“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.