Gov. Pete Ricketts has come out against transferring management of the Omaha Public Schools pension system to the state, suggesting that it’s a step toward Nebraska taxpayers getting stuck with the fund’s $848 million shortfall.
“It is (a) slippery slope, which is why I oppose LB 147 for going down this path,” Ricketts said at a press conference this week. “We should not be exposing the state’s taxpayers for the mistakes that were made by the folks that were managing that fund for the OPS teachers.”
The state lawmaker pushing the bill said he likewise strongly opposes having Nebraska take on the debt and would not support the measure if he thought that it was a step in that direction. State Sen. Mark Kolterman of Seward said the bill’s language is quite clear that the debt remains with OPS.
“I could not be more explicit in saying we are not accepting the liability,” he said. “So to now talk about a slippery slope is very disappointing.”
Kolterman said he will continue to push Legislative Bill 147, setting up the possibility of a veto showdown with Ricketts later this session.
OPS is the only school district in the state, and one of only a handful nationally, that operates its own employee pension fund. All other Nebraska school employees are in a retirement system managed by the state.
The OPS fund now faces a massive shortfall that a World-Herald investigation two years ago traced largely to mismanagement and investment blunders by the fund’s district-appointed trustees.
The newspaper found that the trustees — most of them district leaders and representatives of employee unions — 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 roughly $25 million annually to bring the fund back to solvency — a figure projected to grow by millions each year.
As chairman of the Legislature’s Retirement Systems Committee, Kolterman has made it clear to OPS that the state wants no part of the pension debt. He also noted that OPS leaders have acknowledged that the district is responsible for the shortfall.
But Kolterman and his committee have sought to help OPS find ways to meet its obligations. A study commissioned by the state and funded by OPS last year found that the district could save a little money annually by turning management of the fund over to the state.
Starting in 2024, OSERS would be managed by the Nebraska Public Employees Retirement Systems, the state agency that already runs pension funds for state employees, employees of other Nebraska school districts and county workers.
NPERS would charge OPS its full cost of managing the system, but that would be an estimated $250,000 a year less for the district than operating the system on its own.
“It’s not a free ride,” Kolterman said. “They’re paying for all the expenses that go along with it.”
The Legislature already handed over investment responsibility for the pension system to the state in a bill signed by Ricketts in 2016. Kolterman’s bill would shift the remaining responsibilities, such as sending out monthly retirement checks.
In his weekly column, Ricketts recently singled out LB 147 for criticism, referring to it as the “Bailouts for Omaha Public School Pensions” bill.
In response to questions this week, Ricketts acknowledged that LB 147 does not require the state to take on the shortfall. But he called it a step in that direction, saying a future Legislature could choose to do so.
“We’re taking more and more steps of going down the path of taking it over,” he said. “It’s irresponsible for the State of Nebraska to take over that pension liability.”
After OPS finishes shoring up the fund, he said, the state can revisit whether it should have a role in managing it.
Kolterman questioned why Ricketts considers the current bill a slippery slope when the governor didn’t express those sentiments five years ago in signing the bill that handed over investment responsibilities to the state. State lawmakers also expressed no such concern in passing that bill 46-0.
Ricketts also made no slippery slope arguments last year when he signed the bill that commissioned the feasibility study that led to LB 147.
Kolterman said it’s in the best interest of the state to do what it can to help its largest school district, especially when the assistance comes at no cost to the state.
“We don’t want them to fail,” he said. “When we can help them as a state, without taking on the liability, why wouldn’t we do that?”
Kolterman said he expects there will be enough support to get the bill out of committee. He said he’s not ready to talk about the possibility of needing 30 votes on the floor to override a veto.
“Let’s see how it plays out,” he said.