COLAs seem likely for Oklahoma state retirees
State retirees who haven’t seen a cost-of-living adjustment to their pension since 2008 are likely to see that come to end this year. Approval of a COLA is favored by Republican legislative leaders.
Before this year's session began, Senate President Pro Tem Greg Treat and House Speaker Charles McCall said they were encouraged by studies showing strong performances by Oklahoma’s pension systems. McCall reiterated that point in a recent interview with The Oklahoman.
“The reason I would support a cost-of-living adjustment at this time is the period of time it’s been since one’s been rendered,” said McCall, R-Atoka. “That’s been driven by the fact we had no solvency 14 years ago. Now we’re in good shape.”
During the first decade of this millennium, the unfunded liability of the state’s pension systems grew from $6 billion to $16 billion, driven significantly by the Legislature approving COLAs without paying for them. Some of the pension funds were only about 40% solvent.
Reforms approved by the Legislature in 2011, including requiring that COLAs be fully funded, helped to greatly reduce the unfunded liability. Oklahoma’s retirement systems have grown steadily. Now all but two of the six, McCall noted, are beyond 80% funded. Two of those are beyond 100% funded.
An actuarial study has shown that all the retirement systems can afford a 4% COLA, McCall said. An adjustment of that size is “going to impact the solvency of the funds about 2%,” he said.
“But more importantly, the trajectory, the growth of the funds, remains positive.” That glide path would flatten a bit, but continue in the right direction. “I think all the indications are there fiscally. It’s fiscally sound to issue that,” McCall said.
“What’s important is, where does it leave the pension if you do the cost-of-living adjustment? They’ve been growing. We want to make sure we don’t put the pensions in an eroding position.”
A bill seeking a 4% adjustment won approval in the House last year, but stalled in the Senate.
McCall says the hope is that the various pension funds will continue to grow steadily and that their solvency will be further bolstered.
“At some point in time when they reach 100% or above 90, I’m sure some future Legislature will have some other discussions as to what percentage of funding they actually need to be,” McCall said. “That’s a great position to be in.”
He also noted that today’s House and Senate members are only able to consider approving an unfunded COLA because of the discipline shown by previous Legislatures. McCall is right. If, as appears likely, a COLA is granted this session, it must not mark the beginning of a return to the bad old days when approval of these adjustments were commonplace and lawmakers’ concern about their toll on fund solvency was absent.