Gov. Mary Fallin, still miffed that legislators this year didn't take up her proposal to consolidate the staff, boards and offices of several pension plans into one, vetoed a bill Friday that would have given some state employees the chance to choose between two retirement plans.
House Bill 2077 “qualifies as window dressing, not real reform,” said Alex Weintz, Fallin's communications director. It has negligible savings for state government and gives the false and damaging impression that significant action is being taken to address the state's unfunded liability. The governor looks forward to working with the Legislature to pursue significant pension reform measures in the future.”
Fallin, who asked lawmakers to consider changes to the pension system during her State of the State address that kicked off the legislation session in February, said the state spends $80 million to $100 million each year to administer the pensions, and that the pension system could have realized at least 15 percent savings by consolidating the plans.
“It certainly was disappointing for the governor,” Weintz said.
HB 2077 would have given employees whose pensions would be administered by the Oklahoma Public Employees Retirement System the option of a defined contribution plan, such as a 401(k) plan, instead of the defined benefit plan, which is a traditional pension. New employees hired after July 1, 2014, would have had 90 days to make the decision, which would be final.
Current state employees would remain with the defined benefit plan.
Also, statewide elected officials or legislators whose first service as an elected official occurred on or after July 1, 2014, would have become a participant in the defined contribution system.
In addition to administering most state agency employees' pensions, the Oklahoma Public Employees Retirement System also administers the pensions of most county workers and some city employees.
“While HB 2077 is well intended,” Fallin wrote in her veto message, “it lacks any measurable impact on the unfunded status of the state's pension plans and fails to reduce the state's significant pension debts since participation is only voluntary for state employees and required for a small group of first-time elected officials. I cannot in good conscience sign HB 2077 into law.”
An analysis of HB 2077 by the House of Representatives fiscal staff said the excess employer contributions flowing to the system from new members electing the defined contribution plan should reduce over time the current unfunded liability of the defined benefit plan and result in savings.
However, the rate of reduction would depend on the number of employees electing the defined contribution, their payroll, their termination patterns and the defined contribution plan elections.
Two years ago, the state's pension system had a $16.5 billion unfunded liability, making it among the worst in the country. New laws passed in 2011 reduced the unfunded liability by nearly one third or about $5 billion.
Sluggish market returns were key factors in increasing the liability by $1 billion last year, putting the unfunded liability at $11.5 billion.