HistoryThe ORSC was created in response to financial crises involving local police and fire pension funds. Prior to 1967 police and firefighters were members of local pension funds rather than a statewide fund. In the mid-1960's, many of Ohio's 454 local police and fire pension funds faced financial disaster. They had routinely disregarded the financial impact of benefit increases and, as a result, many were close to financial insolvency. As a result, they were consolidated into a statewide fund in 1967. At that time, the local pension funds transferred assets totaling approximately $75 million to the Ohio Police and Fire Pension Fund and accrued liabilities of approximately $490 million. The cities were given a 67-year period, beginning in 1969, to pay their unfunded accrued liabilities. As of December 31, 2010, the remaining unfunded accrued liability totaled nearly $32.1 million.
Because of this financial crisis, the General Assembly realized there was a need for continuing oversight of the state pension funds to ensure they remained financially solvent, unlike the local police and fire pension funds. The creation of the ORSC was a direct result of the consolidation of those funds.
The Ohio legislature learned early on that it was caught in the line of fire between competing interest groups, and that it was losing the "ole ratchet" game. Give a benefit improvement to one group this year, and the next year another group demands equal treatment while the first group is seeking favorable consideration for yet another benefit improvement. And so the game goes around again and again.
Committed to a fair and fiscally sound retirement program for Ohio's public employees, the Ohio legislature saw a real need for independent advice, both fiscally and policy-wise. Hence, the Council was created to provide leadership before the legislature when the retirement systems and interest groups are divided in their objectives.
Today, additional support for the creation of permanent pension oversight councils comes from the National Conference of State Legislatures, the American Legislative Exchange Council and other national organizations dedicated to public employee retirement systems. Frequently, legislators find that they have either inadequate information, uncertain understanding, or both, when they are called upon to make decisions about public pension plans. Legislators are accustomed to dealing in two-year budgetary cycles, whereas decisions about public pension plans typically involve significant long-term costs, such as 30-year pension obligations. If not made carefully and with foresight, such decisions can seriously threaten the budgetary stability of state and local governments years later when the pension obligations become due. They can also result in an unfair burden on future generations of taxpayers, and adversely affect the credit rating of the state or local government's debt. Moreover, continuing Congressional interest in regulating governmental pension plans makes the need for such councils even more apparent as a step toward avoiding federal intervention.
In short, the merits of a permanent pension oversight council, such as Ohio's, are several. First, pensions are an increasingly complex subject area requiring a degree of expertise and knowledge; once acquired, it should continue to be available. Second, pension laws demand continuous supervision and attention. A single, ill-conceived retirement bill could have serious fiscal consequences that are not fully recognized for many years later. Third, there is a need for continuity of policy based on sound pension principles rather than special interests. Change of policy should always be possible, but it should be accompanied by knowledge of the past. Fourth, permanent pension councils can apply consistent policy to the perpetual stream of retirement bills. A great deal of pension law grows by patchwork, yielding in time to favoritism and special interests in the absence of consistent application of sound public policy. Finally, legislative term limits make the establishment of permanent pension councils essential if legislators are to have an independent source of information to help them place retirement issues in the widest possible context of public policy.
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Ohio Retirement Study Council
88 East Broad St. Suite 1175 | Columbus, OH 43215
Phone: 614.228.1346 | Fax: 614.228.0118
E-mail: email@example.com | Web: www.orsc.org