State teachers and employees should be aware that the Oklahoma Council of Public Affairs is pushing for changes in two of the state’s underfunded retirement systems.
The OCPA, a conservative think tank, is sure to have even more influence in the state political process next year because Republicans will hold every statewide office, including the governor’s office. The GOP also holds majorities in the Oklahoma House and Senate.
Steve Anderson, a OCPA research fellow, recently published an article in the organization’s Perspective publication that argued for changes in the Oklahoma Teachers Retirement System (OTRS) and Oklahoma Public Employees Retirement System (OPERS). In the article, he calls the proposed changes the “OCPA plan.”
The crux of the plan is that new state employees and teachers should be given defined-contribution retirement plans rather than the current defined-benefit plans. This will “begin the process of reducing liabilities to the systems,” according to Anderson. Employees would own the new plans so they could manage and withdraw funds. The employees would not have to pay any of their own money into the new system if they chose to do so. Those employees who have existing plans could “cash out” of the old system and join the new one.
The arguments for or against defined-contribution retirement plans deserve a debate when it comes to the two systems because of their massive underfunding. OTRS has a $10.4 billion unfunded liability. OPERS’s unfunded liability is $3.4 billion.
What is the best way to fix the underfunding? It’s a serious, pressing issue.
But the problem with Anderson’s article is that it’s filled with typical right-wing political rhetoric, and the OCPA plan seems modeled on the private-account scheme some Republicans are again pushing for Social Security.
The article begins like this:
OCPA’s plan is bad for union bosses and old-guard politicians, but good for teachers, government employees, and-most importantly-our grandchildren.
Then there’s this:
The unions and old-guard politicians understand that they lose control when their members and voters aren’t beholden to them for retirement funds. They will resist this change even in the face of a fiscal meltdown.
Then there’s this about tax dollars and eliminating the state income tax:
The conversion to the defined-contribution plan also would allow Oklahoma to stop pouring tax dollars directly into OTRS. This change would free up nearly $260 million in dedicated funding and another $40 million in reduced benefit costs in the first year of plan inception. OCPA believes this funding source should be eliminated immediately and the savings used as a funding source for eliminating the individual income tax.
Note “bad for union bosses” and “grandchildren” and “old guard politicians” and “eliminating the individual income tax.”
The political language and the panacea tax argument is a red flag. Also, everyone should be wary of the idea that OCPA would propose any plan that might benefit the interests of teachers and public employees. Its mission is to push for tax cuts and reductions in government spending. The Oklahoman, an ultra conservative newspaper and OCPA mouthpiece, even published an editorial (“Oklahomans have a choice to make for the future of this state,” Nov. 14, 2010) discussing Anderson’s article. The fix is in.
Legitimate questions about the GOP private-account idea for Social Security seem relevant here. How much money will be taken out of the current defined-benefit retirement systems in years to come? What would it mean for the long-term interests of current retirees and those who want to stay in the defined-benefit plans? Why can’t the government simply put more money into the systems and make better investments? Will it be easier to cut the state’s contributions to the new plans in the future because there’s not a set benefit schedule? What about the individual financial risks of the new system? Will some employees have to delay their retirements if markets are down? Is it even possible to determine if retirees will make more or less money under the new system?
Anderson ends his article with the current GOP “grandchildren” mantra:
Do we want to leave our grandchildren a fiscally solvent state with no pension debt and a low tax rate? Or do we choose to ignore all the warning signals and leave our problems (and higher taxes) to the coming generations?
But Anderson would never mention that money lost through recent income tax cuts primarily benefitting the state’s richest residents could have been used to help bolster the retirement systems. The grandchildren should hear that argument as well.