Archive for Tuesday, May 3, 2011

State lawmakers’ talks stall on pensions bill

May 3, 2011, 4:54 p.m. Updated May 3, 2011, 6:10 p.m.


— Work on pension legislation in the Kansas Legislature stalled Tuesday when House members pressed for a vote in the Senate on creating a 401(k)-style retirement plan for teachers and government workers instead of studying the idea.

Senate negotiators resisted, and the chamber's top Democrat insisted House members should vote on senators' version of legislation attacking long-term funding problems facing the Kansas Public Employees Retirement System.

The three senators and three House members then ended their talks for the day, without scheduling another meeting.

Legislators don't expect the impasse to last long because Tuesday was the 82nd day of their annual session, with 90 days scheduled. But the disagreement underscored that the House's Republican majority is far more eager to have the state start a 401(k)-style retirement plan than either party in the GOP-controlled Senate.

KPERS projects a $7.7 billion gap between anticipated revenues and benefits promised to public employees through 2033. Both chambers have approved bills to increase the state's annual contributions to KPERS, starting July 1, 2013, though by different amounts.

Many House Republicans contend the state can't sustain its traditional retirement plans, which guarantee a worker's retirement benefits up front, based on salary and years of experience, rather than tying benefits to investment earnings, like 401(k) plans. Senate GOP leaders argue setting up a commission to conduct a study this year would bring public employees and business leaders with pensions expertise into the debate more fully.

Senators have suggested their chamber wouldn't approve the House's plan. It would require teachers and government employees hired after June 2013 to join the new 401(k)-style plan and cut the future benefits of other workers if they don't opt to participate as well.

The Senate hasn't voted on a 401(k)-style plan, and House Pensions and Benefits Committee Chairman Mitch Holmes, a St. John Republican who is his chamber's lead negotiator, told senators it's time to test their assumption.

"I think it has a better chance than what we're assuming," Holmes said after the talks broke off Tuesday.

Sen. Jeff King, an Independence Republican, and his chamber's lead negotiator, said a majority there may support moving to a 401(k)-style plan but not the House's proposal, making a study beneficial.

"There are a wide range of choices," he said.

Democrats and public employee groups strongly oppose starting a 401(k)-style plan, fearing it will make workers' benefits less secure and less lucrative.

Last week, a KPERS report said the new plan would come with startup costs that would slow efforts to close the long-term funding gap. The report said the House plan would cost state and local governments $1.2 billion more in contributions to KPERS through 2033 than the Senate's legislation.

But supporters of starting a 401(k)-style plan argue that until the state takes the leap, each new employee adds to its long-term funding liabilities, with taxpayers on the hook.

Senate Minority Leader Anthony Hensley, a Topeka Democrat and one of his chamber's negotiators, said he believes there's enough support in the House to pass the Senate's legislation. He called for a vote in the House.

In theory, Senate negotiators could agree to a plan that includes a 401(k)-style retirement plan for new hires and bring it to their chamber, expecting it to fail. Then, when senators voted it down, the negotiators would resume their talks, with a definitive statement on where the Senate stood.

"It's an unnecessary step in the process," Hensley. "We don't have time to waste on frivolous things like that."

Holmes said Hensley's comments about House members supporting the Senate's plan are a "heads up" that some House members will try to force a vote.

House Minority Leader Paul Davis, a Lawrence Democrat, said he doesn't know of any such plan but added, "That possibility always exists, and maybe that's what we will eventually come to."


justoneperson 7 years ago

What is the retirement plan for State Legislators? What is their health plan? How long do they have to serve in the Legislature before they get full retirement benefits?

These are the things we, as the public that pays the bills, should be asking. If the legislature is willing to cut the benefits of others, we need to be on them to cut their own. Make it an issue.

Dave Trabert 7 years ago

Legislators participate in KPERS and I believe are subject to the same rules as everyone else in the state/school plan with one notable exception: they are credited with a full year of service even though they are only paid for roughly 90 days. Length of service requirements are the same as everyone else in that plan and their benefits would be based on their part-time salary. The changes proposed by the House and Senate would apply to Legislators.

But why do media and some legislators insist on low-balling the deficit? It is NOT $7.7 is at least $9.4 billion according to KPERS and even KPERS is hinting it could be much worse. Government accounting standards allows government plans to not count all of their actual investment losses as they are incurred; instead, they are blended in over a 5-year period. The KPERS annual report says they have $1.7 billion in losses they haven't accounted for. Using the market value of assets, the unfunded liability is $9.4 billion.

But their calculations assume an 8% investment return, which KPERS also acknowledges is likely too high. They say that reducing the rate to just 7.5% would add another $1.3 billion to the deficit. Many actuaries recommend that private sector plans use a 6% rate of return or less to calculate unfunded liabilities. At 6%, the deficit is nearly $12 billion.

While there would be some start-up costs associated with a defined contribution plan for new employees, it is far less costly to do so in the long term. We don't need a study commission to decide whether it's in taxpayers best interests to continue to put new employees into a more expensive plan that provides benefits multiple times better than private sector workers. The DC plan for new hires should be implemented ASAP and move on to making the tough decisions to close the unfunded gap.

notanota 7 years ago

It's nice of you to back up the legislators while they do work for your beloved Kochs, but here's the answer:

Not only do they get credited with more than a year of service, they also have the option to opt into KPERS, so if they saddle the current enrollees with a loser of a 401k plan, they can just opt out of it while forcing the state workers to stay in. Isn't that nice?

As far as the dept, both plans would take care of it, from what I've read. Only the Senate version would do it faster than the House.

Paul R Getto 7 years ago

Too bad the Legislature ripped off KPERS for years and 'hoped for better days.' Now they have to make it right. I suspect the end game will be trying to allow for 'bankruptcy' in some way or another, then tell everyone they are on their own. At least they fixed it for themselves when they had a chance.

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