Getting The Government Out Of The Retirement Business
24 June 2007
One of the biggest road blocks to government reform is the approximate 7 billion dollar liability that exists in the Teachers' Retirement System. The problem is, these are benefits that the state does not currently have to give. We have this problem because liberal big-spending politicians have irresponsibly increased benefits without paying for them.
Since 1991, the Legislature has increased the unfunded liability in the Teacher Retirement System fourteen times. The increase in the unfunded liability, due to legislation from 1991 to 2005, has been $1.3 billion. The result is that the Oklahoma Teachers' Retirement System is the third most poorly funded public pension system in the country.
This year liberal politicians sponsored at least ten bills to increase benefits without finding new ways to dedicate resources or reform the system.
In order to deal with attempts to raid the retirement system, the House has implemented the Oklahoma Pension Legislation Actuarial Analysis Act (OPLAAA). OPLAAA establishes three criteria that bills amending the retirement system must meet. First, benefits cannot be increased by the Legislature without paying for them. Second, actuarial investigation of the bill is required to provide the true cost of proposed legislation. And third, a one year delay mechanism is established that allows more time to assess the merits of retirement legislation. This forces fiscal impact legislation to lay over for a year before it can be considered. This way politicians and special interests should not be able to drum up sentiment in the heat of the moment to generate enough votes to raid the retirement system.
It appears there were no new successful raids on the Teachers' Retirement System this year and legislation was passed to increase funding in order to begin drawing down the amount of the liability.
However, I believe teachers' retirement will always be a problem as long as the government remains in the business of managing retirement funds.
For one thing, government pension fund managers, in their efforts to maximize investment, have made questionable investments in foreign companies which invest in terrorist sponsoring nations.
Also, the OPLAAA law can be changed at any time. Liberal politicians can amend OPLAAA in the same bill by which they are proposing to raid the retirement funds. Until OPLAAA is placed into the state's constitution (which can only be amended by a vote of the people) it will guard the retirement fund much like a bulldog without teeth.
It is my belief that state government should get out of the retirement business and allow new enrollees in the state retirement plans to have ownership of their own retirement accounts.
Known as a defined-contribution plan, these retirement accounts would be entirely controlled by their owners who could invest as they see fit, instead of the government having control of their money. This means that teachers who want a different job could take their retirement plan with them in the form of a 401k. No longer would they be trapped in a job they do not like just because they have state retirement. Also, since the state would be forced to make its contribution directly to that teacher's 401k, the politicians would be unable to raid the account because the teacher would own the money. And, with a 401k, there would arguably be greater inheritability and survivability benefits for the owner of the account.
Under this system, the government would gradually get out of the retirement business and save the cost of having to manage the billions of dollars it controls in retirement funds. And, people in the retirement system would be empowered with the ability to invest their own accounts.
I believe this plan would shrink the size of government while giving control to the people. I am strongly committed to this reform and as always, appreciate your feedback at 557-7350 or www.housedistrict31.com .