Budget & Tax , Education

Steve Anderson | October 5, 2009

Why Are Taxpayers Funding the Retirement of OEA Employees?

Steve Anderson

The Oklahoma Education Association (OEA) is the most powerful labor union in Oklahoma. Their representatives, including lobbyists who roam the halls of the state capitol building, often are schoolteachers who have left the classroom in order to become OEA employees.

Incredibly, since 1986 Oklahoma taxpayers have been helping to fund the retirement accounts of some OEA employees.

Here's how it works. In Oklahoma, full-time teachers are members of the state-funded Teachers' Retirement System of Oklahoma (TRS). TRS benefits include not only a guaranteed benefit payment for life but also supplemental medical insurance, $5,000 in post-retirement death benefits, other miscellaneous death benefits, and disability retirement coverage. While teachers are in the classroom performing the important duty of educating children, it makes perfect sense that they should be members of TRS and recipients of any benefits they earn.

However, unbeknownst to almost everyone, teachers who chose to leave full-time classroom positions to become full-time OEA employees have been given rewards partially paid for by Oklahoma taxpayers. These teachers-turned-OEA employees can continue to accrue as much as eight more years of TRS service credit, which is partially funded by taxpayer dollars. For this we can thank union-friendly politicians, who used TRS to fund this "off the books" gift to the OEA.

The additional increase in TRS's actuarial liability created by these additional beneficiaries is not required to be shown as an expenditure in the state's budgets since it is a type of incurred debt that will be paid in some future period.

Since the inception of this legislative giveaway, former teachers working full time for OEA have accumulated 99 years of retirement in TRS. Of course, OEA could argue that since OEA pays the employer and employee contribution to TRS there is no cost to the retirement system. But the truth is that every year, five percent of the total collections from Oklahoma's individual income tax, corporate income tax, sales tax, and use tax bypasses the legislature and goes directly into TRS to subsidize that troubled system. This is an additional contribution by Oklahoma taxpayers for every participant in TRS, including the OEA employees. In the last year for which data are available, these tax dollars flowing directly to TRS exceeded $266 million.

According to the actuaries who review TRS, it "remains among the most poorly funded of all statewide plans. The actuarial value of assets is just sufficient to cover currently retired members." In plain English, this means TRS is going "in the hole" for all those who are currently teaching, as well as for those OEA employees. The latest actuarial assessment reports that in 2008 alone that hole got $1.488 billion (that's "billion" with a "b") deeper.

Educators are famous for their concern "for the children." But it's the children-future taxpayers-who are going to be forced to pay off all this debt.

Steve Anderson (MBA, University of Central Oklahoma) is an OCPA research fellow and a Certified Public Accountant with more than 20 years of experience in private practice. He spent two years as a budget analyst in the Oklahoma Office of State Finance, and was formerly a state-certified teacher with 17 teaching certifications.

Steve Anderson

Contributing Author

A Certified Public Accountant with more than 30 years of experience in private practice, he is currently a partner at Anderson, Reichert & Anderson LLC. Anderson spent two years as a budget analyst in the Oklahoma Office of State Finance, and most recently served as budget director for the State of Kansas. At one time he held 17 state teaching certifications ranging from mathematics to physics to business.

Loading Next