Monday, October 28, 2013

Retirement Lottery!

Weekly Opinion Editorial
by Steve Fair
Wouldn’t it be great if you could retire with a pension that paid you more than you made when you worked?  That’s doesn’t often happen in the private sector, but according to Gary Jones, Oklahoma’s State Auditor and Inspector, over 500 retired Oklahoma elected officials are drawing more taxpayer money in retirement than they did when they were in office.  How is that possible?  

In 1988, the Democrat controlled legislature passed a bill that allowed an Oklahoman who toiled for years as a state or county employee to hit the retirement lottery if they managed to be elected to public office.  Governor Henry Bellmon, a Republican, vetoed the bill, but the Democrat legislature overrode the veto.  The bill provided that when an elected official retired, their higher pension rate as an elected official was applied not only to their elected years, but also to the years they were a non-elected employee.   
For example, former Oklahoma State Auditor Clifton Scott who worked 20 years in state government before being elected Auditor and served 20 years as Auditor.  Scott now draws 160% of the average of his final three years salary- around $147,000 annually.  He is just one example.  Jones said this loophole has cost Oklahoma taxpayers over a billion dollars.  The legislature closed the ‘loophole’ in 2008, but these overpayments continue to those who were ‘grandfathered.’ into the old formula.
Past Oklahoma legislatures didn’t just ‘feather their own nests.’  They promised teachers and state employees pension benefits and then didn’t fund their pension plans.  Their irresponsible behavior created a shortfall of over $11 billion dollars in the seven pension plans managed by the state.  Since Republicans took over the legislature in 2006, they have made progress in the Oklahoma pension fund crisis, but they the pension plan are still only about two thirds funded.

Three observations:

First, elected officials are public servants.  They deserve to be paid for their work and are entitled to a competitive wage and benefits, but having a retirement pension that is more than double what they made as an elected official is ridiculous.  Most contributed little to their retirement fund.  What’s unfair about stopping the overpayment to retired elected officials the portion of their pension they didn’t earn?   There would be weeping, wailing and gnashing of teeth, but all good things must come to an end. 

Second, this crisis was created by ethical lapses by past legislatures.  Pension benefits were promised, but funds were not appropriated to fund the benefits.  The vast majority of the participants in the seven state pension plans are average folks (teachers, firefighters, state employees) who have contributed to and earned their retirement.  It’s important for the plans to be solvent.  Participants need to remember the current legislators are part of the solution, not the problem.    

Third, the solution will require time.  These pension funds didn’t get into this mess overnight and the solution to fix them will take time.  There are proposals to have new hires in state government in a ‘matching fund’ pension plan similar to a 401K.  Some want to consolidate the funds, but consolidation will not save near enough money to fix the issue.  Raising taxes to fund the plans has also been proposed. 

A recent poll by Wells Fargo published in Forbes magazine found an alarming 37% of middle class Americans believe they’ll work until they’re too sick or until they die.  Another 34% believes retirement will come at the ripe age of 80.  According to the U.S. Bureau of Labor Statistics, fewer than one in five private sector workers qualify for a pension.  It’s a grim look at the state of retirement which seems to be getting worse for middle class Americans.  The gap between pension plans in the private and public sector continues to widen.    
What would make it worse would be for hardworking Oklahoma taxpayers to be saddled with a tax increase to pay pension benefits for retired elected officials who didn’t earn them.

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