Budget & Tax
Stitt says he will veto bills that redirect pension funds
May 11, 2020
Gov. Kevin Stitt announced Monday he will veto two bills that redirect money from state pension systems to education. That will remove a substantial share of funding lawmakers used to avoid making larger cuts to state agency budgets and potentially force a redrafting of the state budget.
Stitt noted the Teachers’ Retirement System of Oklahoma’s portfolio is down more than $1 billion since June 30, 2019. That system’s funded ratio, on a market basis, currently stands at around 64 percent, down from 72.3 percent last year. A system is not considered fully funded until it is at least 80-percent funded.
“We have made great progress shoring up our retirement systems in the last few years,” Stitt said. “Now is not the time to undo that progress. These bills will take tens of millions of dollars away from teachers to fund district costs.”
Stitt said he would veto House Bill 2741 and House Bill 2742, which provide extra funding to schools by redirecting funding from state pension systems.
House Bill 2741 takes $73.1 million in funding that is currently directed to the Teachers' Retirement System of Oklahoma and instead sends that money to the K-12 school system.
House Bill 2742 similarly redirects $38.5 million currently going to the Oklahoma Law Enforcement Retirement System, Oklahoma Police Pension Retirement System, and Oklahoma Firefighters Pension and Retirement System.
The money redirected by the two bills is cash deposited into state pensions in addition to employee contributions and the state’s employer contribution. Legislative leaders said their budget plan continues to leave 75 percent of the extra pension cash flowing into the system but redirects 25 percent for each of the next two years to address school funding during the current shortfall.
HB 2741 passed the Oklahoma House of Representatives by a veto-proof majority, but the bill fell short of that threshold in the Senate. The House also provided veto-proof support for HB 2742, but the Senate again fell short.
Stitt indicated he believes administrative costs could be reduced in the school system, rather than reducing state contributions to pension systems.
“We’re taking from the teachers’ retirement, and we’re filling administration costs,” Stitt said. “That’s what we’re doing. We need to be smarter than that.”
Stitt said he is still reviewing the rest of the budget passed by lawmakers and has not determined if he will sign other budget bills. He questioned the decision to take money from some agencies while increasing the budget of others, such as the 12-percent increase given to the attorney general.
The governor also said lawmakers will face significant financial challenges when drafting next year’s budget, noting the crash in oil prices is not expected to recover until calendar year 2022 and some sources of one-time cash used this year will have to be replaced.
“There’s a lot of things that are going to hit us in 2022,” Stitt said.