Oklahoma State Treasurer Scott Meacham says serious discussions on budget cuts for fiscal year 2011 have begun. Talks between Governor Brad Henry, House Speaker Chris Benge and Senate President Pro Tem Glenn Coffee are intensifying. In an exclusive interview, Meacham also said government financial planners must begin to look at new approaches in providing affordable retirement benefits for government employees.
Despite cordial relations among the leaders, there is obvious potential for disagreements in the closing weeks of the legislative session. “We’re about to decide what to argue about,” Meacham said.
Meacham said face-to-face negotiations among the governor and legislative leaders began last week. He said the governor was focusing on potential revenue enhancements. “It’s not clear if there is the political will to move ahead on any of those,” Meacham told Tulsa Today.
Meacham also said, “We’re trying get good numbers before we make the next round of decisions.” After this reporter arrived at Meacham’s office, the treasurer pointed out that Tax Commission analysts had just left from a meeting focused on state tax revenue projections.
In our interview, a follow-up to last week’s regular revenue briefing for Capitol reporters, Meacham addressed the latest national analysis that found Oklahoma’s teacher retirement system was horribly underfunded. (Click here for previous story.)
The treasurer repeated his belief that a study from the Foundation for Educational Choice and the Manhattan Institute raised “legitimate” concerns in asserting that pension managers here and in other states were too optimistic in their assumed rates of return on stock market investments. Nonetheless, he repeated his belief that the new study’s analysts were, themselves, too pessimistic about market performance. He also said there is always some risk of “mixing apples and oranges” in such discussions. (Click here for a previous story on teacher pensions.)
Meacham said the key question for Oklahoma and other states is “what to do” about pension funds, which are “in very bad shape.” Looking ahead, Meacham said he agreed, “we can’t keep doing things the way we’ve been dong them. It’s time to look at 21st Century benefit structures for public employees.”
Elaborating, he noted the state presently provides defined benefits based on a percentage of an employee’s salary, the number of years of employment and cost-of-living adjustments, a structure assumed to continue “for eternity.”
The alternative, he said, would incorporate a “defined contributions” structure, where much of the retirement benefit would come from a “pot of money” that grows from contributions of both the employee and the employer (government). The fund would be portable (i.e. could “travel” with an employee who departs government service), but the payout would be based on growth in the portfolio.
Without endorsing a particular approach, Meacham said he expects fiscal planners for government to begin considering “some combination of defined benefits and defined contributions” in establishing retirement structures for future hires.
About the author:
Our man at the state Capitol, Pat McGuigan, is also editor of CapitolBeatOK