Lottie Miller spent 38 years as an educator, the last 10 as principal at Wichita's Peterson Elementary.
She's now in her fifth year of retirement, and it's highly unlikely she'll ever feel the full effect of the multibillion-dollar shortfall in funding of the Kansas Public Employees Retirement System.
Economists, state officials and legislators all agree the real crisis is still decades away. Until then, the money should be there for retirees.
But that doesn't entirely ease Miller's mind.
"I'm OK, I guess, from what they're saying," the 64-year-old Miller said. "But I'm concerned about those who retire later."
Concern also is growing that taxpayers may eventually have to bail out the pension fund.
KPERS has had funding woes for years. Talk of reform has been constant.
A national report earlier this month drove home how bad the situation has become: Kansas ranked next to last in the country in funding public pensions.
Kansas' pension is only 59 percent funded. Illinois is last at 54 percent, according to the Pew Center on the States, a nonprofit that analyzes critical issues facing states.
"Current benefits are safe," KPERS executive director Glenn Deck said. "We're talking a couple of decades before there is a problem covering payments.
"But we are building this bigger and bigger obligation and that means the employer contribution rate is going to have to go up, probably the employee rates are going to have to go up and benefits for future members are going to have to be lower to make it all balance."
In fact, the Joint Committee on Pensions, Investments and Benefits agreed Friday to introduce a bill that would increase state and employee contributions.
State officials and lawmakers are trying to find a way to get KPERS on solid financial footing.
KPERS, which has 268,000 members, has projected an $8.3 billion shortfall between its income and expenses over the next 25 years. The stock market collapse in 2008 only exacerbated a situation that had been spiraling downward.
The state for years has failed to fund KPERS at the level the actuary said was necessary to keep pace with benefit demand now and in the future.
The state funded 88 percent of its obligation to KPERS in 2000. By 2008 that had dropped to 59 percent.
"The analogy is like a mortgage or long-term debt if you don't make the full payment each month," Deck said. "It snowballs over time. Eventually, will we be able to pay it?"
Economists say no.
"If things don't change, it will eventually run out of money," said John Wong, an economics professor and interim director of Wichita State University's Hugo Wall School of Urban and Public Affairs.
And then who pays?
"They are on the hook," said Art Hall, executive director of the Center for Applied Economics at the University of Kansas. "It's only a question of how this is going to manifest itself, not if."
Some legislators are optimistic.
"There is nothing critically wrong that we can't fix over time," said Rep. Nile Dillmore, D-Wichita, who sits on the House Appropriations Committee.
He noted that the retirement system was a source of concern when he first came to Topeka a decade ago.
"I suspect if I stay here another 10, I'll be talking to somebody about how we are going to go about fixing KPERS," he said. "We know basically what that deficit is, and we need to start and work incrementally towards that over many, many years. It's high time we buckle down and do that."
Rep. Kasha Kelley, R-Arkansas City, who also is on the House Appropriations Committee, is concerned about what the future tax liability could be to keep KPERS afloat.
"I think the worry is that question, 'What will my children's children be paying?' " she said.
At the same time, Kelley said, "I don't think you can balance it on the backs of retirees in terms of benefits they expect."
Funding levels are key
The best way to avoid pension shortfalls appears to be for the state to maintain the required funding levels.
The city of Wichita is a good example.
As of 2008, the city's pension plan for non-fire, non-police employees was funded at 101.8 percent, said Barbara Davis, the city's pension manager. The fire and police were at 95 percent.
Following the actuary's recommendations, the city will increase its pension contributions for 2010 to offset 2008's losses.
For non-fire, non-police employees, the city will increase its funding to 8.4 percent of salaries, up from 4.7 percent in 2009.
"We're not completely in the clear," Davis said, "but the City Council has always contributed what it needed to."
The Legislature has chosen a different path.
Last year, it chose to contribute only 68 percent of what was recommended by the actuary.
"It's a policy issue," said Wong, the WSU economist. "Why pay the money now, if you can pay the money later? It's kind of like Social Security. You crank up the benefits because you think you have a lot of money sitting around, and you'll pay it back later because later is a long time from now.
"Except later is now."
Catching up would be hard to do — even if the state wanted to pour large increases into the KPERS fund. Lawmakers already face a growing $400 million-plus shortfall for the 2011 budget, which starts July 1.
It's easier for Wichita to adjust to the market because it doesn't have a cap on how much it can increase its funding each year. The state has had a cap since it enhanced pension benefits in 1993.
"The crux of the current Kansas situation got baked into the cake in the early '90s," Hall said.
He said the Legislature saw investment returns jump in the 1990s and decided to put a cap on the state's contributions.
"They were saying, 'Well, things are really going well ... so we're no longer going to do it like it should be done" and balance market shortfalls with increased state contributions, Hall said.
Not banking on future
Some states' pensions are thriving.
Nine states have their pension plans at least 90 percent funded, according to the Pew report. Generally, the report said, states in the best shape are those that have kept up their annual funding requirements in both good times and bad.
Kansas is one of nine states with pension funding levels below 69 percent.
Jane Carter, executive secretary of the Kansas Organization of State Employees — the union for all state employees except teachers — said in a statement that the Pew report "demonstrates nothing less than the sheer neglect of our legislature to make good on its commitments."
Senate President Stephen Morris, R-Hugoton, took exception.
"We certainly are not where we want to be," the chairman of the Joint Committee on Pensions, Investments and Benefits said, "but it's not as bad as it looks in the Pew report."
Nonetheless, no one is suggesting that KPERS should bank on a market surge to push it out of the pit.
Finding solutions will be challenging.
"There isn't a magic bullet," Wong said. "You don't have money, and you're in probably the worst (economic) circumstances to come up with it."
Friday, the Joint Committee on Pensions, Investments and Benefits decided to introduce a bill that would increase employee contributions and bump up the annual amount the state can contribute by one percentage point.
The state has increased its cap by six-tenths of a percent each year since 2004, which has provided additional annual funding of $37 million.
A full percentage point would mean increasing the funding by about $58 million each year.
"I think it is imperative to start that process," Morris said before the meeting.
The bill also would call for employees to increase their contributions by five-tenths of a percent each year until they reach 6 to 8 percent. Now, employees put in 4 to 6 percent depending on when they began working for the state.
Wong warned that talk of increasing employee contribution rates — or cutting retirement benefits — creates another set of problems for the state.
"What are you effectively doing? A pay cut," Wong said.
Government jobs typically pay less than the private sector, he said, and a big attraction is the retirement plan.
"So you're either going to get no workers," he said, "or you're going to get a lower quality of worker."
Switch to 401(k)?
Hall, the economist at KU, said the state could at least diminish its KPERS hole by switching to a 401(k)-like plan for new employees. The state is contractually obligated to keep its existing pension plan for current employees.
Professors and some administration-level employees at state universities have a 401(k)-like retirement plan.
"The short answer is that provides predictability for the state budget," Hall said, "and the employees are never unclear about where they stand."
And the burden is on the employee, not the state.
"Under a pension plan, the state is underwriting the longevity risk," Hall said. "Under the 401(k), the individual is underwriting the longevity risk, meaning 'Can I outlive my income?' "
Wong said most employees in KPERS aren't in upper management and don't make enough money for a 401(k)-style plan to provide enough in retirement.
Others have said that using something similar to a 401(k) wouldn't help get KPERS out of its current funding problem.
"But it does start unwinding the problem," he said. "Let's stop digging the hole."
That's what Morris hopes to do with the proposed increases to the current system.
"We don't want to turn that concern into a crisis," he said. "That is what could happen if we're not careful, and we don't take pretty significant measures."
For those on the other end, such as Miller, the retired principal, it's hard not to see the situation as a crisis.
"I don't know that there's an answer to it," she said. "I still have a lot of friends in the education field. Some of them are thinking, 'I'm not going to stay in this.'
"And they're good teachers. They work hard. It's really disheartening."