My second letter to the Editor of the World was published on Sunday, October 28, 2018 and was in response to the Op Ed Kevin Stitt is the right man to shape the state’s education future by State Representative Michael Rogers of Broken Arrow outlining his reasons why Kevin Stitt should be our next governor. I have never met Michael Rogers and knew nothing about him when I read his Op Ed, but readily knew that he didn’t know what he was talking about. Here’s what he said that caught my attention:
In 2008, the Republicans won the House and Senate for the first time in state history. You would think this was a great time in history for Republicans, and for a short time it was, but quickly they realized they had inherited 100 years of fiscal mismanagement.
A prime example of this was the Oklahoma Teacher Retirement System, which was rated one of the worst pension systems in the country. For the 100 years leading to 2008, the Democrat-controlled Legislature stole from the teacher’s pension fund, driving it almost to the brink of bankruptcy. The new Republican majority decided that the only way to correct this mismanagement was to put a long-term education plan in place at an additional $300 million per year. It worked. OTRS has become the national model for how to fix a mismanaged pension system.
So I did a few minutes of research to confirm what I thought I knew and then penned this letter:
If Representative Michael Rogers’ rendition of how Oklahoma’s Teacher Retirement System has gone from being one of the worst funded nationally to one of the best in the last decade is any indication of how well his choice for Governor, Kevin Stitt, understands state finance then our state will be in trouble should he be elected. Rogers implies that after Republicans won the house and senate in 2008 they added $300 million annually to OTRS to set it on the right path. Read Appendix II, History of Major Legislative Changes, in the most recent OTRS Actuarial Report and you will see that the current revenue structure was put in place by the 2006 Legislature. His “additional $300 million per year” is pure fiction. It was not new revenue that has set OTRS on the path to being fully funded, rather it was the passage of HB 2132 by the 2011 Republican legislature that ended unfunded annual Cost of Living Increases for retired teachers. Making up facts may help Mr. Stitt get elected, but it won’t help us if that’s how he intends to govern.
Before writing this post I researched a little about Michael Rogers assuming that like Chuck Strohm and Kevin Stitt he is likely a hypocrite—being for teacher pay raises but against the revenue to pay for it. I was wrong! Michael Rogers voted for both and is one of the three-fourths majority who were the good guys of the 2018 legislative session. Elected in 2014, so far from term-limited, he still decided to not seek re-election this year “to spend more time with his family.” Usually that excuse is a euphemism for withdrawing when the elected official has been caught doing something he shouldn’t, but apparently that is not the case here. It seems Michael Rogers is acknowledging the toll being away from his wife and school-aged children has on his family—a sentiment I can relate to because it is exactly the reason I never ran for state office when I was doing the local political thing, successfully, for twenty years.
Shortly after I submitted my letter, the World endorsed Kevin Stitt about whose positions on education I’ve already commented. Candidate Stitt gave no cover at all to the courageous members of his party like Michael Rogers who voted to fund the historic teacher pay raise, which makes it admirable that Rogers would go out of his way to support him. So how does a seemingly well-intentioned and diligent legislator get such bad information?
Back to my history lesson for Mr. Rogers. I have become something of an Oklahoma government pension nerd, meaning that I’ve taken the time to learn how to read and, I think, understand the annual actuarial reports performed for each pension system, as well as the analysis of those reports by the Oklahoma Pension Commission. He credits the Republican majority that took control of our legislature with the 2008 election for providing an “additional $300 million per year” to set OTRS on its road to recovery. The facts in the OTRS actuarial reports do not support his statement.
If you look at Table 7 for the 2008 and 2010 actuarial reports and Table 5 for the just posted 2018 actuarial report you will find these contributions numbers in millions:
Year Total State Employer Grant Members
2007 821 244 271 21 285
2008 884 267 309 21 287
2009 907 257 339 23 288
2010 911 228 366 26 290
2017 998 279 403 23 293
2018 1073 318 416 26 313
The actuarial reports are based on the state’s fiscal years, so 2018 is for the year from July 1, 2017 through June 30, 2018. Since Republicans took over following the November, 2008 election, the earliest full year report they could affect would be 2010. That means if Mr. Rogers’ statement is true we should see, at the very least, total contributions to OTRS up $300 million in 2018 over 2009. That increase is $166 million, so Mr. Rogers’ $300 million is just not there, no way, no how.
So maybe he’s just off by $134 million? Nope, his Republican majority isn’t even responsible for the $166 million. Each OTRS report has an Appendix II titled “History of Major Legislative Changes” and its facts are not kind to Mr. Rogers’ version of OTRS being saved by the Republican majority. Here’s what that History tells us.
The 1992 legislature established the member contribution rate at 7%, fully phased in by 1997, which continues to be the member contribution rate. So Mr. Rogers gets no credit for increases in my chart’s Members column.
The 2002 legislature established the state’s contribution rate at 5%, fully phased in by 2008, of state income and sales taxes which continues to be the state’s contribution rate. So Mr. Rogers gets no credit for increases in my chart’s State column.
The 2006 legislature, in tandem with removing salary caps on retiring members through the Education Employees Service Incentive Program, increased employers’ contribution rates to 9.5%, fully phased in by 2010, which continues to be the employer contribution rate. So Mr. Rogers gets no credit for increases in my chart’s Employer column.
The facts are that the Republican controlled legislature, from its first 2009 session through 2018, took no action that the OTRS actuary recognized as adding any revenue to the system, much less “$300 million per year”. Take a look at this table which I have maintained for several years:
The most significant information is the “Years” column, which is the number of years to full funding. Ideally this number should be 0 with smaller being better. Seemingly small changes in the actuarial assumptions can make a huge difference in the outlook for the system. Notice that the 2007 report, under the “mismanagement” by Democrats, showed 21.6 years, not too shabby, which was better than the 23 years in 2016 under Mr. Rogers’ watch. The “brink of bankruptcy”, shown by the Years column for 2008 through 2010, namely 54.4, infinite and infinite, was caused by the assumption that, going forward, COLA’s of 2% per year would be given instead of the previous 1% assumption. Simply stated the Democrats had voted funding that would support 1% COLA’s, but not 2%.
When the Republicans took over with the 2009 legislative session OTRS could not support 2% COLA’s indefinitely without an infusion of additional revenue. To place the system back on a path to full funding, the choice was clear: increase revenue or get rid of COLA’s for retired teachers. Their answer came in 2011 by amending the 2006 Oklahoma Pension Legislation Actuarial Analysis Act to effectively end unfunded COLA’s. That is what changed OTRS from headed nowhere to headed to full funding. Republicans deserve credit for that, but it wasn’t because they voted more revenue as Mr. Rogers believes, rather they ended the expectation of cost of living increases for retired teachers. There has been no COLA for retired teachers since then (there was a one-time stipend voted this last session). That is what righted OTRS. The same action, I suspect, would balance Social Security overnight.
Again, how does a seemingly well-intentioned and diligent legislator get such bad information? Mr. Rogers wrote an Op Ed in the state’s second largest daily newspaper containing a demonstrably false claim that Republicans acted after 2008 to infuse the teacher retirement system with “an additional $300 million per year” which was his lead-off example of the governance to expect if Kevin Stitt is elected. He ought to issue a retraction and should be furious with whoever fed him this false information. I doubt though that either will happen—we seem destined for the time being to be governed by many who either don’t know how to determine what is true or just make stuff up themselves.
As always lunch is on me for the first to ID the photo location.