The Kansas Public Employees Retirement System was enacted 50 years ago this year. It has experienced ups and downs through the years but remained a healthy fund overall — that is, until the past decade.
For 50 years, Kansas public employees have contributed to the KPERS fund, never missing or shortchanging a payment. But since 1993, it has been Kansas law for the Legislature to underfund the retirements of Kansas' public employees.
Despite strong earnings — earnings that exceed the 8 percent assumed rate of return by KPERS management — the KPERS fund will never be actuarially sound so long as our leaders continue to shortchange their contribution for employee retirements.
Though many would have you believe that outrageous retirement benefits drive KPERS' unfunded liability, that is not true. The average KPERS monthly retirement benefit is just $1,100.
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Instead, the liability shortfall is due to the failure of the Legislature for the past 17 consecutive years to fund employee retirements to the actuarially recommended contribution. Politicians in Topeka have kicked the can down the road year after year.
Others would have you believe that the Kansas taxpayer is funding all or most of the retirements for Kansas public employees. This, again, is not accurate. The investment returns on the pooled assets of all Kansas public employees, in addition to public employee contributions to their retirement funds, provide more than 75 percent of the total annual revenues to KPERS. Kansas taxpayers are responsible for only about 23 percent of total revenues each year.
In the past legislative session, there was a push to end the defined-benefit plan for Kansas public employees, despite warnings from the KPERS consulting actuary and testimony that an alternative defined-contribution plan would cost Kansas taxpayers more and provide as much as 60 percent less in retirement benefits to public employees.
Indeed, the Legislature's own research department found that the House's defined-contribution plan would cost Kansans as much as $1.2 billion more than the existing defined-benefit plan.
The reasons for this are twofold: Decentralization of retirement funds from the management of KPERS by a single professional management and investment team to that of hundreds, if not thousands, of investment managers and Wall Street types would increase investment management costs; and the assets of Kansas public employees no longer would be pooled, reducing the investment returns and increasing the risk.
A KPERS Study Commission is holding meetings to review the system for potential changes and recommend those changes to the 2012 Legislature. I would urge the commission to reject any attempt to create a defined-contribution plan for Kansas public employees.