I’m glad that at least one statewide Republican leader has publicly asked for an actuarial study to determine the specific financial impact of a proposed and radical change to one state pension plan.
Oklahoma State Auditor and Inspector Gary Jones, writing in The Oklahoman/NewsOK.com, argues, “Any changes to the pension systems must be verified by an actuarial study to provide the impact those changes will have to the fiscal stability of the plan. It only makes sense to give the pension experts, CPAs and actuaries a chance to fix this problem. Working with these experts, legislators would be able to make the necessary, tough, informed decisions to find an actuarially sound solution.”
Jones’ point makes perfect sense, but some Republican leaders, such as Oklahoma Treasurer Ken Miller and Gov. Mary Fallin, both Republicans, are simply relying on reductionist rhetoric to move some new state employees into 401(k)-styled pensions without defined benefit payments and thereby putting one pension plan at risk.
Senate Bill 2120 and House Bill 2630 would require that new state employees under the Oklahoma Public Employees Retirement System (OPERS) go into a new 401(k)-styled plan. One major question that hasn’t been addressed fully by Miller and Fallin, according to some opponents of their plan, is how the old plan would still remain solvent without new participants.
Instead, we only hear dire cries of a pension crisis from them and the editorial board of The Oklahoman and how the new plan will be portable if employees leave their jobs. (Of course, that wonderful portability has nothing to do with how well the 401(k)-styled plan performs.) While it’s true that all of the state’s pensions face an $11 billion liability that liability has been reduced by some $5 billion just in recent years, and it will be reduced even more if state leaders simply provided appropriate funding and made wise financial decisions.
Jones, of course, who writes that the pension problems were created by “irresponsible, reckless and self-serving actions by the Legislature,” isn’t the only one calling for a financial study of the proposed change. David Blatt, director of the Oklahoma Policy Institute, has been raising this concern for months. How can you make such a major change within a financial system without calculating the impact in specific dollars? As state treasurer, Miller, in particular, should get behind conducting such a study.
Blatt has also pointed out that the change would harm the pension plan for existing employees. Blatt writes:
. . .the proposal to close off the system for new employees and shift these workers to defined contribution plans risks weakening OPERS and increasing the system’s unfunded liabilities. The reason is that pension plans depend heavily on investment earnings to grow their assets so as to be able to meet their obligations. As long as plans remain open to new employees, investment managers can invest for the longer-term because they have a mix of young, mid-career and retired workers.
In other words, if there’s less money to invest, there’s going to be smaller returns. Think of employees, in particular, who have been hired in the last ten years or so and are under the old plan. Think of employees hired under OPERS this year. Will the lack of new participants create a huge liability? Will political leaders, then, declare yet another emergency?
It becomes clear when viewed from a larger perspective that Republicans here and in other states simply want to reduce retirement benefits for government employees. They want to force a crisis. Of course, most Republicans won’t address the issue with that basic language.
Here’s the GOP game plan at the state level here and elsewhere: Cut taxes for rich people, give huge tax breaks to corporations, keep wages stagnant for rank-and-file state workers and cut their benefits, making them financially insecure.
The only thing that will stop the execution of that plan is if people stand up, voice their concerns and vote differently. But the neoliberalism (i.e., “free market” principles) model pits people against one another. If I don’t have guaranteed retirement benefits then why should you have them? The right-wing emphasizes the point. Consequently, no one gets decent retirement benefits. Meanwhile, the wealthiest top 1 percent snicker away from above.
The growing income inequality in this country is the only thing that’s not sustainable, not one pension program in one relatively small state.