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Fund Teachers' Pension System, Oklahoma AG Says

States across the country are carrying big-dollar liabilities in their teacher pension systems. One reason they end up in those jams is because some of them skimped on making the recommended payments into those accounts, to save money.

But when members of Oklahoma's state board of education opted to not make the required contribution into their teacher pension system, they received some pretty direct advice to rethink that position—from the state's attorney general.

Democratic AG Drew Edmondson wrote in a formal opinion that the board of education has a statutory obligation to fund the system, despite the board's attempt to not put $35 million toward the pension program. Edmondson wrote that while the legislature had given the board some discretion for moving money around in programs, state law required Oklahoma officials to fund the system.

State pension systems are generally well-protected under state laws and constitutions. Elected officials who try reduce promised pension benefits for current enrollees risk legal action and protracted battles with unions and retirees. But many states have run up big unfunded liabilities by not chipping in the amounts recommended by actuaries, or by agreeing to benefits they're not willing to pay for.

Amid the widespread pension angst, officials in some states, such as Vermont, have hammered out deals with teachers' unions to change pension benefits—agreements that have lowered state costs, protected most benefits, and avoided lawsuits. Vermont has reduced its annual teacher pension costs from $63 million to $48 million through its accord, state treasurer Jeb Spaulding told me recently.

Other states may be forced to engage in similar deal-making in the years to come.

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