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OPS leaders want state to run pension system; trustees, retirees group opposed
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OPS leaders want state to run pension system; trustees, retirees group opposed

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OPS Superintendent Cheryl Logan said it’s time for the district to get out of the business of running a pension system.

She and the school board are backing a proposal that would transfer administration of the Omaha Public Schools’ financially troubled pension fund to the state.

To be clear, such a change would not relieve the district of the system’s massive $848 million shortfall, which will continue to be a financial obligation of OPS and its taxpayers.

But Nebraska officials already several years ago took over responsibility for managing the investments of the Omaha School Employees Retirement System. So having the state assume the remaining administrative functions, including sending monthly checks to retirees, is “a next logical step,” Logan said.

"Our mission is to provide the finest quality education that we can to our students,” she told the Legislature’s retirement committee last week. “(OPS) no longer wants to be in the business of managing a retirement system.”

However, the proposal faces opposition from the organization representing retired teachers in the district as well as a majority of the pension fund’s current board of trustees, which would be dissolved under the plan.

Those opponents question whether the move would result in any true savings. While modest annual savings are projected, those are offset by millions of dollars in upfront costs for new technology to integrate OSERS into the state system.

“That is money more wisely used to help the funding of OSERS rather than to move the management of the retirement system to Lincoln,” said Walta Sue Dodd, president of the organization that represents retired OPS teachers.

The debate comes in the wake of a World-Herald investigation last year that revealed mismanagement and bad investment decisions by the OSERS trustees that cost the pension fund more than $500 million.

The paper revealed that OSERS trustees — most of them district leaders, representatives of employee unions or retirees — bailed heavily on the stock market amid the 2008 market crash, locking in big losses. They proceeded to move much of that money into atypical and exotic investments like real estate in India and oil in Kazakhstan, many of which proved big losers.

The huge shortfall is now forcing the district to pay an extra $24 million a year to begin to bring the fund back to solvency — a figure projected to grow by millions each year.

“As it grows, it’s going to be tougher and tougher,” said State Sen. Mark Kolterman of Seward, chairman of the Legislature’s retirement committee.

Kolterman has been working with OPS to find ways to improve the system’s financial condition. At the request of the district, Kolterman sought a state study of whether there would be economies of scale to have the Nebraska Public Employees Retirement Systems take over administering OPS pensions.

NPERS, based in Lincoln, already administers six different pension plans, including the one that serves all other public K-12 employees in the state. The OPS system would become a seventh plan within the NPERS system.

On Friday, Kolterman’s committee officially received the study and held an informational hearing.

The study estimated there would be savings of roughly $250,000 a year to have NPERS operate the plan, compared to the current OSERS budget of $1.1 million.

However, there would also be upfront costs of about $4 million for technology to integrate the two systems — costs that could reach $6 million in a worst-case scenario.

During the hearing, Logan said that while the transition costs are significant, the district is committed to paying for them.

She believes it’s worth it in the long run to relieve the district of the management responsibility, noting that OPS is one of only six school districts in the nation with its own pension system.

The OPS school board recently voted 7-0 to endorse the proposal. However, at their own meeting a week earlier, the OSERS trustees were split and voted 4-3 to oppose it.

Cecelia Carter, who serves as the chief administrator for OSERS, appeared at the hearing in Lincoln on Friday to relay the OSERS position. She noted it could take decades for the annual savings to recoup the upfront costs, making the move questionable.

Carter said OPS retirees are used to the convenience and personal services they receive from the OSERS office at the district headquarters and would miss that if administration shifts to Lincoln.

“Our members have been spoiled,” she said.

The decision on any possible change would ultimately be up to the Legislature, which will probably take up the issue during its 2021 session.

Kolterman said he was not overly moved by the appeal to keep the office in Omaha. Teachers in the Millard and Westside districts in Omaha seem to be able handle their retirement matters with the Lincoln office, whether by phone, remotely or by traveling to Lincoln.

“Personally, I don’t see where there’s a huge need,” he told Carter. “At the same time, when you take something away from people who have had it. ... you said it very nicely: They’re spoiled.”

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Reporter - Metro News

Henry is a general assignment reporter, but his specialty is deep dives into state issues and public policy. He's also into the numbers behind a story, yet to meet a spreadsheet he didn't like. Follow him on Twitter @HenryCordes. Phone: 402-444-1130.

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