontology at the university. That means expenses like food, housing and utilities and minimal levels of transportation – and of course, healthcare costs.
The index is calculated for every county in the United States, which means it takes into account regional variances in the cost of living.
The university recently released new data for 2019, and it shows that 50% of Americans over age 65 living alone have incomes that are below the index – in other words, they lack the resources to pay for their basic living needs. For couples – who usually benefit from two Social Security checks and are more likely to have other income – the comparable figure is 23%.
Those figures are shocking, and they are much more dire than the federal measure of poverty used to establish eligibility for many state and federal assistance programs. For example, a measure used by the U.S. Department of Health and Human Services defined poverty for single people last year at annual incomes of $12,490 and $16,910 for couples (bit.ly/31JuDPI). That translates into poverty rates of 18% for singles and 5% for couples – much lower than what the Elderly Index suggests.
These elders live in what Mutchler calls a “gap.” “They’re not poor enough to be considered poor by the federal government, but they fall below what they need to get by and so they’re struggling.”
REMEDIES
The best way to ease this economic stress is through strengthening our two key social insurance programs. “Strengthening and stabilizing Social Security and Medicare is very important,” Mutchler said. “And then, we should strengthen and expand support for the housing needs of older people.”
To which I would add – not just older people today. Strengthening our social insurance programs will be even more beneficial for young people, who will arrive at retirement with smaller retirement accounts and much less likely to lay claim to a traditional defined benefit pension. (reut.rs/38i4cTL).
Social Security reform has been a hot topic on the presidential campaign trail this year, with Democrats competing for pole position as champions of expanded benefits.
A review of candidate positions on Social Security reform by the Center for Retirement Research at Boston College (bit.ly/2tU74r6) found several Democrats backing across-the-board benefit expansion, and a larger number favoring increases targeting vulnerable seniors. The latter include increasing Social Security’s special minimum benefit, which aims to keep very low-income workers out of poverty in retirement; expanding Social Security benefits for caregivers; and raising benefits for surviving spouses.
Targeted increases enjoy broad bipartisan support. A 2016 commission on retirement security organized by the Bipartisan Policy Center (bit.ly/2vmBXok) endorsed several ideas of this type.
“It’s entirely appropriate to focus on parts of the population where current benefits are inadequate,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “People with low incomes can work a long career and still be getting benefits below the poverty line, or not very much above it. We need to make sure seniors who have worked for many years are not forced to live in poverty in retirement.”
President Donald Trump ran in 2016 opposing any cuts to Social Security benefits and pledged to “protect” Social Security in his recent State of the Union address. But he also recently hinted that he might push for benefit cuts in a second term in an interview with CNBC. And his 2021 budget plan, unveiled this week, contains an array of cuts to social insurance and safety net programs, including tightened eligibility requirements for Social Security’s disability program. (reut.rs/2OMqXaH)
No moderator has posed a question about Social Security to candidates at any of the presidential debates so far. Perhaps they think it is a topic of interest only to the geezers, or the “OK boomers.”
Retired Oklahoma state and local public servants have now gone 10 years without a cost of living adjustment, while inflation has eaten away at their income.
For decades they taught our children, kept our streets safe, guarded prisons, fought fires, and provided essential health and social services. They dedicated their lives to making our state better. Now it’s past time to repay our debt to them. We should start on this by providing a long-overdue cost of living adjustment (COLA).
Public employment has long been a path to the middle class, particularly for women and people of color, who are better represented in government jobs than in the workforce as a whole. Women older than 65 typically have 25% lower income than men, and participating in traditional public retirement systems narrows that gap. Pensions are equally important for Blacks who lost wealth during the great recession and afterwards. This group also typically has very low levels of retirement savings.
Robust retirement benefits help keep our retired public servants in the middle class. Inadequate benefits can make it difficult or impossible to keep up with costs like health care, utilities and food, let alone enjoying the “golden years.” This is particularly a challenge for firefighters, highway patrol officers, and some teachers who were not allowed to participate in Social Security.
Oklahoma has made that challenge for retirees a lot harder over the last decade. In our state, retirees get a benefit increase only when approved by the Legislature. The last COLA was granted in 2008, more than 11 years ago. The average state employee who retired that year had — and still has — a benefit of $1,303 per month. Since they retired, inflation has lowered the value of that benefit to $1,042 in today’s dollars. Worse yet, premiums for retiree health insurance have climbed 42%, more than double the rate of inflation. Health insurance alone can take up half or more of the monthly retirement check.
Most state, city and school employees are required to participate in one of six state-operated retirement or pension systems. With the exception of some recently hired state employees, all who serve long enough qualify for a defined benefit, which is a fixed monthly payment that depends on years of service and the salary earned in the last three to five years of a career.
Retirement benefits are paid from funds restricted only for retirement. The retirement funds come from four different sources. Employees pay a percentage of their monthly pay into the retirement fund. Their employers, like state agencies, school districts or local police or fire departments, pay a percentage of payroll. State taxes provide additional funding for some of the retirement funds. All of these receipts are invested so that the balance of the fund grows enough to pay current and future retirement benefits. According to the National Institute on Retirement Security, investment earnings pay nearly 55% of costs of pensions, so the state gets a great return on the first three sources of funds.
At a legislative study on COLAs, Rep. David Perryman, D-Chickasha, stated, “You shouldn’t retire people into poverty…Our failure to approve a cost of living adjustment will put them there within a few short years.”
That’s not what we promised these public servants when they took their jobs, or when they retired. Raising the COLA by 4% would be a good step, but it only restores only about one-fifth of the purchasing power that retirees lost by retirees since their last COLA. A COLA of at least 4% should be enacted this year. It’s the right thing to do for our retired public servants.
Shinn is a tax and budget analyst at the Oklahoma Policy Institute.
WASHINGTON, Feb. 5, 2020 /PRNewswire/ — As governments struggle to fill jobs that deliver vital public services, new research from the National Institute on Retirement Security (NIRS) finds that Millennials working in state and local government are satisfied with their jobs and intend to stay with their employers so long as their benefits are not cut.
In a nationwide poll of state and local employees, 84 percent of Millennials say they are satisfied with their job. This high job satisfaction among state and local Millennial employees comes despite sentiment that they could earn a higher salary in the private sector. Most Millennials in state and local government (80 percent) believe they could earn a higher salary working in the private sector, and only about one on four see their salary as very competitive.
The research also finds that state and local Millennial employees (85 percent) say that they plan to stay in their job until they retire or can no longer work. But, Millennials’ job loyalty would alter if their benefits were changed. Some 78 percent say their healthcare benefits is one reason they chose a position in the public sector, and 77 percent say they would be more likely to leave their job if this benefit were cut.
Similarly, a high number of Millennials (84 percent) say that a pension benefit is the reason they stay in a state and local government job. These Millennials say that cutting their pension benefits would make them more likely to leave their state or local government job (71 percent).
These findings are contained in a new Issue Brief, Millennial State & Local Government Employee Views on Their Jobs, Compensation & Retirement, available here. This research provides a deeper analysis of NIRS’ November 2019 opinion research report, and it drills down to examine the views of Millennials working in state and local government. A webinar is scheduled for Thursday, February 13, 2020, to review the findings and respond to questions. Register at no charge here.
The Millennials survey data reveals that:
Despite knowing they could earn a higher salary in the private sector, Millennials working in state and local government are satisfied with their jobs and total compensation. The vast majority (84 percent) are satisfied with their job. One in four say their salary is very competitive, but most (80 percent) say that their total compensation package (salary and benefits) is competitive.
State & local government Millennial employees are planning to stick with their current job, but changing their benefits might push some out the door. Most Millennials (85 percent) in state and local government say that they plan to stay in their job until they retire or can no longer work. Some 77 percent say they would be more likely to leave their job if their healthcare were cut. A high number of Millennials (84 percent) say that a pension benefit is the reason they stay in a state and local government job, and 71 percent say that cutting their pension benefits would make them more likely to leave their state or local government job.
Millennials working in state and local government are highly supportive of pensions, and they see the advantages of their benefits beyond retirement. Some 97 percent of Millennials in state and local government have favorable views of pensions, and more than three-fourths (77 percent) say that they prefer pensions over 401(k) accounts. Millennials see the value of pensions beyond providing retirement security. Some 92 percent of state and local Millennials agree pensions serve a role in incentivizing long public service careers, while 94 percent say that pensions serve as effective tools for recruiting new employees to state and local government jobs
State and local government Millennial employees feel confident about their retirement, but worry about cuts or changes to benefits. Most Millennials (74 percent) working in state and local government say they are confident that they will be financially secure in retirement. But, 85 percent say they are concerned about potential pension benefit cuts, and 84 percent expressed concern about government officials underfunding pension contributions. More than three-fourths of state and local Millennial employees (77 percent) say they are concerned about cuts to their cost-of-living adjustments.
State and local government Millennial workers say eliminating pensions has negative consequences. Nearly all agree (92 percent) that eliminating pensions will weaken government’s ability to recruit and retain workers to deliver public services. The vast majority (86 percent) say that eliminating pensions will weaken public education, and most Millennials (82 percent) in state and local government agree that eliminating pensions will weaken public safety.
“The key takeaway from this research is that Millennials understand the tradeoff between pay and benefits that often comes with a public sector job. Clearly, benefits are a driving force behind Millennials decision to seek and stay with a career in public service,” said Dan Doonan, NIRS executive director.
“As Baby Boomers retire and Millennials dominate the workforce, it’s imperative that government employers attract talented younger employees committed to public careers that keep our communities healthy and safe and educate our children. Benefits play a key role in workforce loyalty for Millennials, turning jobs into careers,” Doonan explained.
In 2016, Millennials became the largest generation in the U.S. labor force. According to the U.S. Bureau of Labor Statistics, more than 22.5 million U.S. workers are government employees with 2.8 million at the federal level, 5.1 million at the state level, and 14.6 million at the local. In 2019, 32 percent of state and local employees were Millennials. More than half (58 percent) of state and local public employees work in education, while 13 percent work in public safety, and 12 percent work in health and safety.
“But despite state and local Millennial employee high satisfaction with their benefits, governments have been cutting back on health and retirement plans or shifting more costs to employees. We hope this research will inform the policy debate on Millennial preferences, thereby helping government employers make informed decisions related to the public workforce and benefits. More benefit cuts could have unintended and detrimental consequences — like driving Millennials out the door and harming public services,” Doonan said.
Conducted by Greenwald & Associates, information for this study was collected from online interviews between August 22 through September 12, 2019. Sample was selected using two online panel providers, with 1,118 public sector employees aged 18 and older completing the survey to include 362 teachers, 284 police officers, 204 firefighters and 268 other public sector employees. The final data were weighted by age, gender, and personal income to reflect the demographics within each of these professions, and also weighted to reflect the distribution of these professions within the public sector workforce.
The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. Located in Washington, D.C., NIRS’ diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @NIRSonline.
