Bad idea: State House votes to roll back pension reforms, return to same bad system that got into trouble

It wasn't that long ago that the Oklahoma Legislature was faced with the reality of massive financial crisis with state employee retirement systems. We had some of the worst-funded state pension systems in the nation. Following the leadership of individuals like then-State Rep. Randy McDaniel, the Legislature took steps to remedy that situation. This past week, however, the State House approved a measure by State Rep. Avery Frix (R-Muskogee) that would take a dramatic step backward into the failed policy of the past. Frix has a history of pandering to government unions on this issue, and this vote coincides with the launch of his campaign for Congress. When a previous bill of Frix's came up in 2020 which raided pension assets for a transparently political election-year state workers' retirement boost, State Sen. Marty Quinn (R-Claremore), who is also running for the same congressional seat as Frix, had this to say: Sen. Marty Quinn, R-Claremore, said he was “not going to crawl under a rock and ignore the financial mistakes that continue to be made by this body and other bodies so that people can ‘like’ me.” “Why are we taking the same financial destructive path of previous administrations?” Quinn asked. “You know what I’m talking about. A system that was one of the fifth-worst systems in the entire United States, almost $16 billion underfunded, giving away COLAs in election years. We’re doing the same thing. Just a different group of people.” Short HOUSE VOTES TO ROLL BACK OKLAHOMA PENSION REFORMS House lawmakers voted to roll back a 2014 pension reform that was projected to save taxpayers $3.8 billion over 30 years and instead provide state workers retirement benefits that are not available to the typical private-sector worker in Oklahoma. House Bill 2486, by state Rep. Avery Frix, eliminates a defined-contribution retirement plan, similar to a 401(k) plan in the private sector, and instead places most state government workers in a defined-benefit plan. In a defined-benefit plan, state government employees receive a guaranteed, specified amount in retirement payments, while in a defined-contribution plan they contribute and invest in funds over time to save for retirement. Lawmakers voted in 2014 to shift all new state government employees (aside from teachers or those working in hazardous positions, such as police and firefighters) into a 401(k)-style retirement plan. That law was authored by current Oklahoma State Treasurer Randy McDaniel, who then served in the Oklahoma House of Representatives. When she signed the reform into law, then-Gov. Mary Fallin noted, “The system as it stands today is not financially sound or sustainable. Moving future hires to a 401(k)-style system helps to ensure we can pay our current retirees and employees the benefits they have already earned.” In a 2014 interview, McDaniel said the cost of defined-contribution plans is predictable for state government, and also noted that defined-benefit plans involve moral hazard that causes politicians to rapidly inflate the system’s unfunded liability by increasing benefits without covering the cost. “An issue that is overlooked in the mathematical data is the issue of political incentives to harm the system by making unsustainable financial promises,” McDaniel said. “Unfortunately, those incentives are real, and they greatly impact the situation we face today. It’s easy to make promises when someone else is going to have to pay for those promises at some point in the future.” Read more » by Jamison Faught - March 29, 2022 at 07:38AM

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