When Gov. Laura Kelly offered a plan last month to refinance Kansas’s public pension system, Republicans immediately slammed it as unaffordable – a plan that would cost $7 billion over next three decades.
The proposal appears dead for now, despite the Democratic governor’s arguments that the refinancing is needed to keep state contributions to the pension system, called KPERS, affordable over the next few years.
The House rejected the measure, 36-87, on Thursday. The vote was largely along party lines, though a handful of Democrats also voted against the plan.
The vote marks Kelly’s first legislative setback as governor, after taking office in January. Kelly put forward the refinancing plan – called reamortization – as part of her state budget proposal.
“I took office one month ago today. I have offered commonsense solution after solution, in addition to working in good faith to engage legislators. I look forward to hearing their ideas to balance the budget moving forward – while also meeting all our other obligations like schools and highways,” Kelly said in a statement. “We are a third of the way through the legislative session. It is time to stop playing political games and get to work finding solutions for the families of Kansas.”
While Kelly’s plan would not have affected benefits for current or future retirees, members of KPERS had been closely watching the proposal. Some 311,000 current and former public employees belong to KPERS, and the board that governs the system had condemned the proposal.
The plan involved extending out the time it will take to fully fund the state’s obligations to current and future retirees. The plan would save the state $770 million over the next five years, according to calculations by KPERS. But over 30 years, Kansas would ultimately have to contribute $7.4 billion more than currently projected.
Without refinancing, the state’s current annual contribution of $547 million could rise to more than $900 million by 2035. Kelly contends those contribution levels would be unaffordable.
Rep. Brett Parker, an Overland Park Democrat who carried the bill on the House floor, said the bill would have allowed Kansas to pull out of a cycle of not always making pension contributions and he criticized Republicans who voted against it. The state has not fully made pension contributions 15 times over the past nine years, he noted.
“I think they’re sending a message they’re more interested in playing political games than they are in actually putting together a budget that works and keeping our promises to KPERS retirees,” Parker said.
Rep. Kristey Williams, R-Augusta, rejected that idea. She said she would have also opposed the plan if Republican Gov. Sam Brownback had proposed it.
“It’s very simple. This was considered two years ago, four years when we trying to make ends meet. This is something that Republicans considered. But at the end of the day, you cannot trade $146 million annually for a few years for $7 billion,” Williams said.
Kelly and her allies say the rest of her budget plan can stand without the KPERS refinancing.
Under Kelly’s budget, KPERS refinancing would have left the state with $686 million in the bank at the end of the next fiscal year. Without refinancing, the ending balance would be about $541 million instead.
“KPERS re-amortization is a fiscally prudent way to address the long-term stability of our state. It is one component of the budget,” Kelly said.
Republicans, however, have described the KPERS plan as the “cornerstone” of Kelly’s budget. They appeared eager to defeat the legislation ahead of the state GOP convention this weekend.
A House committee focused on financial institutions and pensions held a hearing Wednesday on the plan and then took a last-minute vote to advance the legislation to the House floor. Typically, committees don’t vote on bills until the day after a hearing, at the earliest.
“Republicans are simply not willing to saddle our children and grandchildren with the $7.4 Billion price tag of Governor Kelly’s plan just so we have an extra $145 Million to play with this session,” House Majority Leader Dan Hawkins, R-Wichita, tweeted after the vote.
During debate on the bill, Democrats mounted an unsuccessful attempt to send the legislation back to committee. Rep. John Barker, an Abilene Republican, said the House should debate the plan out of respect to Kelly.
Lawmakers also rejected two amendments to provide a cost of living adjustment to retirees. Many retirees haven’t received an increase in years.
“Our retirees have not had a COLA increase since 1998,” House Minority Leader Tom Sawyer, D-Wichita, said. He added that retirees need this “very badly.”
Rep. Steven Johnson, R-Assaria, indicated a cost of living adjustment cannot necessarily be done easily.
“Our first priority is making sure we have a secure retirement for all members,” Johnson said.
In addition, an amendment to include a $115 million payment to KPERS to make up for a previously-delayed contribution was ruled non-germane to the legislation. The Senate has approved a bill making the payment, but the House has not yet voted on it.