Teach­ers’ re­tire­ment sys­tem a bright spot in gov­ern­ment

The Oklahoman (Sunday) - - OPINION -

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.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.