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Plan for $1.5B in pension bonds stalls in Kansas

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TOPEKA, Kan. (AP) — Legislation authorizing $1.5 billion in bonds to bolster the Kansas pension system for teachers and government workers has stalled in the state Senate, and one advocate said Wednesday that the bill is “dead in the water.”

Senate Ways and Means Committee Chairman Ty Masterson said he doesn’t want to issue the bonds without creating a 401(k)-style pension plan for new public employees. The Andover Republican said the state shouldn’t be “taking on one debt to cover another” unless it reforms its retirement system.

The Kansas Public Employees Retirement System operates traditional pension plans guaranteeing benefits upfront, based on an employee’s salary and years of service. KPERS projects a $9.3 billion gap between anticipated revenues and promised benefits through 2033.

Under a 401(k)-style plan, workers’ benefits would depend on investment earnings and would fluctuate when financial markets are volatile. Public employee and retiree groups strongly oppose moving to such plans.

Bonds would give KPERS a quick infusion of cash, so that the percentage of its obligations covered by its assets, now 53 percent, would jump to 61 percent in 2015 and grow more quickly than it would under current law. Also, the state wouldn’t have to boost its annual contributions to KPERS as aggressively as it does now.

The House approved the bill last month, but Masterson’s committee hasn’t taken a vote. Senators and House members drafting the final version of other pension legislation and reconciling differences between the two chambers could slip in authorization for the bonds, but Masterson is the Senate’s lead negotiator.

“We need to see a transition” to a 401(k)-style plan for new public employees, Masterson said.

Last month, the House Pensions and Benefits Committee tabled a bill to start a 401(k)-style pension plan for government workers hired after 2014. The measure would have created a separate plan for new teachers in which they would have contributed part of their salaries to tax-free annuities paying out once they retired.

Masterson’s position means that the House committee’s delay of a decision until next year on the proposal to create new retirement plans also blocks the bill authorizing bonds.

“It makes it dead in the water,” said House committee Chairman Steve Johnson, an Assaria Republican.

Both pension bills follow two years’ worth of legislation overhauling KPERS, and the retirement system projects that its long-term funding gap will be eliminated over two decades even if lawmakers do nothing more. The state committed to larger annual contributions to KPERS and dedicated future profits from state-owned casinos to the retirement system.

Reining in the annual contribution of tax dollars to the pension system would lessen the squeeze on other parts of the budget. But in issuing the bonds, the state would gamble that KPERS investment earnings would outstrip the interest paid on the debt.

The bill authorizing pension bonds is HB 2403.


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