OKLAHOMA CITY (AP) — A legislative plan to shore up Oklahoma's underfunded pension systems by requiring any cost-of-living increases to be funded by the Legislature received final approval on Tuesday and is heading to the governor's desk.
The Oklahoma House voted 64-25 for the bill that is expected to immediately reduce the state's total unfunded liability among its five largest pension systems by more than $5 billion. Actuarial studies have determined Oklahoma's pension systems have a $16.5 billion unfunded liability, which is the amount owed to pensioners beyond what the systems can afford to pay.
"We are on an unsustainable path," said Rep. Randy McDaniel, R-Edmond, who carried the bill on the floor for House Speaker Kris Steele. "The best way to get out of a ditch is to stop digging."
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By far the largest component of the state's unfunded liability is the Oklahoma Teachers' Retirement System, with an unfunded liability of $10.4 billion. The COLA bill is expected to immediately decrease its unfunded liability by $2.9 billion and increase its funded ratio from 48 percent to 56 percent, according to a fiscal analysis prepared by House staff.
Lawmakers have traditionally granted retirees a 2 percent cost-of-living adjustment, or COLA, every two years, typically during election years, but not provided the necessary funding to support the increase. As a result, McDaniel said, the unfunded liability of the systems has grown by more than $10 billion over the last decade.
But opponents argued that COLAs are critically important to retirees living on a fixed income, especially with the rising costs of fuel and food.
House Democratic leader Rep. Scott Inman said that while he agrees COLAs should be funded, he said several of the state's pension systems are well funded and can afford to support COLAs without legislative funding.
"You can either fund it out of general revenue, or you can fund it out of the retirement system itself," said Inman, D-Del City. "It's their money. And we're essentially telling folks it's going to be a decade or more before we even consider it, let alone approve it."
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