KPERS delay may be best of bad options

As far as desperate budget measures go, delaying the state’s payment to its pension plan may be the best of the bad options. The move allows the state to postpone major budget cuts that would be very difficult to implement this late in its fiscal year.

But it also does nothing to solve the state’s underlying revenue shortfall. And it makes next year’s budget problems worse.

Budget director Shawn Sullivan announced last week that the state would temporarily delay its $92.6 million payment to the Kansas Public Employees Retirement System that is due Friday. The ability to delay the payment was authorized by the Legislature as part of its revised budget plan, contingent on the payment being made, plus 8 percent annual interest, no later than Oct. 1.

Sullivan hasn’t decided yet how long the payment will be delayed. He is waiting on the new state revenue estimates that come out on April 20.

However, those estimates are sure to be lowered, given that the state has missed its revenue targets 12 of the past 13 months. And because the state will have only a little more than two months before the end of the fiscal year June 30, it would be nearly impossible to make enough spending cuts to cover the shortfall, as public schools and state agencies already have spent most of their funding.

Reinstating the state income taxes on pass-through businesses also wouldn’t help the current fiscal year – though it should be part of next year’s budget solution.

And though the state may raid more money from its transportation fund, there likely won’t be enough available to cover the entire budget gap.

Delaying the KPERS payment could help the state eke through the current year, buying (or rather, borrowing) itself a little more time to come up with a more permanent solution.

Many schoolteachers are understandably frustrated about the delay. They have been paying more into KPERS as part of a reform plan aimed at shoring up the underfunded system, and now the state is reneging again on its obligation.

But as Sullivan noted, the delay won’t affect benefits. And assuming that the state really does pay back the money with interest, the delay won’t affect the plan’s solvency.

The biggest problem with the delay is that it makes next year’s budget hole even deeper, because not only will the state have to cover that projected shortfall, it will have to make the missed KPERS payment.

But that’s what balancing the budget entails under the financial mismanagement of Gov. Sam Brownback and the Legislature – choosing from among bad options.

This story was originally published April 12, 2016 at 7:08 PM with the headline "KPERS delay may be best of bad options."