House panel begins examination of possibly transferring $1 billion into KPERS

Pending bill covers $254 million in missed state payments and much more

By: - February 9, 2022 5:21 pm
Alan Conroy, executive director the Kansas Public Employees Retirement System, endorsed a House bill earmarking $1 billion of the state's revenue surplus to the government employee pension system. (Kansas Reflector screen capture from Kansas Legislature YouTube channel)

Alan Conroy, executive director the Kansas Public Employees Retirement System, endorsed a House bill earmarking $1 billion of the state’s revenue surplus to the government employee pension system. (Kansas Reflector screen capture from Kansas Legislature YouTube channel)

TOPEKA — The Kansas Legislature began consideration of a bill Wednesday transferring an eye-popping $1 billion from the state treasury to cover years of missed state payments and to shrink the unfunded liability of the Kansas Public Employees Retirement System.

In addition to clearing debt of $254 million resulting from skipped payments to KPERS from 2017 to 2019, the bill would infuse $746 million into the pension system to bring it closer to fulfilling long-term obligations to former government workers. Despite higher pension investment by the Legislature in recent years, the unfunded actuarial liability of KPERS stands at $5 billion. The House bill would cut that burden to $4.25 billion.

Adam Proffitt, the governor’s budget director, told the House Insurance and Pension Committee that relying on the state’s large budget surplus to cover the debt to KPERS would save taxpayers about $171 million in interest payments over the next 16 years.

Gov. Laura Kelly recommended paying off this debt, but didn’t propose the full $1 billion transfer that would occur under House Bill 2561.

Alan Conroy, executive director of KPERS, endorsed the House legislation. The proposal also attracted support of Republican state Rep. Steven Johnson, a candidate for state treasurer and the House committee’s chairman, and Attorney General Derek Schmidt, a GOP candidate for governor.

Johnson said the legislation would pay dividends by reducing debt, solidifying the pension’s balance sheet and meaningfully reducing future cash-flow requirements.

“I’m excited about this bill,” he said. “Passing this legislation would result in a landmark achievement of restoring the trust fund to over 80% funded under our current assumptions. Not only has this not happened in many years, one decade ago we were looking at a grim reality of further erosion of our funded ratio below 56%.”

Schmidt said expanded state revenue fueled in part by “reckless spending decisions” by Congress and President Joe Biden presented the state with an opportunity to allocate a portion of the surplus to strengthening KPERS. Contents of the House bill, including the early repayment and the bonus contribution, would free up money for tax reductions or spending on public education, transportation and social services, he said.

“Aggressively prepaying at least $1 billion now will save taxpayers hundreds of millions of dollars in debt service — more than $400 million saved over the next five years,” Schmidt said.

The House bill stood in contrast to “unwise and failed proposals” from legislators and Kelly to refinance KPERS’ debt that would have increased costs to taxpayers of the retirement program, the attorney general said.

In the past, in addition to increasing contribution rates to KPERS, the Legislature ordered issuance of $2 billion in bonds to help the system’s bottom line. Proceeds from sale of bonds was invested in the market with the goal of making a profit and devoting that money to lowering liabilities within KPERS. The state’s bond issues for KPERS began in 2004 with $500 million before the $1 billion issue in 2015 and another $500 million issue in 2021.

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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International. He has been recognized for investigative reporting on Kansas government and politics. He won the Kansas Press Association's Victor Murdock Award six times. The William Allen White Foundation honored him four times with its Burton Marvin News Enterprise Award. The Kansas City Press Club twice presented him its Journalist of the Year Award and more recently its Lifetime Achievement Award. He earned an agriculture degree at Kansas State University and grew up on a small dairy and beef cattle farm in Missouri. He is an amateur woodworker and drives Studebaker cars.

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