Bill to Strengthen Retirement Systems Clears Committee

State Sen. Mike Mazzei wants the state to strengthen its retirement systems, particularly the Teachers Retirement System of Oklahoma (OTRS), before it is too late. Mazzei, R-Tulsa, said he began laying the groundwork to lower the unfunded liability of that system during the 2005 session. On Wednesday, the full Senate Appropriations Committee approved a comprehensive bill to continue that effort. Mazzei said it is critical to decrease unfunded liabilities as soon as possible.

“Last year we unanimously approved Senate Concurrent Resolution 4 which expressed the intent and goal of fixing the Teachers Retirement System by the year 2015,” Mazzei said. “OTRS was 47 percent funded at the time we passed that measure. Currently it stands at 49 percent. The problem is that still leaves us with $7 billion in unfunded liability, which is more than the entire state’s annual budget.”

According to OTRS, in June of 2005, there were 40,879 retirees receiving benefits from the system. Ten years from now, that number is projected to be 61,127.

“The fact that the baby boomers are approaching retirement age should help lawmakers and the public realize the crisis we’re facing. We’re going to need to pump $900 million dollars into OTRS over the next 9 years to ensure the system is 60 percent funded,” Mazzei said. “We must repair this before the unfunded liability cripples our state’s finances and threatens the retirement of thousands of teachers.”

In the short term, Mazzei explained the unfunded liability hurts the state by giving it a lower bond rating.

“The public should know that this situation hurts us when we finance capital improvement projects. The amount of unfunded liability we have in these state pension systems means we don’t get as good a rate as possible. If we reduced the unfunded liability, we could save millions of dollars in bonding expenses.”
In order to address problems in OTRS and other systems, Mazzei has introduced Senate Bill 1894. The measure calls for several reforms, which includes:

Requiring fiscal retirement bills to have an actuarial study. Such bills may be introduced in the first session of the legislature but no action can occur until the second session of the legislature, wherein the legislature can review the actual impact of any proposed change.

Requiring a specific provision for funding the proposed legislation which fiscally impacts the retirement system.

“I believe these reforms will significantly stop the bleeding that has been occurring in our state retirement systems, especially OTRS,” Mazzei said.

The bill now moves to the full Senate for further consideration.