Politics & Government

Delay in paying KPERS liability would cost state extra $3.7 billion

Gov. Sam Brownback is seeking to delay paying off a state pension system unfunded liability by 10 years.
Gov. Sam Brownback is seeking to delay paying off a state pension system unfunded liability by 10 years. Courtesy photo

Changes to the state’s pension system proposed by Gov. Sam Brownback could cost Kansas $3.7 billion in the long run, lawmakers learned Tuesday.

The governor seeks to delay payments intended to shore up the state’s pension system in order to save money in the short term.

The Kansas Public Employee Retirement System faced an unfunded liability of $9.8 billion at the beginning of 2014. The state was on pace to pay it down to zero by 2033 because of reforms enacted during Brownback’s first term.

However, Brownback proposed Friday to pay down the unfunded liability more slowly, by 2043, to save money in the short term.

“It’s like the mortgage on your house. If you pay less, you’re going to pay longer and you’re going to pay more,” Alan Conroy, the executive director of KPERS, told the House Appropriations Committee.

The delay would increase costs overall by $9.1 billion. But Brownback proposes issuing $1.5 billion in bonds, and the profits from the interest on those bonds would partially offset that cost.

Rep. Kathy Wolfe Moore, D-Kansas City, said the state was undoing the progress it had made in reforming the pensions system.

“It costs us $9 billion with a B (to enact the governor’s plan). … So we’re doubling what we have now? We’re doubling our unfunded actuarial liability?” said Wolfe Moore. “We’re going in exactly the wrong direction, as far as I can see.”

Rep. Ron Ryckman Jr., R-Olathe, who chairs the committee, said lawmakers were at the beginning of the process, and he gave little hint about whether he supported the governor’s plan.

“We look forward to having more information and deciding what our determination would be,” Ryckman said.

Conroy said the governor’s decision to take $58 million out of KPERS in December to help plug a $279 million budget hole for the current fiscal year should not by itself prevent the state from paying off its unfunded liability by 2033. But he said that would cost the state an additional $76.7 million over 20 years.

KPERS provides retirement benefits for state workers, public school teachers and most local government workers.

Reach Bryan Lowry at 785-296-3006 or blowry@wichitaeagle.com. Follow him on Twitter: @BryanLowry3.

  Comments