DALLAS — Oklahoma's seven public pension funds reported a significant drop in investment earnings during the 2015 fiscal year, according to a consultant's report for the Oklahoma Pension Commission.
The report by the commission's consultant, NEPC, shows the $28.8 billion invested by the state's public pensions gained on average only 3.6% during fiscal year 2015, compared to average earnings of 19.9% the previous fiscal year.
Oklahoma's fiscal year runs from July 1 to June 30. The report was submitted Aug. 19.
The state's largest pension, the Oklahoma Teachers Retirement System, experienced the largest drop in earnings from 22.4% in 2014 to 3.5% in 2015. In 2014, OTRS was in the top one percent of best performing public pension systems. In 2015, it slipped to the 11th percentile.
The smallest decrease was in the Firefighters Pension System, which saw returns fall from 17.8% in 2014 to 5.9% in 2015. The second-largest system, the Oklahoma Public Employees Retirement System, experienced a decrease in earnings from 18% in 2014 to 3.2% in 2015.
While the sharp drop was not unexpected and is similar to investment returns from public pension funds throughout the nation, Oklahoma Treasurer Ken Miller said the numbers illustrate an underlying reality.
"For the past few years, the state's pensions have atypically exceeded the required funding levels to improve their financial health, but it has been due primarily to unsustainable investment returns," said Miller, who also chairs the Oklahoma State Pension Committee. "These lower returns are a reminder that we should not veer from the path of fiscal discipline and should, in fact, look for additional avenues to ensure our systems continue on the path to financial health."
Miller said the state should not dip into the pension funds for other needs and should maintain the actuarially required contribution rate.
He has also proposed combining the administrative and investment functions of the non-public safety pension systems under one pension board to reduce expenses, while keeping the funds legally separated. Currently, each of the seven systems has a governing board, staff, consultants and investment managers spending about $100 million per year on overhead.