State Budget Deal Reached; Pension Bills Signed
Post date: May 11, 2011 1:03:36 PM
State Budget Cut of 4.1% Expected
On May 4 the governor and legislative leaders announced a budget deal in which common education would be cut by 4.1%, not the 2.9% originally proposed by the governor. A proposed supplemental funding bill, which might or might not pass the legislature in January, could reduce the cut to 3.8%, but that would come too late for budgeting, is not guaranteed, and could easily be eaten up if health insurance costs increase with the new calendar year. The 4.1% cut roughly translates into more than $200,000 in additional cuts for Bartlesville on top of the $2.2 million overall funding loss we were already facing.
The Superintendent's Budget Development Committee meets this week to assess the new numbers and further refine the budget it will recommend to the Board of Education after the legislature and governor sign into law the state budget and any supplemental funding bills.
Pension Bills Signed
The Governor has signed three pension bills affecting the Oklahoma Teacher Retirement System. Two are meant to reduce its unfunded liability, while the third is a potshot at the OEA leadership.
HB 2132: Automatic COLAs Eliminated
HB 2132 requires that any cost-of-living adjustments for participants in state retirement systems be directly funded by the legislature. The resulting change in the actuarial assumptions for OTRS, which now presume a 2% COLA (at a present cost of $170 million), will reduce the unfunded liability of the system but will likely freeze pensions for existing retirees for years to come. Sponsors claim the change would reduce the unfunded liability of the state's five retirement systems, now at $16.5 billion, by more than $5 billion.
SB 377: Higher Retirement Age for New OTRS Members
SB 377 does not change retirement eligibility or payouts for current OTRS members, but makes significant changes for those joining the system on or after November 1, 2011.
Those who joined OTRS before July 1992 may continue to retire with full benefits at age 62 or when the sum of their creditable years of service and age reaches 80 (the "rule of 80").
Those joining from July 1992 up to November 2011 may continue to retire with full benefits at age 62 or when the sum of their creditable years of service and age reaches 90 (the "rule of 90").
For either of the above groups, members who have at least 5 years of creditable service and are below age 62 yet have not accumulated the required 80 or 90 points may retire early at the following reduced benefit rates:
Those joining OTRS after October 31, 2011 (Happy Halloween!) will not be eligible for retirement benefits until he or she is age 65 or meets the "rule of 90" provision with a minimum retirement age of 60. And even if they meet the "rule of 90" provision, their benefits will be reduced as follows if they retire before age 65:
The law does not change how the retirement benefit levels are calculated.
HB1648 Bans Full-Time Association Officers from OTRS Participation
HB 1648 bans teachers who are absent from their teaching positions because they are serving as local, state, or national education association officers from participating in OTRS. Previously they were allowed to make monetary contributions equivalent to the combined employee and employer contributions to OTRS to receive their usual year of service up to a limit of 8 years. This potshot at the OEA means that teachers who advance to full-time leadership positions in the association can no longer accrue retirement service credits and will make teachers more leery of entering such commitments.