TOPEKA — The high likelihood of litigation against the state and added confusion for school employees were among concerns voiced Monday by opponents of a bill increasing contributions made by school district employees to the Kansas Public Employee Retirement System.
KPERS school district workers currently pay 6% into the retirement fund. Under the proposed bill that contribution rate would increase to 7.15% and payment of roughly $40 million would be made from the state general fund to the state department of education for a 1.15% raise for those employees.
The bill, filed by Rep. Ron Highland, R-Wamego, seeks to boost the KPERS school group, which has been underfunded since the old school retirement system merged with KPERS in the early 1970s. The 2019 valuation showed the school group funded at 65%.
Highland said the goal of the bill was to ensure payment into the group that he said was dragging down the total KPERS funded rate.
“Whether it’s the Legislature or the governor, the money that is put into this every year is one of those things that can be fiddled with,” Highland said in testimony before the House Committee on Insurance and Pensions. “I’d like to see this be a mandate where these payments are made into the system and skirt around that ability for the Legislature or the governor to stick their fingers into that pie.”
The state is currently paying off decades of debt to KPERS through a 40-year payment plan put in place in 1993. As of 2019, the unfunded actuarial liability sits at about $9 billion. That equates to a 70% funded ratio, still below the goal of 80%.
Alan Conroy, executive director of KPERS, said the bill would push the arrow in the right direction for the total funded rate. It would result in higher retirement benefits for KPERS3 members — those hired after 2015.
Opponents questioned the constitutionality of the bill and argued it would likely bring about unintended consequences and lawsuits against the state.
Under the state Supreme Court ruling in Singer v. City of Topeka, any changes made to the contractual rights of a pension plan must be offset, thus the pay raise. However, the raise would be taxed, and the appropriation to the department of education is only scheduled for one year, so while school employees may see the same amount of money in the long term, they will have less money in their pocket from each paycheck.
“With HB2044, if teachers tell me that this seems unfair, I am in a position to tell them yes, it is unfair, and it is also not legal,” said Kimberly Streit Vogelsberg, staff attorney for the Kansas National Education Association. “Even if that money is made up on the back end, which I’m not sure that it is in every case, the employee isn’t going to get to use that money in the meantime.”
Vogelsberg noted the employee contribution rate increase would also decrease the employer contribution rate. In turn, it would not be likely to pass the balancing test required by the Singer case.
Beyond questions of legality, opponents also argued the bill punishes school employees for something that is not their fault.
When the old school retirement system was absorbed by KPERS, the Legislature agreed to make annual contributions to help catch that area of the retirement fund up, said Ernie Claudel, of the Kansas Association of Retired School Personnel. After about a decade or so, those payments ceased, he said
Claudel said missed payments in recent years to the entire KPERS fund have pushed the school group of KPERS into a larger deficit.
“This is a bad time to be pouring any more weight or concern on our teacher’s shoulders. … It’s like you’re trying to penalize someone who was no way at fault in this,” Claudel said.
An alternate option more palatable to opponents would be placing the roughly $40 million for the raise directly into KPERS, cutting some of the confusion and potential for litigation.