Retirement Blues

There has been a whirlwind of activity lately surrounding the subject of public pension systems in the state of Oklahoma. I would like to shed a little light, at least for my constituents and friends, on my read of the situation. First of all, there is no doubt that public pension systems are expensive. They are a scary place to tread for any politician because in my experience, the private sector opinion is that the public sector employees have a bird nest on the ground and the public sector employees think that they have a birthright. As with most issues, you have to peel back the layers of the onion or clear the air of the smoke most of which is created by rhetoric from either side, to get down to what I call the real deal, or the brass tax.

I have been involved in numerous discussions with some incredibly smart people for the past few weeks where the pension subject has been cussed and discussed in great detail and in some very heated settings. I believe as I have said many times in many articles that life is truly about balance. Pension systems can be a huge drain on the state budget but I also consider them to be a commitment that I believe we should honor. Right or wrong, if a guy signs up to be a teacher, fire fighter, or state employee, he signed on with the agreement that if he worked a certain number of years and paid into the system, he could rightfully expect compensation in the form of some type of retirement check. Now, there is a great deal of disagreement on how that should be handled. I am not what I would call “a numbers guy” but as I always do, I try to apply some common sense and “cowboy logic”. The proposal to put everyone in state service on a “defined contribution plan” vs. a “defined benefit plan” to many folks makes a lot of sense. Most proponents of defined contribution say that no longer will the state be responsible for retirements but that it now becomes the individuals’ responsibility. Simple enough, right? But, where do you start?

The proposal was to put all new employees on a defined contribution system which means, in oversimplified terms, they are now in their own 401K plan. That stops the drain on the state system, right? Except when you consider the employees who are nearing retirement who have worked their entire career assuming the money would be there for their retirement check each month. Prior to putting everyone on defined contribution, any new hire would be paying into the retirement system, funding that system for the guy who has already retired. That creates an interesting scenario. The question that no one can answer to my satisfaction is this: 20 years down the road, where does the money come from to fund a 70 year old’s retirement and does it run out before the people do?

I trust a great deal in some of the guys who have authored the retirement bills and in their ability to crunch numbers and play out scenarios. I probably trust them with my life savings. When I ask the aforementioned question the answer has always been “well, the legislature will just have to appropriate the money”. That is the part that I think they and many others miss. I have been in the legislature longer than any of the guys running the bills. The huge hole in their theory is the political hole. I cannot tell you what the legislature will do next week with any certainty let alone a generation down the road. That, in my estimation is the big problem. Can we honor that commitment while we fix the system? Nothin’ to it, right? Well, not if you are working on it in the coffee shop. Where it gets tough is the Capitol where the real deal happens. Where every time you push that button you affect somebody’s life. The good news is that these bills are going to a task force to thoroughly study these issues to come up with a real world, workable solution that can shore up these systems and quit putting such a strain on state budget. Hopefully in the end, balance can be struck.

If you would like to contact me while I am at the capitol, please do not hesitate to send an email to donarmes@house.gov or call me at 1-800-522-8502.

And here’s a little something to think about as you go down the road:

"Beware of little expenses; a small leak will sink a great ship"-- Benjamin Franklin