Brownback signs bill to issue $1 billion in state pension bonds

Gov. Sam Brownback has signed a bill approving the issuance of $1 billion in state pension bonds, his office announced Thursday.

SB 228, which Brownback signed Wednesday, will put an influx of cash into the state’s pension system for teachers and state employees, reducing the unfunded liability to $6.3 billion from $7.3 billion.

The state will also have to pay interest on the bonds. The state is planning to invest the proceeds of the bonds in hopes that the rate of return will surpass the interest on bonds.

Critics have compared this to using a credit card to pay off the debt on another credit card. The move has been called risky by the Wall Street Journal, but the state has done it before.

Kansas issued $500 million in bonds in 2004 and paid about 5.4 percent in interest. The pension system’s annual earnings since then have been about 7.7 percent. Brownback and other Republicans are confident the gamble will pay off again.

The bill also lowers the state’s contribution to the pension system from 12.37 percent to 10.91 percent in 2016 and from 13.57 percent to 10.81 percent in 2017. This would save the state an estimated $63.6 million over the next two years.

This story was originally published April 16, 2015 at 7:14 PM with the headline "Brownback signs bill to issue $1 billion in state pension bonds."