When the state of Oklahoma borrows money one thing the lending companies consider is whatâ€™s called unfunded pension liability. Studies show that Oklahoma has an unfunded pension liability of approximately $11 billion. What that means is, if ALL state employees, municipal police, teachers, and firefighters retired today, then the state would be $11 billion dollars short.
This is only part of what lending companies use to determine the amount of interest the state would pay back on money it borrows. Other factors such as the total amount of debt, sources of revenue and general overall economic conditions all play into the amount of interest the state would be charged.
The unfunded pension liability fails to consider many facts. If all state employees, municipal police, teachers, and firefighters retired today, then that means we would not have any prison guards, no Highway Patrol Troopers or school teachers. I do not see this as a very likely scenario. Another aspect is they fail to consider when a state employee retires, usually that job is filled by someone else, and that new hire is paying into the system.Â
Because of this $11 billion liability, many legislators have cried, â€śThe sky is falling, the sky is falling.â€ť Then these legislators call for extreme changes to the stateâ€™s pension plans.
Currently, state employees are under a defined benefit plan, which means they know how much their retirement check will be each month. When they retire, the benefit is defined.
Some legislators are pushing for a defined contribution plan, much like a 401k, where the contribution is defined. If these legislators get their way, all newly hired state employees, municipal police, teachers, and firefighters will know the amount placed into their retirement account each month, but they will not know the amount of the retirement check when they retire. Under this system if the stock market goes up, their retirement check goes up, but if the stock market crashes, so does the retirement check.Â
Many legislators are worried these cuts to state employeeâ€™s retirement will cause thousands of state employees to retire into poverty.Â Leadership has consistently stated they oppose placing more people on welfare, yet if they continue with plans to slash retirement benefits they will do just that.Â
I am asking my colleagues to develop policies that will keep Oklahoma workers off welfare. The legislature should enact policies that lift people out of poverty, instead of forcing them into it.Â
James Lockhart of Heavener represents District 3 in the Oklahoma House. Call him at home (918) 653-7571 or the Capitol (405) 557-7413, e-mail him at email@example.com or find him on Facebook.