Luckily for Kansans, the 2012 Legislature’s few successes included state-pension reform.
Lawmakers and Gov. Sam Brownback came together on a plan that responsibly addresses the Kansas Public Employees Retirement System’s long-term underfunded liability by boosting employer and employee contributions, changing benefits and tapping gambling revenue.
Though the reform won’t solve all the financial challenges facing KPERS, Kansas now has a credible strategy to close the $8.3 billion gap between expected revenue and promised benefits through 2033.
It wasn’t the wholesale shift to a 401(k)-style plan that the governor sought last year to “stop the bleeding” in the pension plan, which the state has neglected to fully fund for decades. The majority of lawmakers realized such a cure, however appealing for the future, would undermine the system’s ability to cover its existing obligations.
But the final legislation was substantive and forward-thinking enough to prevail 74-42 in the House and 35-2 in the Senate last month. And it earned Brownback’s signature last week, as well as his applause of the Legislature’s work to “move our state’s employee retirement system forward and to ensure state employees have a pension system that is stable.”
Those already in the system will step up their contributions and see some previously discussed benefit changes (for details, go to www.kpers.org). New state, school and local public employees as of January 2015 will have a “cash balance” retirement plan paying 5.25 percent annual interest on the balance resulting from state and employee contributions. The state also will shore up KPERS with 50 percent of its casino revenues remaining beyond a $10.5 million annual commitment through 2021 to state universities’ engineering programs.
And the new plan avoids a repeat of the past decade’s unwise decision to borrow $400 million for KPERS and put it in the stock market, where the investment value dropped.
Only the future, and an unpredictable economy, will gauge how well the 2012 Legislature did on KPERS reform. But for now, Brownback and legislators get credit for exercising foresight and taking steps to avoid a major KPERS meltdown – acts even more remarkable because of the dysfunctional lawmaking that went on all around them this session.
For the editorial board, Rhonda Holman