Is pension reform the crowning achievement of the 2011 Legislature?

 Oklahoma Governor Mary Fallin Tuesday signed five significant reform proposals that will, advocates say, begin transforming state government pension systems. While announcement of a final budget accord among key state leaders dominated state Capitol news coverage this afternoon and evening, many veteran observers of state governance believe the new pension measures are, at least arguably, the crowning achievement of the 2011 Legislature.

Before signing the legislation, the chief executive told reporters in the Blue Room of the state Capitol, “Pension reform is about creating a sustainable future for our state budget and our state retirement systems. We can’t keep allowing these systems to go deeper and deeper into debt without serious consequences. By beginning the reform process today, we are helping to ensure that we don’t one day face a crisis scenario where the state is simply unable to deliver on the benefits we’ve promised our retired workers.” 

The most significant of the pension reform measures, House Bill 2132, will have a projected impact of more than $5 billion in reducing the state’s estimated $16 billion in unfunded pension liabilities. H.B. 2132 forbids unfunded cost-of-living adjustments (COLAs).

Fallin commented, “We can’t promise to increase pension payments without identifying where that money is coming from.

“That’s the sort of behavior that put the state of Oklahoma $16 billion in the red when it comes to our pension systems. HB 2132 changes that and ensures that any COLA increases are fully funded and fiscally sound.”

The two Republican point men for pension reform, state Sen. Mike Mazzei of Tulsa and state Rep. Randy McDaniel of Oklahoma City, said they were gratified at enactment of what each deemed “historic” legislation.

McDaniel said, “This is in many ways an historic day. This is meaningful law. This may be the signature accomplishment of this legislative session, taking from 25 to 35 percent of the unfunded liability burden off the table.”

Mazzei projected the combined impact of the five measures will lower Oklahoma’s unfunded pension liabilities by $6.8 billion over three decades – more than one-third of the $15 billion plus burden that has focused the attention of public officials in recent months.
Mazzei asked, rhetorically, “When is the last time you heard state government say they are saving you billions of dollars? Today, we are making that announcement; with these key reforms our pension system will be dramatically stronger.”
Earlier this session, Mazzei had memorably characterized the state’s pension problem as “the one that could implode us.”

Mazzei and McDaniel thanked legislative leadership, Senate President Pro Tem Brian Bingman and House Speaker Kris Steele, for their willingness to tackle the politically challenging pension issues this year.

Mazzei, known for a mild mannered speaking style in Senate debate, was obviously exhilarated at the signing ceremony. He told reporters that pension reform was “the biggest financial achievement we could have achieved this year, and we did it.”

Saying the end result had required teamwork and focus, Mazzei thanked the Senate Select Committee on Pensions and other colleagues, the governor, and even reporters for helping the public and members of the Legislature understand the magnitude of the pension solvency crisis.

State Senate staff summarized the five bills in these words:

“* HB 2132, requiring that all COLA’s have a funding source, reducing the total unfunded liability between all six of Oklahoma’s pension systems by $5.4 billion;
“• SB 377 raises the normal retirement age for new teachers from 62 to 65 years of age and establishes a minimum age of 60 for full retirement benefits for teachers who meet the rule of 90;
“• SB 794, treats elected officials the same as public employees when calculating retirement benefits;
“• SB 347 requires that municipal employees forfeit retirement benefits if they have been convicted of crimes related to their office; and
“• HB 1010 increases the retirement age for new members of the Uniform Retirement System for Justices and Judges (URSJJ) who started work after January 1st of this year.”
State Treasurer Ken Miller reflected the five measures amounted to “an important fiscal milestone in the history of our state.” He expressed hope that the dramatic reforms would “communicate to the rating agencies” that the state was moving aggressively on pension reforms.
Each of the speakers sought to convey that the reform process is not concluded.

Miller concluded his remarks, saying, “The job is not done. We have to go forward and design a system that is cost effective, building a modern workforce and a leaner government.” While work remains, he reflected, “This is a big deal.”
After the signing ceremony, President Pro Tem Bingman said, “Reducing the long term unfunded liability of our pension systems is the single most significant accomplishment of this legislature.  With this legislation we are committed to a sound fiscal future and leaving our state stronger for our kids and grandkids.”
Senator Bingman identified pension reform as one of his top priorities during discussions with reporters in January, and has repeated his emphasis on the reform package throughout this session.

Also released today was the final report of the Select Committee on Pensions, a document made public by Bingman’s office.