Rep. Rui Xu, D-Westwood, offered an amendment to a pension bill that would have provided cost-of-living increases to 82,000 retirees in the Kansas Public Employees Retirement System. The idea was rejected by the Kansas House. (Sherman Smith/Kansas Reflector)
TOPEKA — The House and Senate approved rival bills injecting $1 billion of the budget surplus into the state pension to cover skipped payments to the system in 2017 and 2019 and to bolster the bottom line of a retirement program serving more than 300,000 members.
Both Republican-led chambers Wednesday rejected cost-of-living payments to individuals receiving retirement benefits from the Kansas Public Employees Retirement System. House Democrats were unsuccessful with an amendment earmarking $238 million for the first COLA since 1998. In the Senate, Democrats were unable pass an amendment giving retirees an additional monthly check at a cost of about $155 million.
Republican lawmakers voting for the bills said the objective was to use excess state revenue to pay off debt to KPERS and to diminish the unfunded liability in the system’s portfolio serving state workers and school teachers.
Democrats were in favor of taking care of the skipped payments, but also sought to leave money on the table for other priorities, including Gov. Laura Kelly’s proposal to eliminate the state sales tax on groceries.
Under the House measure, Rep. Steven Johnson, R-Assaria, said the strategy was to deal with the $253 million owed by the state to KPERS for the two years of missed payments and then add $746 million to the pension’s asset column. Dropping that much cash into KPERS all at once would save the state an estimated $400 million in payments to the system over the next five years.
“Managing the liability over time is critical. Making a payment of this size is significant,” Johnson said. “Are our retirees deserving of consideration? Absolutely.”
Want a COLA?
Rep. Rui Xu, D-Westwood, proposed granting the state’s 82,000 KPERS retirees a COLA ranging from 1% to 5% depending on retirement date. The average monthly payment to KPERS’ retirees is $1,200. Nobody would receive more than a $200 monthly increase under Xu’s amendment. It was rejected 38-79, but the underlying content of Senate Bill 421 was adopted later on a vote of 113-5.
“While we are experiencing and expecting higher gas and groceries prices, it is essential now more than ever for our retirees to get a COLA increase. This is sorely needed and it is a shame that help was refused,” Xu said.
His amendment would have paid off the state’s two years of missed payments to KPERS and funneled money to COLAs, but also would have left about $500 million in reserve that he said could be used to slash the state sales tax on food.
Rep. Susan Estes, a Wichita Republican, said the state was at risk of suffering an economic recession. Instead of a COLA for retirees, she said, the state should shore up the pension system and cut the cost of state government to “weather whatever comes forward.”
Derek Schmidt, the attorney general and a GOP candidate for governor, said he encouraged legislators to lower state debt in KPERS and regarded the House bill as a “bold step that for years will benefit taxpayers.” He criticized Kelly’s past recommendation to refinance KPERS’ debt, which would have freed up cash for other state government priorities but deepen the unfunded liability over time.
In the Senate, the GOP majority also pushed through a bill that set the stage for $1 billion investment in the pension system. Senate Bill 523 passed 28-12.
It would place $600 million into KPERS in the current fiscal year ending in June. The State Finance Council, comprised of the bipartisan leaders of the House and Senate as well as the governor, would decide in October whether to transfer $200 million more into KPERS. The council also would be tasked with determining next January whether to authorize a second $200 million investment into KPERS.
“The State Finance Council will be able to look at what is going on in the economy, whether our revenues continue to come in and what’s going on with the stock market,” said Sen. Rick Billinger, a Goodland Republican who chairs the Senate Ways and Means Committee.
The Senate voted 12-26 against the amendment offered by Sen. Pat Pettey, D-Kansas City, that would have used $155 million of the initial $600 million investment to issue a 13th monthly check to KPERS’ retirees.
Sen. Tom Hawk, D-Manhattan, said the Senate should wait to determine how much to set aside for KPERS until the end of the 2022 legislative session. He said the Legislature would be prudent to delay large appropriations decisions until analysts get a better sense of economic trends.
“We do have a healthy surplus projected, but this is a very interesting time,” Hawk said. “We have a war going on across the world in Ukraine. It looks a little dicey for our economy.”
Kelly proposed in January the Legislature repeal the state’s 6.5% sales tax on groceries and issue $250 income tax rebates to Kansans. The tax rebate hasn’t gained much traction, but Republican legislators may be interested in adjusting the food sales tax.
“We are in a position to debate the best way to appropriate funds and deliver relief to Kansans because our economy is so strong and has resulted in a significant surplus,” said Dinah Sykes, the Senate’s Democratic leader. “Each of us has differing ideas of what our top priorities should be, and each of those priorities deserves serious consideration.”
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