Gov. Sam Brownback defended his decision to cut the state’s pension contribution to help fill a $279 million budget hole amid criticism from leaders in his own party Wednesday.
He said using funds from the Kansas Public Employees Retirement System was a way to prevent cuts to K-12 education, higher education and Medicaid, which together make up about two-thirds of the budget.
“It’s kind of, uh, well where are you going to go for the funds? And I don’t like it, but it’s kind of what’s your other option if you don’t hit K-12 and higher ed with allotments?” Brownback said. “It’s also one of those things where we’ve made a lot of progress on it, but we’re at a point where it’s difficult to sustain right now.”
Some of the budget cuts, known as allotments, require legislative approval, but the reduction to the pension fund does not.
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“We’ve got a near-term problem and none of these are ideal answers,” he said. The governor added that he was hoping to revisit KPERS in the upcoming legislative session, but did not offer specific policy proposals.
The governor cut state contributions to KPERS $40.7 million for the next six months, dropping the employer contribution rate to 9.5 percent from 12.1 percent.
The cut won’t affect current state retirees. But it will slow the state’s efforts to reduce the pension system’s unfunded liability from $7.4 billion to zero over 20 years, as laid out in a plan passed in 2012.
Failure to pay off the unfunded liability could exacerbate long-term financial problems for the state or cause future retirees to receive less in benefits than they expected.
Brownback had repeatedly touted the bipartisan pension fix as one of the biggest accomplishments of his first term.
State Treasurer Ron Estes, a Wichita Republican who supported Brownback’s re-election, panned the pension funding cut in a statement released Wednesday morning.
“While I understand the need to re-balance the budget in light of unexpected shortfalls, the decision to delay state contributions to our underfunded pension system is disappointing,” he said.
By delaying paying down the unfunded liability now, the state runs the risk of facing greater costs in the future, he said.
Estes added that the state has a responsibility “to preserve and protect what so many Kansans rely on for their retirement” and that “these benefits have been earned and should be paid to the state and local employees for their years of service.”
His comments came on the heels of even stronger condemnation by Senate Vice President Jeff King, R-Independence.
King, who chairs the joint committee on pensions, said in a phone call that Brownback had shown unprecedented leadership on pensions over the past four years but that Tuesday’s move represented a major reversal.
“By raiding the KPERS fund, instead of continuing prudent reform, Governor Brownback is threatening to undo all of the hard-fought gains that we have made,” King said in an additional e-mail.
Ernie Claudel, vice chair of the Kansas Coalition of Public Retirees, said Brownback’s plan had caused an outpouring of concern among KPERS beneficiaries.
“Particularly, the retirees understand what’s going on,” Claudel said.
Brownback said he was still committed to the long-term viability of KPERS, which he repeatedly noted developed its unfunded liability over several decades.
“We’ve done more in this administration with the Legislature to fix it than anybody else,” he said. “We’ve added a lot of money going into to KPERS. We’ve changed the system going forward for new hires next year, so we won’t be digging the hole deeper.”
The pension fund benefits both state and local public employees, including teachers.
The Brownback administration has previously included spending on teacher pensions when discussing school funding, but this week he differentiated between the cost of pensions and classroom funding.
“We’re trying to protect K-12 and higher ed funding. So what I tried to do is say we’re not going to do allotments on K-12 and higher ed,” Brownback said. “So if you’re not going to do those things where are you going to get your resources?”
Senate Minority Leader Anthony Hensley, D-Topeka, a public school teacher, said the governor “makes it up as he goes along.”
“A year ago he was saying the exact opposite, he was saying we were going to increase the employer contribution, which means more money for education,” Hensley said. “Now if we’re reducing the employer contribution, does that mean he’s cutting education?”
“It is an outrageous contradiction,” Hensley said. “I mean, my Lord, you can’t have it both ways.”