The State Pension Board met on 01-18-17. There is a lot of information in the monthly financials and I want to share a few of those with you. These numbers are as of Dec. 31st, 2016. Our current fund balance has increase to $2.26 Billion. The one year return is 7.52%, five year is 8.30 % and since inception (1981) 8.26%. Our actual portfolio distribution matches our current actual portfolio distribution. This means we set an investment goal of 60% Equity, 25% Fixed Income and 15% Real Assets and our current investments fall within those parameters.
There are currently two legislative bills that we are monitoring. HB1119 is our annual Technical Cleanup bill that we need passed each year to stay complaint with IRS regulations. This allows us to operate without paying taxes. HB2834 that basically says any Oklahoma Public Pension that has over a 90% funding level can divert pension system money to give retirees an increase. This could be a Cost of Living Adjustment, a one-time stipend, or any other monetary distribution. However, the distribution cannot cause the system funding ratio to drop below 90%. Our last actuarial report from 2016 has us at a 98.7% funded, so we would be eligible. The retirees have not had a pay increase in the past 9 years. However, with our current funding level there is concern that the state may attempt to divert insurance premium tax money (which is the state appropriation to our system) to help with the budget shortfall.
While our fund and investments are doing well there is also some concern about possible changes by the state. Members pay 8% and the city pays 13% to the state each month for their pension and that money is then transferred to the pension system. The state does not pay anything into our system. However, there is an Insurance Premium fund in the state that we do get 14% of each year. This amounts to about $35 million a year. The Fire Pension fund gets 36%. Home owners pay insurance and a small amount is paid every year into the Insurance Premium fund. After giving money to police and fire the remainder of that fund goes to the state. There is talk within the state of reducing or eliminating the amount that goes to the police pension fund. This can be done without any legislation. That would reduce our funding ratio over time. A second issue we have heard rumor of is that the state may delay sending the monthly contributions to the pension systems to help with their funding crisis. The law apparently does not stipulate a time frame for the state to send the money to the pension systems so they can legally delay the distribution. Any delay in the monthly distribution results in decrease revenues, less return on investment, and a lowered funding ratio for our system.
During the past few months there has been discussion at the Pension Board meeting surrounding hiring a lobbyist. Some on the board feel that legislators would view opinions from the board lobbyist more favorably. I have been in vocal disagreement with this mainly because this is the job of the System Director. During the discussion on the motion to hire Jordan the State FOP President, Ron Bartmier, spoke and stated he supported the idea as long as they were on retainer and only paid when there was a single issue the lobbyist was needed for. The board had previously sent out Request For Proposals on a lobbyist and no one responded to the single issue RFP. Several did respond for one year retainers. One concern with single issue retainers is that by the time we hear about an issue and obtain a Lobbyist we would be so far behind the curve on the issue that the lobbyist would have minimal effect on the outcome. The State FOP was concerned that there might be a time when the pension board and a local or state lodge might be in opposition to a pension related issue. The board assured the FOP that they did not envision that happening and that if it ever did we would meet to resolve any differences. FOP President John George spoke at this meeting and stated he is strictly against any lobbyist for the pension board. The Moore FOP President and he states the Moore FOP is against a pension board lobbyist. The motion to hire the recommended Lobbyist failed to obtain a majority board vote. .
The pension board web site contains all of the agendas, minutes and financial information if you care to review it in depth.
As always, please contact me if you have any questions.
Oklahoma Police Pension & Retirement System