KPERS perk for legislators gets little discussion by legislators as they consider sweeping changes
Hutchinson ? A state pension formula exclusive to Kansas legislators assumes they work every day – all 372 days of the year.
As legislators wrestle to bring solvency to the Kansas Public Employees Retirement System, their annualized pay formula, based partially on non-existent days and pay, has not entered discussions, the Hutchinson News reported.
Senate President Stephen Morris, R-Hugoton, defended the KPERS formula for legislators by pointing to lawmakers’ pay, which he said was among the lowest in the country.
It’s a perk, said Rep. Mitch Holmes, R-St. John, and chairman of the House Pensions and Benefits Committee.
“It’s one of the few perks we have,” he added.
Building a benefit
There are approximately 1,400 state, local government and school participating employers in KPERS and about 260,000 active, inactive and retired members, according to the agency.
Pension benefits are determined by final average salary, years of service, and a multiplier. Both employees and the employer pay into the system on a percentage basis. Where the KPERS formula takes a detour for legislators is how it calculates their pay.
Members of the 40-seat Senate and the 125-seat House fall under the same pay scale. A legislator’s pay is not a set sum but is built from three parts: daily rate, subsistence and non-session allowance.
A legislator receives a daily rate of $88.66 during the session. That includes payment for Saturday and Sunday, unless the Legislature takes a break. Last year, the Legislature reduced the $88.66 daily rate to $84.23 a day for six pay periods, in response to a tight economy and budget. This year, the daily rate is back at $88.66, according to LaVonne Mumert, payroll administrator in Legislative Administrative Services.
Accompanying the $88.66 is a subsistence payment of $123 a day. The subsistence rate is tied to a federal rate, which is why the Kansas rate climbed from $116 to $123 in October 2010, when the new federal fiscal year began, Mumert explained.
In addition, legislators receive a taxable allowance of $7,083. This is meted out in 20 biweekly installments of $354.15, enabling legislators to receive checks throughout the year.
Lawmakers receive the daily rate and subsistence when they participate in committee meetings during non-session months. Also, members in leadership receive varying amounts of increased compensation. Posts drawing additional pay, according to Mumert, are: Senate president, House speaker, Senate vice president, Speaker pro tem, majority and minority leaders and assistant majority and minority leaders, and chairmen of Senate Ways and Means and House Appropriations committees.
Up to new members
Freshmen entering the Legislature are given the option of joining KPERS.
Regular employees do not have that option and must enroll in KPERS, said Kristen Basso, communications officer with KPERS.
Former Senate President Richard “Dick” Bond, R-Overland Park, said he enrolled in KPERS when he entered the Legislature in 1987, and he didn’t know any legislator who didn’t sign up.
In 2010, according to KPERS, there were employer contributions made on behalf of 149 legislators.
The next decision for the new legislator, according to Basso, is to elect how much compensation to include in their KPERS’ calculation: only the daily rate, the daily rate plus subsistence; the daily rate, subsistence, and non-session allowance; or any combination of those incomes.
“So basically they can have a pretty small salary or they can have a pretty large salary,” Basso said, to determine the benefit.
Individual retirement choices and benefits are confidential data, but Basso said, “The tendency is generally when they choose to be part of KPERS, they put it all in, anything that’s possible.”
The Legislature opens its 90-day session on the second Monday of January. Typically, the Legislature concludes its regular session in early April and returns later in the month for wrap-up work that can take anywhere from less than a week to more than two weeks.
To determine a legislator’s KPERS benefit, his pay is annualized, treated as if the job entailed full-time employment and full-time pay.
“Even though they only really earn that for several months of the year, they get credit for earning it all year long,” Basso said.
For the legislator listing all income – the daily rate, subsistence and allowance – this is how annualization is calculated:
$88.66 (daily rate) x 31 (days) x 12 (months) = $32,981.52
$123 (subsistence) x 31 (days) x 12 (months) = $45,756
$7,083 non-session allowance.
Altogether, that equals $85,820.52, and that’s the pay figure that would be used for that legislator retiring now.
The Senate president and House speaker are at the top of the pay scale, and annualized pay for those posts could be as high as $99,859.74, depending on their enrollment choices, Mumert said.
A legislator’s actual yearly compensation is less than one-third of the annualized pay of $85,820.52, but his payroll deduction for KPERS is based on the annualized figure.
Often, the general public doesn’t understand that the legislator pays an employee contribution based on the higher pay, Mumert noted.
Legislators, along with other state, school and local government workers enrolled in KPERS, pay a 4 percent employee contribution if they were hired before July 1, 2009. Those people starting on or after that date are in Tier 2 and must contribute 6 percent. The KPERS vesting period also changed, effective in July 2009, dropping from 10 years to five years for participants, including legislators.
For a legislator in Tier 1 with an $85,820.52 annualized pay, his KPERS contribution per biweekly pay period is $132.03, or approximately $3,432 a year, according to KPERS. For lawmakers elected last fall and in Tier 2, their annual contribution if enrolled in KPERS and declaring the maximum annualized pay is approximately $5,149.
Employer rates change based on actuarial experience. The state as the employer had an annual contribution rate of 7.57 percent in fiscal year 2010, but that rate now stands at 8.17 percent. For the fiscal year starting July 1, it will climb still higher, to 8.77 percent.
In calendar year 2010, employer contributions for legislators in KPERS slightly topped $900,000.
Former Rep. Mark Treaster, a Pretty Prairie Democrat defeated after four years in office and too soon to be vested, pointed out that legislators contribute a sizable amount because it is based on the annualized pay.
But, Treaster said, KPERS retirement for legislators is “still a heck of a good deal.”
State staff and former legislators could not recall exactly how the annualized pay formula arose, but all said it’s been in place for many years.
Longtime KPERS employees agreed the annualized concept has been used “since the beginning,” Basso said.
“I think the reason they did that was because that was a way to raise salaries, basically, without raising salaries,” Treaster said.
“Clearly, the pay is very low,” former Sen. Bond said, but it’s “politically objectionable” for legislators to vote themselves a pay raise, he said.
“It’s probably not going to happen. Nobody’s got that kind of courage,” Bond said.
Kansas has a citizen Legislature, comprised of lawyers, farmers, doctors, teachers, business owners, and bankers.
The National Conference of State Legislatures released its 2011 legislator compensation comparison earlier this month, and in nine states, the base salary for a legislator is $50,000 a year and upwards. At the top is California, where the base salary for a legislator is $95,290 a year.
Sen. Chris Steineger, R-Kansas City, defended the KPERS formula, “given our overall low pay and being available 24/7.”
Steineger, who has rental properties, said he tells constituents he is “working for them all year round.”
KPERS is a multi-billion-dollar fund, Steineger further noted, and legislators’ retirement expense represents a “fraction.”
A legislator retiring with an annualized pay of $85,820.52, and with 10 years’ service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years’ service, the annual benefit would be $30,037.20, and monthly, $2,503.10.
The News asked some KPERS retirees about their pension benefits. Their answers varied widely.
A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years’ service, estimated the earned benefit at $2,300 to $2,400 monthly.
A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.
Kathy Mendenhall, a public speaking instructor at Hutchinson Community College and past president of the Hutchinson National Faculty Association, had not been aware of the annualized pay formula for legislators.
“Oh, wow,” she said.
“Teachers work so hard for their pay. We give our heart and souls to our job,” Mendenhall said. “There’s a level of insult to our profession when those kinds of things happen.”
“I think it should be fair and equitable for everybody, and I don’t think that one group should receive any kind of preference over another,” said Jane Carter, executive director of the Kansas Organization of State Employees.
The annualization formula hasn’t been discussed in legislative committees dealing with KPERS and its unfunded actuarial liability of $7.7 billion, according to Mark Desetti, director of legislative advocacy for the Kansas National Education Association.
“They’re focused on whatever their agenda is for the system as a whole, for fundamentally everybody else. Our interest is in preserving what is a fair retirement system for teachers, firefighters, state employees, judges, and so on,” Desetti said.
“Is it fair or not? It depends on who’s looking at it,” said Desetti, emphasizing he was not making that call.
Recently, legislators in the Illinois House of Representatives shaved pension benefits for legislators and judges that were better than those for teachers and state workers.
Treaster said he never heard any Kansas legislator say the annualized pay formula should be changed.