State pension fund deficit grew by $1 billion last year, officials say / LJWorld.com

Kansas and regional news

The Associated Press

July 17, 2005

Topeka — The gap between what is paid into the pension fund for Kansas public employees and what will be required to pay future benefits grew by more than $1 billion last year, but officials say there isn't cause for worry yet.

Actuarial experts told trustees for the Kansas Public Employees Retirement System on Friday that the fund's unfunded liability had grown from $3.58 billion in 2003 to $4.74 billion in 2004.

That's much faster than previously expected. Analysts in 2002 said the unfunded liability was $1.8 billion and warned that without additional cash contributions it would grow to $4 billion by 2011. Instead, it's almost $5 billion now.

The biggest reason for that growth, a study done last year shows, is that retirees are living longer, forcing officials to adjust their future benefit cost figures.

Teachers make up the largest share of the unfunded liability, officials said.

State Rep. John Edmonds of Great Bend, a Republican who is chairman of the Legislature's Joint Committee on Pensions and Benefits, said teachers are, on average, healthier than the general population. He said many of them are women and aren't as likely to engage in life-shortening habits like smoking and excessive drinking.

While the gap between funding and liability has widened quickly, system officials said the system, which covers retirement for one in 12 Kansans, or 250,000 people, isn't in danger of defaulting. They said the state is finding more money to put in the fund, and said they expected the deficit to grow much slower in the future and start shrinking by 2020.

Edmonds said the Legislature agreed two years ago to slowly increase the state's annual contribution to KPERS, as the fund is called. He said it will be important for future lawmakers to keep to that schedule, but admitted that a budget crunch could tempt them to postpone an increase for a year or two.

"We're not yet contributing at the rate required by actuaries," he said.

Also, lawmakers last year approved the sale of $500 million in pension obligation bonds, which will give the system additional assets to invest and collect interest for the fund.

State Rep. Ray Cox, a Bonner Springs Republican, added that the financial markets should increase the value of KPERS investment, further reducing the excess liability.

"We're very aware of the situation," Cox said. "It's going to be taken care of. We still have a lot of money."

KPERS, which also covers retirement for firefighters, police officers and judges, pays out about $678 million a year to 61,000 retirees and other beneficiaries. State law requires that retirees be paid at a fixed rate.