Spending money you don’t have quickly leads to financial instability. That’s obvious to anyone who has balanced a family budget. Yet Oklahoma politicians appear intent on ignoring that reality.

The problem of deficit spending is well-known at the federal level but is also a problem at the state level when it comes to the management of the Oklahoma government’s pension systems. Lawmakers keep voting to provide benefit increases without paying for them. And more bills have been filed to do the same thing again this year.

While arguments for a “cost of living adjustment” (COLA) for state retirees may sound compelling, the simple fact is there is a cost to those increased benefits. When lawmakers refuse to provide extra money, they are effectively raiding the benefits of current workers to pay retirees, draining the pension systems.

During a 2019 legislative study, the executive director of the Oklahoma Public Employees Retirement System bluntly warned lawmakers, “If COLAs are not funded by the Legislature, and the plans are required to fund them, the plan is basically taking out a mortgage to pay for them.”

Unfortunately, Oklahoma has been here before.

From 1975 to 2008, there were 19 COLAs authorized by lawmakers that resulted in nearly $16 billion in unfunded liability for Oklahoma state pension systems. By 2007, the worst-funded state pension system (the teachers’ system) was only 52.6 percent funded.

That finally prompted lawmakers to adopt reforms that included directing money from other uses to prop up state pension systems and to ban the passage of unfunded COLAs.

Around $300 million is already diverted from other uses each year to shore up Oklahoma government pension systems due in part to unfunded COLAs enacted in decades past. Notably, that figure is equal to the amount of this year’s projected revenue shortfall, meaning that proper pension management in the past would have effectively negated today’s financial strain.

But lawmakers chose in 2020 to evade the reforms, passing another unfunded COLA that drained an estimated $700 million from pension systems. Roughly half the unfunded liability accrued to the teachers’ retirement system, according to estimates.

Now, it appears some lawmakers want to do the same thing again.

Some entities that promote unfunded COLAs argue that some state pension systems can withstand them, saying an 80-percent funded ratio signifies a pension plan is “actuarially” sound. But the American Academy of Actuaries has called that a “mythic standard” and declared, “Pension plans should have a strategy in place to attain or maintain a funded status of 100% or greater over a reasonable period of time.”

The first step to recovery is admitting you have a problem. It’s time lawmakers face facts about pension management.