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Archive for Friday, July 17, 2009

KPERS hits record unfunded actuarial liability of $8.3 billion

Pension system’s unfunded liability reaches $8.3 million

July 17, 2009, 12:20 p.m. Updated July 17, 2009, 4:29 p.m.

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— Kansas’ public employee pension system investments have taken such a beating in the stock market that the system needs a long-term fix soon, leaders said Friday.

The Kansas Public Employees Retirement System had a record unfunded actuarial liability of $8.3 billion as of Dec. 31, 2008 — the day officials took a snapshot of the system. That represents a $2.7 billion increase from the previous year in the unfunded liability, the difference between the system’s assets and future pension obligations.

Glenn Deck, executive director of KPERS, emphasized that current retirement benefits “are safe,” but that the state needs a long-term strategy to reduce the liability. He said it would not be prudent simply to wait for the market to rebound.

“This is the most important issue facing KPERS,” Deck said during a meeting of the KPERS board of trustees. “The longer we wait to act on this, the more expensive the problem becomes.”

He said KPERS will work with lawmakers, Gov. Mark Parkinson and other interests to develop a plan for the 2010 legislative session, which starts in January.

KPERS provides retirement plans for state and local public employees, including teachers, and has more than 250,000 members.

Doug Wolff, vice chairman of the board of trustees, said the gravity of the issue should help “convince those in the Legislature that something needs to be done.”

KPERS officials said they planned to put a notice on the system’s Web site stating that its stock portfolio was down 19.2 percent in the last fiscal year.

The $8.3 billion unfunded liability is not too far off the system’s $10 billion in assets.

Pat Beckham, a consulting actuary with Milliman Inc., said most public employee pension systems are in similar circumstances. “Everybody is feeling the pain,” she said.

Comments

Shane Garrett 5 years, 5 months ago

KPERS needs a bail out or it will be known as the Kansas Public Employee keep working system.

Bruce Bertsch 5 years, 5 months ago

Well, the answer that the legislature will come up with is to reduce taxes, cut programs and blame someone else.

Steve Jacob 5 years, 5 months ago

Don't forget they recently made all the new hires pay into KPERS 6% instead of 4%, so the gap should close in a few years.

Godot 5 years, 5 months ago

This happened under Kathleen Sebelius' watch.

tir 5 years, 5 months ago

Actually the unfunded liability has been around for a long time. It did not "happen under Kathleen Sebelius' watch". Here's an article on the Topeka Capital Journal site that indicates the legislature has been trying to deal with this since 1993.

http://findarticles.com/p/articles/mi_qn4179/is_20011024/ai_n11774466/

Godot 5 years, 5 months ago

Apparently tir believes that, in 6 years time, a governor has no responsibility to address a problem that has been festering since 1993. Especrially since that governor held highly responsible positions in said government during the time of the fester.' Please, refresh our memories. Just what actions did Governor Sebelius take to correct this well recognized problem?

tir 5 years, 5 months ago

All I'm saying is that Sebelius did not create the unfunded liability while she was governor. Certainly she might have tried harder to do something about it. But the same might also be said for the governors who preceded her. And the legislature.

BigDog 5 years, 5 months ago

There is another financial issue that will also impact state employees this year that KHPA and Governor Sebelius' office kep under wraps.

According to inside sources, the KHPA/Governor's Budget Office last year miscalculated one of the health insurance programs. It is said that one of the major state employee insurance program's had its premium cost miscalculated when the state was setting aside funds in the health insurance pool.

I am told this particular product was calculated at the PPO rate ..... result will mean significant increase in this year's premiums for health insurance coverage. It will get blamed on cost increases in health care insurance.

BigDog 5 years, 5 months ago

I have sat through the actuaries discussing this topic at the Capitol for many years, but little actions seems to be taken until recently.

A major part of the issue is two-fold, first the KPERS benefit program was not built to handle the length of time people are drawing on the system. Much like Social Security ..... the age 65 retirement qualification was set when life expectancy was age 67.

Second, the system was designed to handle the number of people who have started working for the state at a young age then been able to retire in their early 50s from the state.

In both cases, the KPERS system wasn't set up to pay retirement benefits for 20 to 30 years.

somebodynew 5 years, 5 months ago

And there is one other LARGE problem. For the past several years the legislature has not put in their part of the funding that is called for each year (under the original set up). They have "raided" that money and used it for other things, against the wishes and multiple warnings of the KPERS folks. So (even tho I would like to) I don't think you can just blame the gov or Jenkins.

bisky1 5 years, 5 months ago

ya know you may be right about ol' george but, he was not alone in creating our problems and at some point in time obama, nance, and harry are going to have to show they have a clue how to fix it.

Sigmund 5 years, 5 months ago

"Kansas’ public employee pension system investments have taken such a beating in the stock market that the system needs a long-term fix soon, leaders said Friday."

Those are just greedy oldsters. They are going to get free health care under Obama so they don't need all that money anyway.

Godot 5 years, 5 months ago

I would add to BigDog's good analysis that the change in payout options in 2001 that allowed retirees to choose to take 50% of their retirement, based on a lifetime payout calculated using a very generous (IIRC 8 percent) rate of return, as a lump sum at retirement, must surely have had a disastrous impact on the fund.

If I were a state employee and nearing retirement, I would definitely choose that option, just to make sure I got something out of KPERS.

BlackVelvet 5 years, 5 months ago

The Kansas Legislature didn't seem concerned about state employees' pay raises during the 30+ years I worked for the State-so why should they give a hoot about the retirement system?

ridinthefence 5 years, 5 months ago

HMMM what happened under Dubya's watch? huh?

jumpin_catfish 5 years, 5 months ago

How many years was George Bush in office and is he the only one to blame for everything? Based on Marion post which correctly states the facts, it must have been Clinton's fault.

ridinthefence 5 years, 5 months ago

ya blame it on Clinton! What a joke! Did you ever listen to dubya? Did you ever sit down and listen to him when it was time to "address the nation"? It was pretty painful. And we will feel the repercussions of his presidency for a long time. What a shame. He took us down.

Larry 5 years, 5 months ago

Hey....I have an idea. Let's try it.."the Obama way". Let's borrow billions of dollars and send it all over the state for pork projects. We could even send 40 million in STD education in Omaha, NE.. That's correct. OMAHA,NE..Similar to the "GREAT ONE" who wanted to send 400 million overseas for STD education...all the while our nation is facing it's biggest economic crisis since the depression. I guess the all mighty OBAMA knows better than us. There must be something to spending money on Sex Ed in another state/country that helps us here at home. We should also spend millions on old worn out bridges in western Kansas that get used by a John Deer tractor two or three times a year (just because) that county actually voted for Governor Sebelius in the past election. HEY...if we're suppose to believe that it will work in D.C., we might as well try it at home too. Face it, in order to get us out of debt, we need to spend tons of money. As Obama said before the election, "I'll take a scalpel to the budget".. That some big ass scalpel he's using.....and people thought W. was an idiot, a threat and a liar? How about the BIG O? The man has spent more money in spent more money in seven month than every other president put together and he still has over three years to spend. OUCH!

Larry 5 years, 5 months ago

ridingthefence.....GOOD GRIEF...W didn't take us down. He fought a war on two fronts, prevented any attacks on America for over seven year and spent far less money in his two terms as the Manchurian Candidate has in seven months.. Seven months into office, two American based hotels are attacked. Here we go again! Just like Clinton....the terrorist simply laugh at the our current president. After all...what is there to be afraid of? The worse that could happen is a stern lecture. At least with W....the terrorist knew that he would follow through and wasn't going to take any crap off of them.

Godot 5 years, 5 months ago

Governor Sebelius was at the helm of KPERS for the last several years. She was not a victim, she was in charge. She managed to stymie and stonewall many budget and social initiatves put forth by the Republican controlled legislature during her tenure, so, obviously, she was not powerless. She had the responsibility and the power to correct the looming meltdown of KPERS, yet she did nothing, nothing, nothing, to change the course.

If her treasurer, Lynn Jenkins, was not performing up to snuff in the summer of 2008, it was Sebelius' responsibility to handle the problem. Ultimately, the buck stopped with Sebelius. It seems that Sebelius was too busy working to assure Obama's election to look after KPERS and Kansas.

When it comes to KPERS and Kansas classified employees' retirement, Sebelius equals Fail.

Either a governor has power, or she does not. If she does not, what purpose does she serve?

Jeff Kilgore 5 years, 5 months ago

Those of you in the majority of finger pointing based on political parties, are frankly, blind. Blind, blind, blind, just like your political parties want you. While you stand like five year olds blaming each other's leaders, you fail to understand that they are all our leaders and all equally guilty of not funding the system. I am going to take my 50% in 2014 if there is anything left. Because of the idiotic faction hatred and blaming, political decisions simply cannot be managed anymore. It is ridiculous how far the division has come. It's perhaps the main reason we are where we are today. All blaming and no solutions.

Anyone who is counting on KPERS and social security after about 2020 will be stunned. It isn't going to be there. So, teachers like myself who have contributed hundreds of thousands of dollars will be left out. Meanwhile, Goldman Sachs bankers who have been very generous to both parties for the past 80 years are stealing our money every day! Bush? A National Joke. Obama? Simply more of the same.

somebodynew 5 years, 5 months ago

jkilgore - I wish I had done the same when it was my time, but I thought I was helping my spouse.

What bothers me, is that people keep trying to blame a few people. IF they had followed the past news stories they would clearly see that it was the LEGISLATURE that failed to put in the State's share of the money, which was spelled out. THEY just chose to ignore it and use the money elsewhere. I could be wrong, but I don't think anybody who was governor could just say you can't do that. And trust me, I am not a Kathleen or a Lynn supporter, but the most of the blame lays at the feet of the legislature.

igby 5 years, 5 months ago

We are a little top-heavy on State employees. Per population, Kansas, holds the record for having a state employee for every 2.7 people living in Kansas. Lol. Almost the same as the average size family having 2.5 children. I guess we could call Kansas, the big brother state, or the big sister state. But here in Lawrence, it's the big transgendered sissy/brother state. Lol.

Isn't Capers those little green berries in pickle juice! Lol.

Larry 5 years, 5 months ago

jkilgore,

I agree with you. Both parties are to blame. Bush's second term was a nightmare in terms of spending, yet he spent way less than our current administration. What I don't understand is that people voted the manchurian candidate into office based on promises to get rid of old Washington politics and nothing has changed. I never thought for a moment that he would follow through and his actions have always been the opposite of his words. However, the one politician that I think I could support because SHE seems to follow through with what she says, the mainstream media totally goes crazy on her for reasons that I still haven't figured out. I can only assume because she is a very attractive female who likes to hunt moose and openly practices Christianity. She had experience at the executive branch and yet mainstream media claimed that she had less than the other candidates. I would argue that she was more qualified than most of the presidential candidates. Never made much sense to me. Last time I checked, Alaska's budget was in great shape (even through the current crisis), California (the most liberal state in the union) needs a bailout due to it's liberal beliefs and spending habits and the entire nation looks to California for answers. I've heard that Palin has decided to become a community organizer so she can gain needed experience for a presidential run. :)

Dan Eyler 5 years, 5 months ago

Kansas tax payers have no obligation too fund a retirement plan for federal state or local government employees. Just like social security both dems and repubs have been siphoning money off these agencies and putting in IOU's. Next will be your own health care if you don't wake up. Are you really okay with the kansas legislature raising taxes by billions to cover this debt? Not me. I say cut the loss and can KPERS now. Are you doing to trust government with your health care? If yes then you will see another IOU government slush fund that is going to be an endless tax pit that will continue to strip the middle class of any wealth we had. We will have a fraudulent retirement plan and a world class health care system only rivaled by that of Cuba and Venezuela. I will take a private approach over government IOU's every time.

skinny 5 years, 5 months ago

Kansasfaithful, Sorry to have to tell you this but KPERS is guaranteed and backed by the state of Kansas per state statue . This means that YOU as a Kansas tax payer will pick up the tab! So I suggest you start voicing your option loudly so that they make whoever is/was responsible for managing these funds gets sued or fired.

Dan Eyler 5 years, 5 months ago

Who do you think is taking these losses with KPERS. Better half is a KPERS contributor. I am a private investor and we both are tax payers. If someone is worried about salaries of a government employee then they should find a private sector job. I have no pity for a government employee and their pay; doing a job that either doesn't need to be done or in many cases can be done far better and more efficiently than a government employee.

Hey skinny I am aware of our ridiculous obligation to KPERS and I routinely express my concerns.

Godot 5 years, 5 months ago

I concede that this was not just Sebelius' fault, because the problems began years and years ago, and many governnors, legislators, KPERS board members and regulators either did not have the wherewithall to manage the KPERS fund in the manner of "the prudent man," which is their fiduciary responsibility, or they simply chose not to, for whatever reason.

I am pointing one finger at Sebelius (and the rest at others) because she spent an enormous amount of political and taxpayer capital on sideline issues like protecting abortion providers and opposing the construction of coal plants, all with, as I suspect, an eye on national office, when she should have concentrated her efforts on exposing and clearing out the problems with the KPERS board and its financial advisors. It was not necessary for the mismanagement to continue, year after year. If Sebelius had acted as the adult in the room, as her supporters claim she did with abortion and climate change, and convinced/cajoled/forced the KPERS board to realize that their quest for high returns was dangerous and irresponsible, the KPERS fund would be less worse off, probably by billions of dollars, than it is today.

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