Archive for Tuesday, October 13, 2009

House Democrats bristle over description of KPERS as bankrupt

October 13, 2009

Advertisement

— 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.”

Comments

frank mcguinness 5 years, 7 months ago

It is bankrupt as it currently stands. Potentially as it goes forward.

Jump ship folks, You don't want to go down with this one.

Evan Ridenour 5 years, 7 months ago

"KPERS has projected a long-term funding gap between its income and expenses, but has said that current pensions are safe."

I don't think many people actually understand how pension funds operate which is probably half of the reason why they are historically underfunded (the other half being that they are run by people, in this case politicians, who would rather use money on anything other than the fund).

The legislators use of the term bankrupt is applicable in this case. KPERS does not have enough projected assets to pay off its projected liabilities which is most definitely a definitive use of the term. The democratic legislators pointing out that KPERS can pay off its near term liabilities obviously have no idea what they are talking about. Of course KPERS can pay off its near term liabilities, it better have the assets to do that! It is a flipping pension fund! That isn't the point at all. The question isn't paying liabilities of the fund right now it is paying over the next 10, 15, 20 years. It is the question of paying out to all of the people currently paying into the system when they retire and in that case the system is very much bankrupt.

Maybe instead of whining about the use of diction when someone is discussing a very real problem they should expend their efforts in finding ways to fix the system. And on that matter, the 401k system is a great idea...

KansasVoter 5 years, 7 months ago

The 401k idea is terrible. One of the only good things about a state job is their defined benefit plan, and if they switch it to a defined contribution plan they'll have a much harder time attracting talented employees.

Evan Ridenour 5 years, 7 months ago

Even blue chip corporations like IBM have gotten rid of their defined benefit plan for a defined contribution plan and many states are even moving away from them and almost every state is discussing moving away from them. Kind of eliminates your argument that it would prevent them from attracting talented employees when everyone else is dumping defined benefit plans too.

You aren't living in economic reality if you think that a 401k plan is a bad idea. You must be someone who has one... cough.

calvin 5 years, 7 months ago

Maybe State Rep. Bill Feuerborn needs to learn what bankrupt means. The plan has more liability than assets, Feuerborn is a business man, he should know that.

Randy Leonard 5 years, 7 months ago

The reason that KPERS works as an incentive to help attract talented state employees is that if offsets some of the disparity in pay. When a state agency recruited me for a mid-level professional position, KPERS was the only thing that made it viable to even contemplate, considering the 20% difference in salary. The people of Kansas have no idea of the service that state employees provide. After this past year, with threats of furloughs and pay cuts the while politically appointed employees were getting significant raises and bonuses, if KPERS is cut or transitioned to a 401k type plan there will be a mass exodus of good talented people from the state work force once the job market improves. Let's see what happens when there is no one left to provide services such as highway maintenance and snow removal, look after the public health during the next flu scare, or emergency relief for the victims of the next tornado or flood. Maybe that is what it will take to make the citizens of Kansas appreciate the value of their public servants.

Evan Ridenour 5 years, 7 months ago

Your mistake is assuming that the removal of KPERS would equal a reduction in effective pay. The reason that everyone, and it is important I emphasis that... EVERYONE... is moving away from defined benefit plans is that they are inefficient and prone to abuse. The cost savings could be used to raise base pay and to provide equitable contributions to a defined contribution plan. It is a convenient fact that people ignore, pension plans are freaking expensive (and not always for legitimate reasons but that doesn't really matter). You are trading having more disposable income in the present (that you could use to invest personally for future income) for having more secure future income.

As for all the state employees fleeing employment... to what jobs? Are you seriously going to tell me that the thousands of Kansas state employees are working for the government because of KPERS? They are working there because they can't work elsewhere. It isn't like there are a bunch of jobs with more competitive perks just lined up waiting to be had. And almost all of these other theoretically amazing jobs have defined benefit plans. You sound like just another spoiled person sitting there preying not to lose your wasteful pension. Well hate to break it to you, it doesn't matter what either of us thinks... unless you are retiring within the next 5 years, its already gone.

Randy Leonard 5 years, 7 months ago

Eride, that would be fine if the effective pay were to actually be increased to match the private sector. However look at the history of pay for state employees. It has not matched the rate of inflation for 20 years. The professional staff will flee. The attorneys, engineers, and other professional staff will leave in large numbers. Through most of the 90's KDOT ran a 30-40% vacancy rate for engineers. The main factor in turning that around was a bonus system implemented by the Secretary. After 4 years the legislature took it away and the vacancy rate rose again. A salary adjustment for new graduates along with the bad economy turned helped to improve it again. However, currently mid-career engineers are at least 20% behind there private sector counterparts. It will only take one more straw along with an improving economy to reverse it again. The situation is similar for many other professionals. Nutritionists in positions requiring Masters degrees with 25 years experience are payed less than new graduates with only Bachelor degrees in the private sector. IT staff in many cases are at least 20% under paid when compared to the private sector. I can go on with many examples, but the answer is yes eventually a large number of highly educated and talented state employees will flee employment with the State of Kansas. Most city and county governments pay better than the state. State employees in Kanas rank 47th or 48th in pay among all state governments. How long would you work under those circumstances if you had a choice?

Randy Leonard 5 years, 7 months ago

Eride, I wish I had read your entire post before my last reply. I thought you were actually trying to discuss facts, but I was mistaken. Just like so many of your type you have to resort to personal attacks and insults rather than discuss the issue. So I guess turn about is fair play. You sound like one of those unappreciative citizens who hates public servants until one of the government services important to you is taken away then all hell breaks loose because something you think is your right is taken away. Well wake up but government services are not free someone has to pay for them. I'm tired of paying the same taxes as you then have to pay a special tax because I work for the state. Every time the legislature fails to raise our pay or actually cut as proposed recently it is a tax that only we have to pay. I worked in the private sector for many years. I was recruited for a specific job with the state with appeals to my sense of public service. There are many like me. I am have had my fill of idiots like you.

Boston_Corbett 5 years, 7 months ago

KPERS won't be eliminated, because the legislators have their snout in the trough big time.

They they get an oversized pension, based on accounting tricks of artificially booster their salary and years of service for the purposes of calculating pension benefits.

And Eride is too waaay too strong in his statements. Defined benefit plans are alive and well in many places, especially public employers.

Randy Leonard 5 years, 7 months ago

Marion, I'm not sure who you are addressing you comment to, but I don't consider myself a Democrat, however I am adamantly anti-Republican in the current state of the party. If there were ever anyone who can't handle the truth it's the rightwing nuts.

Randy Leonard 5 years, 7 months ago

Boston made a very good point. The Legislators gave themselves a sweetheart of a deal in about 1990. With 10 years of service in a part time job they can retire with the same pension as a upper level manager with 40 years service. It's that kind of almost criminal idiocy that needs to be corrected as well as funding the program as required by statute.

Evan Ridenour 5 years, 7 months ago

I would like to see where I attacked you because I read my post again and I didn't see it. Was it because I implied you were biased due to having a KPERS account? Is it where I stated that it is asinine to assume (as you did) that employees working for the state could find jobs in the private sector (even in a good economy)?

  1. Of course you are a big fan of inefficient pension funds. You have one. My taxes are being used to fund a purpose that could be much more efficiently served by a 401k plan. You get something out of it, the rest of us get a potential black hole of tax payer money with little return.

  2. Sorry, it is a well known fact, public sector employees make way less money than private sector employees. And it is because those employees are less competitive in the job market. That is just the truth, I am sorry if you find that insulting. Maybe you work in the public sector because you find it rewarding in some other way... and if so good for you, but that doesn't mean tax money should be thrown around without thought to make your life easier.

The majority of the country is saving for retirement without defined benefit plans (other than social security although good luck having that around either), it is just a ridiculous waste of money.

Godot 5 years, 7 months ago

Democrats always "bristle" at the truth. What elses is new?

farva 5 years, 7 months ago

Other states tried switching to 401k plans a few years back. They all failed and reverted back to defined benefit. 401k plans were more expensive and cumbersome to manage. It was cheaper to keep the pension, with guaranteed benefits.

bear1956- ignore Eride. You've already gotten him figured out.

There are many many state employees that cannot get work in the private sector because their job does not exist in the private sector! Think scientists (geologists, hydrologists, biologists) with public health as their concern--not corporate profits, law enforcement, social services, health crisis prevention experts, the list goes on. The govt also needs lawyers, engineers, physicians, accountants-financial managers, etc just as the private sector does. Claiming govt employees are dumb and untalented is ridiculous! If I were forced to deal either with a state agency or a private company, I would pick the state agency any day. It still amazes me I can get my tax refund (electronically deposited) within days, but it takes 10-12 weeks for a cash rebate to arrive from private sector business promotions. Really, how hard is it to cut a rebate check...and how simple. This is just one of the simplest examples of how inefficient private sector companies are run. I'm glad the state government isn't run like a private business!

texburgh 5 years, 7 months ago

Eride has no real understanding of the 401(k).

First it was never intended to replace a defined benefit system, just to augment it. Secondly, research demonstrates that the 401(k) will not provide for a secure retirement. Just last Friday, Time published an article explaining why. Among the findings, the average 401(k) savings is just over $45,000 - not enough to provide any kind of stable retirement for long - and 46% of all 401(k) accounts have less than $10,000.

Read for yourself: http://www.time.com/time/business/article/0,8599,1929119,00.html

texburgh 5 years, 7 months ago

And Eride perhaps should think about this statement: "it is a well known fact, public sector employees make way less money than private sector employees. And it is because those employees are less competitive in the job market."

Think about it, Eride, the next time you need a police officer or firefighter; the next time you want a street crew to fix a pothole or see an EMT running to the hospital. Think about it the next time you look at constantly rising student assessment scores as reported in this paper today.

Eride - your ignorance is showing.

Janet Lowther 5 years, 7 months ago

KPERS has a problem because the Legislature has persistently refused to appropriate the full amount of employer contributions required to fund its pension obligations.

If I recall correctly, KPERS has at least intermittently, if not consistently, owed more benefits than they have funds to support since the 1980s.

Now, the legislature wants to shirk its responsibility by abandoning the defined benefit pension and putting a defined contribution system in its place.

At the moment I suspect Inflation will reduce the significance of the shortfall to insignificance in the not too distant future, 'cause KPERS benefits are not indexed. Of course, I'd be a lot happier to be a KPERS member if they were.

MyName 5 years, 7 months ago

it is a well known fact, public sector employees make way less money than private sector employees. And it is because those employees are less competitive in the job market.

Well known by whom, and when did this line of bull become a "fact"? I've worked in both, and I can't see a nickle's worth of difference between the two. The truth is that all workplaces are made up of the same types of people. There are the 15% of people who go and get it done and the 85% who do the minimum and try and look busy. If you're on a message board trying to sell this BS about how private sector employees are more deserving of their pay because they are "more competitive" I can already make a safe bet as to which group you fall into.

I will admit that the private sector is very good at harnessing and rewarding that 15%, while the public sector doesn't do much to pay these people more for their hard work. That being said, for 85% of the people out there, a job is a job and they'll be putting in the minimum no matter who is paying the check. So don't even start with that BS about how private sector cash is somehow "blessed" and private sector employees are all harder workers. Especially since, for better or worse, most of the growth is coming from the public sector in this economy and most businesses that want to stay afloat will be looking for some kind of government contract if they can.

KansasVoter 5 years, 7 months ago

Eride (Anonymous) says… "They are working there because they can't work elsewhere."

As soon as I read that I knew that I could quit reading anything written by Eride. bear1956 nailed it when he said, "You sound like one of those unappreciative citizens who hates public servants until one of the government services important to you is taken away then all hell breaks loose because something you think is your right is taken away."

Commenting has been disabled for this item.