Even if lawmakers ordered a comprehensive move to a 401(k) system today, the state would still be on the hook for existing liabilities in the current system. When this issue came up in 2011, officials with the teachers' retirement system said it would take at least $1.4 billion to fully fund that plan as it closed out.
House Speaker T.W. Shannon, R-Lawton, told our editorial board that any transition would likely be gradual and incremental to create “savings over a period of time without creating too much unaffordable chaos within the system.”
Still, the consequences of failing to act are worse than doing too much too fast. Just look at Illinois. That state's pension crisis has led Standard & Poor's to downgrade Illinois' rating to the worst of any state in the country. In January 2011, Illinois lawmakers raised personal income taxes by 66 percent and business taxes by 46 percent, partly to address pension debt. By 2020, Illinois' pension contributions are expected to consume around 30 percent of the revenue generated by corporate income taxes, personal income taxes and sales taxes. By 2045, pension payments are projected to require up to half of those tax revenue sources, forcing major cuts to areas like education and roads.
That's a path Oklahoma must avoid. The sooner lawmakers begin implementing additional meaningful pension reforms, the less jarring the transition process will be and the greater the benefit to Oklahoma taxpayers.