OKLAHOMA CITY -- The Oklahoma Teachers' Retirement System might benefit if some legislators have their way with spending the state's $2 billion tobacco settlement.
Two bills have been filed. One would give the $5.2 billion fund the entire settlement; the other would give the fund a portion of investment income from a tobacco trust fund.
The tobacco money would help the fund in its never-ending struggle to bring down its unfunded liability. With a funded ratio of 46%, the fund ranks as one of the five worst funded public pension plans in the country, said Tom Beavers, executive secretary.
State Rep. John Sullivan has filed House Bill 1036, which calls for all tobacco settlement money received by the state to be allocated to the teachers' fund. If approved by the Legislature, it would be effective immediately after Gov. Frank Keating signs it.
Mr. Sullivan said he hopes the state ultimately creates a 401(k) plan.
State Rep. Jari Askin plans to reintroduce legislation that would create the "Tobacco Settlement Endowment Trust Fund," which would be invested under the prudent person rule. The fund would be overseen by a board, which, in turn, would set up investment policy and guidelines and would hire custodians and money managers.
Annually, at least 95% of the investment earnings of the fund would be distributed between the teachers' pension fund and the "Tobacco Settlement Special Cash Fund." The pension fund would receive one-third of the earnings until its total amount of transfers to the fund equal $1 billion.
The special cash fund would pay for programs to prevent and reduce tobacco use, particularly among children.
Ms. Askin's bill was passed by the Legislature last year, but was vetoed by the governor because of concern of adding another level of bureaucracy, Mr. Beavers said.
Both bills will have "numerous hurdles to cross," he said. Mr. Beavers assumes some of the money in either bill would go to health-related costs, he said.
A state law passed last year pushed back the fund's amortization schedule by 14 years to total 34 years.
The state now will be paying about 13% of employees' pay vs. 18% in previous years. Teachers will contribute 7% of pay to the fund.
