Nearly seven dozen non-educators have accessed teacher retirement, hearing reveals

Rep. Sally KernA government retirement
system intended for teachers, administrators and support personnel in
public schools has included a total of 80 non-educators at one point or
another since the 1970s, according to information provided at a House
interim study.

During the same hearing, the head of Oklahoma Teacher Retirement System
said OTRS is assuming a 2 percent cost-of-living adjustment (COLA) for
retired teachers, although the Legislature has only approved a 1% COLA
in the present cycle.

Steven Anderson, a Certified Public Accountant now in private practice
who worked for former Gov. Frank Keating, believed that 56 non-educators
had participated in the system, but James Wilbanks, who runs OTRS, said
the number was actually 80.

Anderson detailed what he had learned about the history of a
controversial loophole in eligibility requirements, noting that it had
developed from federal legislation in the 1970s but required
state-by-state enabling legislation.  Anderson provided his critical
analysis of the situation at a Tuesday, October 19 House interim study.

While much of the testimony was technical in nature, Anderson at one
point observed, “People don’t do things like this in the light of day.”
While access to the system for non-educators began in 1976, the issue
only came to light in the last year.

Anderson said wording in federal law that allowed access to
non-educators was “an inside job,” and noted “words matter. When you get
into the IRS code, they matter a lot.” Anderson added that even under
the controversial provisions examined at the interim hearing, some
participants might not have been eligible. He said the Oklahoma
Education Association, one of the private groups whose employees have
accessed the OTRS, was a labor organization, not a true association.

In the 2010 legislative session, Rep. Sally Kern, an Oklahoma City
Republican who asked for this week’s interim study, sponsored House Bill 3108.

That measure would have prohibited former public school teachers who
become executives at private associations or unions from continuing to
participate in the OTRS. To put it another way, the proposed law would
have ended the special status given to association executives of certain
non-government groups in the Sooner State’s underfunded teacher
retirement program.

Rep. Kern pulled her bill voluntarily to allow more detailed study of
the issue. Assailing Kern’s legislation during the session, but silent
during the interim hearing, were officials with the OEA and other
private groups that have had non-educator employees who retained OTRS coverage.

Dr. Wilbanks said that of the 80 non-educators who have accessed OTRS,
16 are still in the system. Nine have returned to teaching, while seven
are employed with private groups. Estimating the net cost of the 80 is
probably irretrievable, both Anderson and Wilbanks said. However, they
agreed the average annual salary of the non-educators who are or have
been in the system would typically be higher than for educators, meaning
the calculation for retirement benefits would also be also higher.

Oklahoma Treasurer Scott Meacham, the Pew Center on the States and many
other authorities have described the Oklahoma teacher retirement system
as among the nation’s worst.

State Rep. Ken Miller, an Edmond Republican seeking to become state
Treasurer, pressed Wilbanks on the fiscal implications of the OTRS
decision to assume a 2% COLA rather than the 1% the Legislature has
approved. At 2%, Wilbanks said, the system is about 49.8% solvent; at 1%
it would be about 52%.

In a prepared statement, Anderson said, “The coming explosion of
Oklahoma’s pension bomb is going to be ugly enough as it is. The
taxpayers are already on the hook for all this debt. We shouldn’t be
making matters worse for the taxpayers by forcing them to fund the
retirement of union employees.”

Anderson had some good words for Wilbanks, observing the system’s
investments have performed comparatively well in recent quarters.
Anderson is a research fellow at the Oklahoma Council of Public Affairs
(OCPA), a nonpartisan think tank is calling attention to some of
Anderson’s conclusions.