Teachers’ retirement system a bright spot in government
GOOD financial management hasn’t been a strong suit for those in Oklahoma government in recent years, so it’s worth noting that the Teachers’ Retirement System of Oklahoma has been an exception to the rule.
Tom Spencer, the system’s executive director, announced last week that it achieved a 70.4 percent funded ratio for the fiscal year ending June 30, 2017. That’s notable because the system has never been that well-funded in the 74 years that have passed since it was created in 1943.
That means the system now has more than 70 percent of the assets on hand to pay all of its pension liability. And projections indicate the system could be 100 percent funded in 17 years.
As recently as 1996, the teachers’ retirement system had only a 39.6 percent funded ratio. It had a $5.5 billion unfunded liability and assets of $2.28 billion. Things improved by 2010, but only marginally. At that time, the system had a 47.9 percent funded ratio.
Starting in 2011, lawmakers enacted several important reforms, the most consequential of which was the decision to require that cost-of-living adjustments be fully funded. Previously, politicians would vote to increase benefits without paying for them, which meant the system would instead draw down on existing assets at a much faster rate. And lawmakers compounded the problem every time they approved another benefit increase without additional funding.
The results of the sensible reforms enacted since 2011 have been dramatic. In 2010, the teachers’ retirement system had more than $16 billion in unfunded pension liabilities, despite record contributions, and it was projected that the system would never reach fully funded status. The unfunded liability today has been cut to $6.5 billion, and more than $1 billion in that reduction occurred just in the past year.
The improvement of the Teachers’ Retirement System of Oklahoma is a rare success story in state government financial management. Yet some people apparently think that should change.
In October, a tweet from the account of the Oklahoma Education Association, a teachers’ union, called for giving retired teachers a 5 percent cost-of-living increase and declared the cost of that benefit increase would be “$0.” The tweet said the Legislature could “do this through the pension system itself.”
In other words, it appears the OEA wants lawmakers to reduce the system’s funded status and return to the old practices that once made it among the nation’s worst-funded pension plans.
There have been other bad ideas proposed by people who now view the system as a piggy bank. In 2015, a state senator endorsed providing a $1,000 raise to public school teachers that would be funded in part by raiding teacher retirement funds. About $300 million is earmarked directly to the Oklahoma Teachers Retirement System annually. The lawmaker wanted to divert $30 million of that total from retirement benefits to teacher pay.
The 175,000 retired individuals served by the system deserve better. The improvement of the teachers’ retirement system is a bright spot in Oklahoma government. Policymakers should recognize this fact, and keep the positive momentum going.