Archive for Monday, September 13, 2010

KPERS problems await next Kansas governor

September 13, 2010


— The next Kansas governor is going to face a problem that to fix will require a lot of what state government doesn’t have: money.

The Kansas Public Employee Retirement System has an unfunded actuarial liability — the difference between the system’s assets and future pension obligations — of nearly $7.7 billion.

The unfunded actuarial liability doesn’t affect current benefits, but officials say a plan needs to be implemented to address the issue over the long term. The system has 250,000 members.

The problem, according to experts, is the state doesn’t contribute enough to the system.

A recent report by Pew Center for the States rated KPERS as one of the most underfunded pension systems in the country.

“We are certainly one of the lower-funded systems and one of the reasons: We are not contributing at the actuarial rate,” said Glenn Deck, executive director of KPERS.

Senate President Steve Morris, R-Hugoton, said addressing the issue will be one of his top priorities in the next legislative session, which starts in January.

He supports legislation that would increase the state’s contribution at an annual cost of approximately $58 million.

But after six rounds of budget cuts and amid a struggling economy, finding that kind of cash will be extremely difficult.

Some have suggested the state move away from a deferred benefit plan based on employees’ salaries and years of service, and move toward 401(k)-style plans. But others have argued against that, pointing to the beating that 401(k) plans took during the recent recession.

The Lawrence Journal-World asked the two major political party candidates for governor — Republican Sam Brownback and Democrat Tom Holland — what they would do to address the KPERS issue and whether they support a 401(k) style plan for new teachers and government employees.

Here are their responses:

Tom Holland

“The state has failed to fully fund KPERs. As the economy improves and new resources become available, we must address this unfunded liability. Meanwhile, we cannot expect employees to increase their contributions if the state has failed to meet its obligations.

“In terms of the retirement benefits, I support the defined benefit plan. I do not support cutting those benefits. And we should not be putting our retirees’ future at risk by gambling their contributions in the stock market, especially after my opponent and his friends in Washington devastated the stock market by deregulating the banks and bailing out Wall Street.

“The state has made a promise to our teachers and civil servants that, after many years of paying into a system, that system would be there for them at the end of their career. We cannot break that promise. As governor, I will not break that promise.”

Sam Brownback

“KPERS faces huge problems. It has a projected deficit of $7.6 billion, and that’s if the fund averages an 8 percent return on its investments in the coming years. According to a recent report in Barron’s Magazine, KPERS is one of the most underfunded state retirement systems in the country.

“A Brownback administration will work with the Kansas legislators, retired and current state employees, KPERS board and others to develop a plan for its long-term solvency. State employees who dedicate their careers to meeting the needs of Kansans deserve a stable retirement system.”


Zachary Stoltenberg 7 years, 9 months ago

And the mud slinging begins. You won't get my vote that way Tom. They asked you what you plan to do, not how you would blame it all on your opponent. I want rid of that polar political rhetoric. Better start looking at your other options if you are this desperate and it's only September.

just_another_bozo_on_this_bus 7 years, 9 months ago

"I want rid of that polar political rhetoric."

Given that the defining Republican strategy, a strategy that Brownback has fully embraced throughout his career, has become one of polarization, how can you vote for him if that is your alternative to Holland?

texburgh 7 years, 9 months ago

And I guess then that Brownback gets your vote because he simply said he'll work with legislators? Why won't Brownback tell us what he proposes on anything? Either he doesn't know or his plans will be terrible for average working Kansans.

Zachary Stoltenberg 7 years, 9 months ago

that's precisely my point. Neither one of them gave an answer, but only Holland used it as an opportunity to slam his opponent. Desperation from the dems only hope. I'm not a Brownback fan either but the negative campaigning really rubs me wrong, no matter which side it's coming from.

Scott Drummond 7 years, 9 months ago

Is the accusation accurate? If so, it seems a compelling reason not to adopt the stock market gamble approach. Why would pointing that out cause you to support the person who does want to take that approach?

CreatureComforts 7 years, 9 months ago

Political Science 101...don't give answers, give air.

So_tired_of_the_whiners 7 years, 9 months ago

Wow, way to use first hand information and soild facts to support your statement.

You do know that government employees pay into this system, or did your friend not mention that...

pittstatebb 7 years, 9 months ago

That is a lie, a bold lie. You can google KPERS, put info into the retirement calculator and find that reitirement amounts will be around 50% of final salary. I ran the number you gave (96K) with 30 years of service and retirement with 85 points (the earliest date). The result $50,400 or 52.5% of final salary. KPERS is a terrible pension plan. My father will retire from the UPRR in two years and his pension will pay him over 6k a month (more than a teacher in my district could EVER make).

Adrienne Sanders 7 years, 9 months ago

Brownback didn't say what he would do at all.

Holland apparently thinks the economy is getting better, which is delusional.

@gregsharp, I doubt that's true about your friends' mom, but even so, her retirement would have nothing to do with KPERS.

mistygreen 7 years, 9 months ago

Teachers as well as school district employees contribute to KPERS. Also, and I'm sure someone will correct me if I am wrong, but I think firefighters and police officers and highway patrol also contribute. They may have different criteria, but it is more that just state employees.

aa469285 7 years, 9 months ago

Do you know what KPERS is? A significant part (if not all) of a public school teacher's retirement comes from KPERS. You just proved your ignorance on the topic.

Jimo 7 years, 9 months ago

“A Brownback administration will work with the Kansas legislators, retired and current state employees, KPERS board and others to develop a plan for its long-term solvency."

Vote for me and I'll support other people solving this problem but you have to turn power over to me first before you (and I) find out what the plan is. Heck, I can't even give you general principles that should govern a solution. (*Pssst. That's because I don't have a solution.)

Will voters never tire of being treated as fools?

Scott Drummond 7 years, 9 months ago

If there are new uneducated voters every year, then it is hard to see how the politicians won't continue the abuse. The key is to point out their tricks and educate as many of your fellow citizens as you can of the unworthy things that politicians do.

yankeevet 7 years, 9 months ago

So where is all of this KPERS money at???

jafs 7 years, 9 months ago

Some of it is undoubtedly invested in the stock market, and took a serious hit with the recent financial meltdown.

And, the state hasn't been living up to it's responsibilities for a while, due to the anti-tax stance of Kansas Republicans.

Scott Drummond 7 years, 9 months ago

And remember, "took a serious hit" is just a nice way of saying, we took your money, gave it to a bunch of Wall Street banksters and now someone else has half of your money.

Scott Drummond 7 years, 9 months ago

Or maybe the people who worked for the State and counted on KPERS being funded as part of their agreed upon compensation package want it.

So if the "productive" people in Kansas have it, perhaps they should give it back.

BTW, Bernard Madoff, Lehman Bros., AIG, Enron, the list goes on, and on, and on. All full of "productive" people. Maybe we ought to worry more about who's an ethical member of society, rather than who's "productive."

nobody1793 7 years, 9 months ago

I blame Lew Perkins, Wall Street Fat Cats, and China.

skinny 7 years, 9 months ago

There is a state law requiring the State of Kansas to be financially reasonable should KPERS fail!

As a state employee I have paid into this system for 31 years. It is not a handout!

Moderateguy 7 years, 9 months ago

Vote Libertarian. Neither of these guys has a clue.

Evan Ridenour 7 years, 9 months ago

There is a reason why the only employer providing defined benefit plans these days is the government. They are incredibly burdensome.

It is time for the public defined benefit plans to go away.

Instead of pouring more money in KPERS, shut it down.

honestone 7 years, 9 months ago

And what becomes of my 27 years of state employment....

jafs 7 years, 9 months ago

So everyone can take their chances in the stock market?

Jimo 7 years, 9 months ago

No, the reason is that government isn't as quick to change as private employers.

Private employers discovered a few decades back that they could dump their responsibility to provide retirement benefits onto their employees. Simultaneously, there was an upsurge in individualist sentiment -- 'I can be independent!' 'I can make 10%, 12%, 20% annual increases by putting money in the stock market' 'I can retire as a millionaire and early to boot!' Sadly, we are only beginning to see the consequences of this misguided sentiment with the worst to come (the societal and economic burden of increased elderly poverty).

pittstatebb 7 years, 9 months ago

Eride - KPERS is a great plan for the state government because pay next to nothing (4% of wage) into the retirement plan and only when they want too. The problem with KPERS is that EVERYONE is paying too little into the plan. 4% of your salary is NOT enough of a contribution (even when considering the state's match) to leave a comfortable retirement. See Missouri's double digit contribution schedule (~14%).

Pension plans have nothing to do with government employees and everything to do with unions. Must unionized workforces have pension plans and most non-unionized have 401k's. If you are a worker you want a defined benefit plan not a 401k type plan because the pension plan will provide a better retirement (safer and more money.

PS: the state cannot afford to close down KPERS b/c they cannot afford to pay off their payments to the current retirees and the current employees in the system in one large payment. They have to rely on the chipping away little by little at their legal responsibility and the market recovering.

jafs 7 years, 9 months ago

So, make it harder on the employees rather than requiring the state to live up to its end of the bargain.

Even though people may have made long-term employment decisions, and accepted lower wages, based on their understanding of their pension benefits.

pittstatebb 7 years, 9 months ago

Toe - benefits are already reduced (KPERS only pays ~50% of final salary), 10 years is already required to vest, employee contributions have already been increased by 50% (two years ago for all new employees), by increasing retirement age you are keeping a teacher making 2x a new teacher (by allowing them to retire you can hire a new teacher at 1/2 the salary and it is a budget win for the local district and budget neutral in the whole scheme of things).

RegularJane 7 years, 9 months ago

Gregsharp--I seriously doubt her retirement is even close to what she makes. I don't know about the Olathe school district, but no one is getting rich on a state employee pension. I don't believe the average retired state employee could just live on the state pension alone. The formula is the avergage yearly salary x 1.75 x the number of years employed. I know it used to take 10 years to vest, but I think they have reduced it to 5 years, removed the 85 points retirement option (you could retire with full benefits if your age and years of employment totaled 85), and increased the employee's contribution . Also, I understand that you can stay on the state's health insurance, but you have to pay your part and the state's--I think it runs about $500 month, which is probably cheaper than if you had to go out on your own, but it is a big chunk every month. If you drop it for whatever reason, you can never go back. If the state had done the state's part in funding it, there wouldn't be a problem.

Beth Bird 7 years, 9 months ago

One question, two responses - NO PLAN!!!

John Kyle 7 years, 9 months ago

Photo caption: "The next Kansas governor is going to face a problem that to fix will require a lot of what state government doesn’t have: money."

I know some syntax professors who would love to analyze that one. Or should I say: this is one some syntax professors I know would love to analyze.

BigDog 7 years, 9 months ago

Interesting that it is expected to be solved by the next governor.

This is not a new problem ...... the question should be why have the last two governors not come up with any kind of plan for dealing with this issue?

pittstatebb 7 years, 9 months ago

After reading these comments, there are a lot of uniformed people who want KPERS workers to have a lesser retirement plan. The question is why? Is it because some of the money comes from taxes? Is it resentment b/c you think KPERS is such a great deal? I do not complain when private companies offer paid sick days, vacation days, 401k plans that the employee pays management fees for or even pays matches, medical benefits, etc. ALL of these drive up the cost of goods and services, meaning that all of us pay more for consumable goods and services. It is the same as having higher taxes to pay for public workers benefits. Go to KPERS, play with the retirement benefit estimator and then decide how great of a deal KPERS is.

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