Topeka Describing the Kansas governmental pension system as “bankrupt” was incorrect and that description frightened retirees, Democrats on Tuesday told Kansas University’s Art Hall.
Hall, executive director of the Center for Applied Economics in the School of Business, said he regretted if the word “bankrupt” upset any senior citizens. However, he said, it was an accurate description of the Kansas Public Employees Retirement System.
KPERS has projected a long-term funding gap between its income and expenses, but has said that current pensions are safe. Democratic legislators said the Legislature needs to fund KPERS properly to ensure its fiscal soundness.
Hall said the private sector and some state governments are moving away from the KPERS-style defined benefit plan. Hall is pushing for the Legislature to replace the government pension plan with a 401(k)-style plan.
In the report from Hall’s center, KPERS was described as “bankrupt under current operating assumptions.”
During a meeting of the House Appropriations Committee, Democrats said that frightened many retirees.
Hall said that there was discussion in the center on whether to use “bankrupt,” and that he decided it was appropriate.
State Rep. Bill Feuerborn, D-Garnett, disagreed.
“Maybe, you should have gone to a nursing home and ran that word by them,” he said.
But state Rep. Peggy Mast, R-Emporia, defended Hall, saying he was being criticized for providing much-needed information while the Legislature was acting like “gutless wonders.”
But under questioning, Hall agreed there were no cash problems with KPERS for the foreseeable future. And, he said, the improved performance of the stock market was making the unfunded liability gap less severe.
State Rep. Mitch Holmes, R-St. John, asked Hall how the state could switch to a 401(k) plan for new employees, while continuing to fund the retirement system promised to current workers.
“The transition is going to require some alternative funding mechanism,” Hall said.
Dennis Constance, president of KU’s support staff senate, was one of about 20 state employees who attended the meeting to hear the discussion.
Later, Constance said he disagreed with Hall.
“I think the 401(k) plan has a lot of volatility that was played down here.” He said the bottom line is that KPERS represents a “moral commitment” to workers.
Gov. Mark Parkinson also weighed in, although not in person.
In his blog, Parkinson wrote that the report’s use of the word “bankrupt” detracted from other important information in the report.
The report, he said, “Demonstrates that the state has underfunded this pension program for a long time and to ensure the perpetual solvency of KPERS, we must eventually add more funds.”