Tuesday, November 29, 2011

OK Pension Reform Results in Historic Debt Reduction

Pension reforms implemented earlier this year have reduced the state’s pension debt by $5.5 billion. This is the largest single-year debt reduction in Oklahoma history, lawmakers were informed today.
Thanks to recently enacted reforms, the unfunded liability of all the state pension plans has fallen from over $16 billion to $10.6 billion, officials announced.
“The reforms are making a meaningful difference. At a time when nations in Europe as well as other states in our country struggle to even address their structural debt problems, Oklahoma’s financial condition is already exhibiting remarkable improvement,” said state Rep. Randy McDaniel, an Oklahoma City Republican who chairs the House Pension Oversight Committee.
“This is good news for all Oklahomans,” said state Rep. Todd Russ, a Cordell Republican who is vice-chair of the House Pension Oversight Committee. “Workers depending on state pension systems benefit from greater long-term security, and all working families are protected from the tax increases that might have otherwise occurred.”
In addition to reducing debt, the state pension plans are experiencing growth in asset levels. The state’s major pension plans now have $21.5 billion in assets, an increase of over $3.5 billion in the past year due to healthy investment returns.
The combination of a reduced unfunded liability and asset growth has improved the integrated ratio of Oklahoma state pensions from 56 percent to 67 percent, McDaniel noted.
“The reforms we approved this year are working exceedingly well. Our debts are declining significantly while our assets are increasing,” McDaniel said. “Although more can be done to solidify our pension system, this has been an exceptional year for improving the financial stability of our pension plans.”
The reforms enacted this year included House Bill 2132, which requires a funding source before cost-of-living adjustments (COLAs) can be granted, and several acts that increased the retirement age for future employees.

Oklahoma Economy Rises Above Worldwide Chaos

OKLAHOMA CITY – In spite of external threats, volatile markets and global instability, Oklahoma’s economy is rising above the chaos, State Treasurer Ken Miller said as he released the state’s monthly gross receipts report.
“With yet another month of healthy collections, it appears Oklahoma’s economy is hitting its stride,” Miller said.
October collections were 7.4 percent higher than in October of last year, showing steady improvement in the state’s economy. Collections over the past 12 months are up almost nine percent from the previous 12 months.
Miller said gross revenue, a reflection of the state’s economic performance, has grown for 20 consecutive months.
“We have regained almost 60 percent of the revenue that disappeared during the recession,” he said. “We saw a more than $1.9 billion drop in 12-month receipts between December 2008 and February 2010. Since then, we have seen an increase of more than $1.1 billion.”
Oklahoma: A positive example
As world financial markets react to uncertainty in Washington, Europe and the Middle East, Miller said Oklahoma’s economy is setting a positive example.
“Oklahoma’s two major revenue streams, income tax and sales tax, are showing remarkable resilience,” he said. “Income tax collections – up by almost 12 percent this month – show Oklahomans are making more money, and sales tax collections – up by almost nine percent – show we are also gaining confidence.”
Miller said the latest Business Conditions Index for Oklahoma continues to reflect a positive outlook for the state’s economy. The index for October shows anticipated growth for the next three to six months.
By contrast, the index for a nine-state region of the Midwest and Plains, of which Oklahoma is a member, dipped slightly below the positive benchmark. Oklahoma and North Dakota, both energy-rich states, continue to outperform the other states in the region.
“In spite of record levels of money circulating throughout our economy, core inflation in the region is at its lowest level since the end of the recession,” Miller said. “Low price levels help both consumers and policymakers as we work our way back to fiscal health.”
The nine-state region includes Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Oklahoma.
In September, statewide unemployment was set at 5.9 percent, an increase of 0.3 percent from the previous month. National unemployment held steady at 9.1 percent. Oklahoma’s seasonally-adjusted unemployment is down by one percent compared to September of last year.
Miller said the increase in unemployment is likely another sign of economic improvement.
“The slight uptick can be interpreted as a sign of recovery and renewed optimism for employment prospects, as formerly discouraged job seeks reentered the labor force,” he said.
Figures from the Bureau of Labor Statistics show that in September 7,920 Oklahomans began looking for employment and 3,240 were successful in obtaining a job.
Collections in all major categories increased in October, except for gross production. However, Miller said the decrease was expected as remittances from the tax on oil and natural gas production reflect prices and volumes from two to three months ago.
October collections
The revenue report for October shows gross collections at $838.01 million, up $57.5 million or 7.4 percent from October of last year.
Gross income tax collections, a combination of personal and corporate income taxes, generated $269.27 million, an increase of $28.21 million or 11.7 percent from the previous October.
Personal income tax collections for the month are $239.56 million, up $11.49 million or 5 percent from the prior year. Corporate collections are $29.71 million, an increase of $16.72 million or 128.7 percent.
Sales tax collections, including remittances on behalf of cities and counties, total $324.31 million in October. That is $25.59 million or 8.6 percent above October of last year.
Gross production taxes on oil and natural gas generated $68.36 million in October, a decrease of $9.44 million or 12.1 percent from last October. Compared to September reports, gross production collections are down by $19.19 million or 28.1 percent.
Due to a technical glitch in electronic funds transfers, $8.32 million in gross production taxes were remitted in October but not recorded until November. If recorded in October, gross production collections would have been $76.68 million, a reduction of $1.12 million or 1.4 percent from the previous year.
Motor vehicle taxes produced $52.2 million, up by $6.05 million or 13.1 percent from the prior year.
Other collections, consisting of about 60 different sources including taxes on fuel, tobacco, horse race gambling and alcoholic beverages, produced $123.87 million during the month. That is $7.09 million or 6.1 percent higher than last October.
Twelve-month collections
In the past 12 months, gross revenue totals $10.49 billion. That is $844.14 million or 8.7 percent higher than the 12-month period ending in October 2010.
Gross income taxes generated $3.596 billion for the 12 months, reflecting an increase of $349.77 million or 10.8 percent from the trailing 12 months.
Personal income tax collections total $3.121 billion, up by $219.27 million or 7.6 percent from the prior 12 months. Corporate collections are $475.33 million for the period, an increase of $130.5 million or 37.8 percent over the previous 12 months.
Sales taxes for the period generated $3.798 billion, an increase of $270.35 million or 7.7 percent from the prior 12-month period.
Oil and gas gross production tax collections brought in $1.035 billion during the 12 months, up by $106.98 million or 11.5 percent from the previous period. If the $8.32 million in gross production remitted in October but recorded in November were included, 12-month collections in the category would have been $1.043 billion, an increase of $115.3 million or 12.4 percent from the prior 12 months.
Motor vehicle collections total $648.24 million for the period. This is an increase of $46.59 million or 7.7 percent from the trailing 12 months.
Other sources generated $1.414 billion, up $70.45 million or 5.2 percent from the previous period.

Fewer Americans Feel Good About Financial Situations

Forty-nine percent of Americans are feeling better about their financial situations these days, representing a continuing downturn from the average of 53% who were feeling better in mid-summer. The drop in Americans' positive attitudes about their finances in August occurred just after the congressional wrangling over the Aug. 2 debt ceiling deadline, suggesting that there may be a similarly negative impact from this week's failure of the supercommittee to reach its budget-cutting deadline.
Americans' broader assessment of the U.S. economy also fell at about this same time. The timing of the drop in these economic measures, coinciding as it did with the debt ceiling debate, suggests that Congress' difficulties in reaching a decision on crucial budget and economic matters had an effect on the way Americans look at their financial situations.
Americans this week are hearing news reports that their elected representatives have failed to reach an agreement on cutting $1.2 trillion from the federal budget. Any possible impact of this on Americans' views of their personal financial situations will become evident in the weeks ahead.
A majority of Americans (55%) believe Republicans and Democrats on the U.S. debt "supercommittee" are equally to blame for its inability to reach an agreement.
These results are based on a Nov. 21 Gallup poll, conducted after the committee of six Republicans and six Democrats conceded Monday afternoon it would not be able to reach an agreement by its Nov. 23 deadline. The supercommittee was created as part of the legislation to raise the federal debt limit in August. Because it did not reach an agreement, automatic cuts in defense and entitlement spending will be made in 2013, though Congress is considering its options for preventing those automatic cuts from being made.
A majority of Republicans and independents blame supercommittee members from both parties equally. In contrast, Democrats are most likely to blame Republicans for the failure to reach an agreement.
It is not a surprise that Congressional job approval remains at 13% in November, identical to October and tying the all-time Gallup low on this measure. The 2011 average is on track to be the lowest annual rating of Congress in Gallup's history.