Politics & Government

Lawmakers approve compromise pension measure

File photo

Gambling dollars would help pay for retirement benefits under a plan Kansas legislators approved Thursday that aims to bolster the long-term financial health of the state’s public pension system.

The measure directs future revenue from three state-owned casinos to the Kansas Public Employees Retirement System, which projects an $8.3 billion shortfall between anticipated revenue and the benefits promised to teachers and government workers through 2033. The bill also sets up a new retirement plan for public employees hired after 2014 to limit the state’s future financial risks.

The House approved the measure 74-42, hours after the Senate passed it 35-2. It was a compromise that legislative negotiators drafted to settle dozens of differences between the two chambers, and Gov. Sam Brownback said he’ll sign the bill when it reaches his desk.

Brownback and fellow conservative Republicans had hoped legislators would create a new 401(k)-style plan for public employees. The new retirement plan would not go that far, though it moves away from traditional KPERS plans that guarantee benefits up front, based on a worker’s salary and years of service.

“It’s not what I initially proposed, but I think it’s workable,” Brownback said. “It gets us to a system that’s funded, and that’s what I really wanted.”

The legislation passed despite opposition from public employee groups, which worry that a new retirement plan will be less generous than existing ones.

Last year, to help close the long-term KPERS funding gap, Brownback and lawmakers boosted the state’s annual contributions to the retirement system and required public employees either to contribute more of their salaries or accept less generous benefits. But Brownback and many members of the GOP-controlled Legislature didn’t think those changes were enough.

An alliance of public employee groups called Keeping the Kansas Promise Coalition argued that legislators should have stopped with last year’s reforms. Chairman Terry Forsyth, a lobbyist for the Kansas National Education Association teachers union, said the bill is based on “an ideological desire to follow the failures of the private sector and shift all the risk from the state to retirees.”

Supporters of this year’s bill said they worked hard to limit the state’s future risks in providing benefits without being too stingy.

“This plan will lower the risk to the employer, and it will provide a fair and reasonable benefit to our public employees,” said Sen. Laura Kelly, a Topeka Democrat and one of the negotiators.

The new Kansas plan would pay 5.25 percent annual interest on the state’s and workers’ contributions to their retirement benefits. Upon retirement, a worker would receive a lump sum that could be converted into an annuity.

If KPERS earns more than 8 percent on its investments in a year, it also could pay a dividend toward workers’ retirement benefits. The amount would depend upon how much the long-term funding gap had shrunk.

The 401(k) plans common in private industry tie retirement benefits to the plan’s investment earnings. Critics see such plans as far less secure for workers, but backers say they prevent a gap between projected revenue and what’s promised to workers.

The plan to use casino revenue has Brownback’s backing and bipartisan support. Kansas has licensed developers to operate casinos in Dodge City, in Kansas City and Mulvane, and the state receives 22 percent of the gambling revenue.

The state has committed $10.5 million a year in casino revenue through 2021 to state universities’ engineering programs. Under the bill, 50 percent of the remaining casino revenue would go to KPERS, starting in July 2013. Supporters predicted that could add up to several billion dollars over the next 20 years, though no solid estimates exist.

Related stories from Wichita Eagle