Topeka Kansas would start bankrolling its public employee pension system in part by borrowing money, according to a bill recommended by the Senate budget-writing committee.
The committee endorsed legislation to issue as much as $750 million in pension obligation bonds to reduce the gap between assets and benefit obligations -- called the unfunded liability -- in the Kansas Public Employees Retirement System.
Senate President Dave Kerr, R-Hutchinson, said the proposal was needed because the state couldn't afford to address the unfunded liability in the system through appropriations of tax funds.
The measure also increases the maximum amount by which the state could increase its contributions to KPERS.
Under the proposal, the state would issue state-backed pension obligation bonds. If the state could negotiate a low interest rate and KPERS investments could earn, say 8 percent, then the difference could help close the gap. Several states are considering such proposals.
The 10-year average investment performance for KPERS is 8.1 percent, but the average of the past three years has been a negative 4.5 percent. Last year, the system's portfolio was down 6.9 percent, reducing its assets from $9.1 billion to $8.2 billion.
House Speaker Doug Mays recently appointed a committee to make recommendations on helping the pension fund.