The language on Page 49 of the bill couldn’t be more clear, its sponsor said: If Nebraska takes over management of the Omaha Public Schools pension system, the fund’s almost $1 billion shortfall would remain the obligation of the district.
In the end, senators voted 31-5 to give first-round approval Thursday to a bill that would enact the management transfer — despite Gov. Pete Ricketts’ statements that the state could be embarking on a toward assuming the pension debt.
“I am confident this bill does not put the state at risk of any financial obligation,†said Sen. Mark Kolterman of Seward, who chairs the committee that handles retirement issues. Kolterman said the bill would allow the district “to focus on their core duty, which is educating 57,000 students.â€
While the measure moved on with solid support, Ricketts’ concerns could raise the possibility of a veto override battle later in the 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 an almost $1 billion shortfall that a World-Herald investigation two years ago traced largely to mismanagement and investment blunders by the fund’s district-appointed trustees. The massive shortfall is now forcing the district to make roughly $25 million in extra annual payments to bring the fund back to solvency.
Under LB147, starting in 2024, the OPS pension system would be managed by the Nebraska Public Employees Retirement Systems, the state agency that already runs pension funds for state employees, employees of other school districts and county workers.
NPERS would essentially 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.
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.
Ricketts’ “slippery slope†comments ended up shaping much of Thursday’s debate.
Kolterman read aloud the key language in the bill: “At no time, and under no circumstances, shall the State of Nebraska be liable for any funding obligations. ... The school district remains at all times and in all circumstances solely liable for all funding obligations and responsibilities.â€
He also noted the OPS board recently passed a resolution making clear that it knows that the district owns its pension debt.
Kolterman said it would take a majority vote of a future Legislature for the state to assume the debt. That would require the governor’s support or enough votes to override a veto.
“If there’s anybody who is thinking that’s going to happen, I’d like you to stand up and raise your hand,†Kolterman said.
Sen. Brett Lindstrom of Omaha, whose district includes part of OPS, agreed with the assessment, saying it would be “foolish†for future state senators to take on that huge bill.
“To say this is somehow a slippery slope is simply not the case,†he said.
Sen. Mike Groene of North Platte was one senator who wouldn’t rule out a future Legislature taking that step.
“Somebody in the future will bring it when things get tough, and money will be transferred because urban outvotes rural,†he said.
Kolterman believes that the bill would give OPS, its patrons and employees confidence that the system is being run right, which is needed before the district can fully solve its pension problem. He suggested the possibility that Omaha’s strong philanthropic community could even become part of such an effort.
“That won’t happen if it continues to be mismanaged or not managed as efficiently as we can do it,†he said.