Oklahoma's public retirement systems are financially stronger than they were just four years ago and their unfunded liability has declined by $6.5 billion, pension system managers told members of a state House panel Wednesday.
The improvements reflect the impact of legislation approved by lawmakers in recent years designed to improve the financial health of the systems, including bills passed in 2011 that increased the retirement age of some state employees and required that any retiree cost-of-living raises be fully funded, said state Rep. Randy McDaniel, R-Edmond, author of many pension overhaul bills.
"We've been monitoring this for several years," McDaniel told members of the House Economic Development and Financial Services Committee. "I'm very proud of what Oklahoma has done."
McDaniel, chairman of the committee, made the comments after officials from the Oklahoma Teachers Retirement System, the Oklahoma Public Employees Retirement System and other major retirement systems outlined their financial conditions.
In 2010, the state pension systems' unfunded liability — the amount owed to pensioners beyond what the system can afford to pay — was more than $16 billion. The Teacher's Retirement System was only 48 percent funded and had a $10.4 billion unfunded liability, and the Public Employees Retirement System was 66 percent funded and had $3.3 billion in unfunded liability.
At the time, officials said the pension systems threatened to place financial burdens on the state's ability to finance road and bridge construction and other capital projects.
"The status quo was not sustainable," McDaniel said. "Reforms were needed to ensure strength and security."
Figures presented by managers of the pension systems show that for the fiscal year that began July 1, the unfunded liability of the state's pension systems had dropped to $9.6 billion. McDaniel said it was the first time in a decade that the systems' unfunded liability has been below $10 billion.
The funded ratio of the systems has improved from 58 percent four years ago to 74.4 percent and the annual funding deficiencies to pay benefits and service the debt have been filled.
"The recovery is a result of major reforms, funding and investment gains," McDaniel said.
The unfunded liability of the Teachers Retirement System has been reduced to $7.2 billion and it is 63 percent funded, officials said. The unfunded liability of the Public Employees Retirement System has been reduced to just $994 million and it is 88.6 percent funded.
Earlier this year, Gov. Mary Fallin signed legislation that would end the traditional pension system for newly hired state workers in favor of a 401(k)-style retirement plan beginning in November 2015.
A group of public employees has filed a lawsuit to block the measure. The suit alleges the transition could cost Oklahoma taxpayers millions of dollars in lost revenue returns and reduced employee contributions. McDaniel said he is confident the legislation will be upheld.