Oklahoma lawmakers should give previous efforts to revamp the state’s pension plans a chance to work instead of pursuing additional reforms, the president of an Oklahoma City firefighters union said Tuesday.
“This urgency to continue this move toward trying to reform on a continual basis, year after year after year, without giving previous reforms an opportunity to work over time is a recipe for disaster,” said Phil Sipe, president of Oklahoma City Firefighters Local 157.
Sipe is a member of Keep Oklahoma’s Promises, an organization that opposes additional changes to Oklahoma’s pension plans for state employees. The organization hosted a conference call for reporters and editors Tuesday.
Revamping the pension system
Two years ago, the state’s pension system had an unfunded liability of approximately $16 billion. Lawmakers responded by approving measures that cut the unfunded liability by about 5 percent, reducing it to about $11 billion.
Their work isn’t done yet.
State leaders are considering options that will meet the demands of the modern workforce and satisfy the state’s interested in greater financial stability, said Rep. Randy McDaniel, an Oklahoma City Republican who heads the House Pension Oversight Committee. He said lawmakers are not considering any measures that would harm the current system, and they have not discussed privatizing state pension plans.
“My goal is, I want to improve the existing system we have as well as ensure investment product choices that are efficient and desirable for future employees,” McDaniel said Wednesday in a phone interview. “As a result, we will be looking at an existing program, such as SoonerSave, that has substantial assets and economies of scale that will benefit employees.”
Lawmakers have already approved several measures aimed at reforming the pension system, including a 2013 bill that increased the years-of-service requirement for new firefighters from 20 to 22 years.
House Bill 2078 moved the vesting schedule from 10 to 11 years and raised the minimum age for receiving retirement benefits to 50. The measure also raised firefighters’ contribution rate from 8 percent to 9 percent. Cities’ rates rose from 13 percent to 14 percent, and the state’s percentage of the insurance premium tax allocation from 34 percent to 36 percent.
Gov. Mary Fallin signed HB 2078 into law, but she vetoed another bill that would have allowed new state employees to opt out of the traditional pension program in favor of a defined contributions plan.
Other ideas on the table include a proposal to consolidate the boards, staffs and offices of several state pension plans into a single organization. Lawmakers tabled the consolidation proposal this year but may take it up again in 2014.
Also next year, Fallin is expected to push lawmakers to approve a proposal requiring new employees to participate in a defined contribution program similar to a 401(k) plan. The plan would provide retiring employees with a payout based on past contributions and investment gains or losses.
Members of Keep Oklahoma’s Promises are worried that the state is moving away from traditional pension plans to defined contribution programs. They contended that changing the pension system could hurt Oklahoma teachers, firefighters and state workers.
Sipe said the state’s current pension plans are built around the concept that participants pay into the system, just like other Americans pay into Social Security.
“We pay a significant portion of our paycheck every time we get paid into that system,” he said. “The system works, and I think there’s significant evidence to prove that.
“Perhaps it needs some reforms, and we’ve actually agreed to those reforms and that’s occurred in the last three years. And our position is, simply give it time to work.”
Area lawmakers said the Legislature is likely to take up pension reform again in 2014, but it’s too early to predict how that discussion will go.
Rep. Todd Thomsen, R-Ada, said the state should take a wait-and-see approach before considering additional reforms.
“I think we’ve taken significant steps to shore up the pension system,” he said Wednesday. “We need time to let them play out and see their impact, but it’s also worthy to continue the discussion on other possibilities.”
Sen. Susan Paddack, D-Ada, also said the state should give previous reforms more time to work.
“If you continually do reform upon reform upon reform, how do you know you’re getting the results you want?” she said.