Note: The author is a retired state employee.
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.