Pension policy has an important, but often hidden, impact on the finances of state governments. The issue of increasing pension unfunded liabilities flies under the radar for most Oklahomans. A liability for a public pension plan is a benefit promised to public employees based on their years of service and average income without regard to the actual financial resources available in the investment portfolios of the pension systems when they retire. When benefit plan assets (contributions from employees, taxpayer dollars and investment returns) are less than total promised benefits, the remaining promised benefits are considered “unfunded liabilities.” Unfunded liabilities consume large amounts of residents’ tax dollars, placing fiscal constraints on the remaining tax dollars available to the state Legislature for appropriation and reducing available funding for essential core government services, such as roads, bridges and public education.
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