Oklahoma Governor Signs Pension Reform Law

Finally, State Pension Reform Gets Moving

May 13, 2011

The Oklahoman Editorial - Less talk, more action. That's been the mantra for years for those advocating for reform of the state's pension systems. Finally, the time has arrived.

Gov. Mary Fallin's signature this week on pension reform laws signaled the beginning of the end of years of piled-up pension responsibilities due in no small part to governmental inaction.

This issue “has been kicked down the road for years and years,” state Treasurer Ken Miller said.

Still, the road ahead is long. The state's seven pension systems have accrued $16.5 billion in unfunded liabilities — a financial black mark on the state that has only become worse over time.

The Republican-controlled Legislature deserves credit for pursuing the series of bills that tackle the liability by increasing the retirement age for many of those in the systems and forbids lawmakers from offering cost-of-living increases without identifying a funding source. The retirement age change affects judges, teachers, elected officials and public employees either hired or elected in the future.

Those are not easy or wildly popular changes. Lawmakers and other state leaders could have chosen the path plodded by so many of their predecessors, either ignoring the problem or adding to it by increasing benefits without paying for them. Instead, they stood up.

Starting the reform process will help 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,” Fallin said. Amen to that.

Some state officials had warned that the growing unfunded liability endangered the state's bond rating. A downgrade would make it more expensive for the state to borrow money, costing taxpayers more to build roads, bridges and meet other infrastructure needs. That threat's been used before in pleading with lawmakers to take action, but it wasn't enough.

The change in granting cost-of-living adjustments alone is expected to reduce the liability by about $5 billion over time, officials said. But it and the other reforms signed into law shouldn't be the end.

Policymakers must remain vigilant in not rolling back the reforms and letting the pensions again become victims of shifting political winds. Other states have moved to, or are considering moving to, a 401(k)-style retirement plan for the pension systems. As Oklahoma's unfunded liabilities become more manageable, it would be wise for officials to consider whether such a change makes sense here.

Miller, who is head of the state's pension commission, said he'll recommend more changes in the future to modernize the pension systems. But that effort absolutely depends on future legislatures showing the same sort of leadership as this one.

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