Topeka Gov. Sam Brownback signed legislation Wednesday to inject more taxpayer dollars into Kansas' public pension system while also requiring teachers and government workers to make concessions on their future retirement benefits.
The bill also establishes a commission to study other issues, including whether the state should start a 401(k)-style plan for new public employees. Such a plan would tie a worker's benefits to investment earnings; the state's traditional plans guarantee benefits up front, based on an employee's salary and service time.
The new law is designed to close a projected long-term funding shortfall for the Kansas Public Employees Retirement System. It projects a $7.7 billion gap between anticipated revenues and benefits promised to retirees and current employees through 2033.
The shortfall has led some legislators to question whether the state can sustain traditional pension plans, and Brownback favors starting a least a "hybrid" allowing new hires to join a 401(k)-style plan. But public employee groups strongly oppose moving toward a 401(k)-style plan.
The study commission must make its recommendations by year's end, so that legislators can consider them before June 2012.
"People are living a living a longer period of time — which is a good thing — retiring at a younger point in time, and the system can't sustain it," Brownback said during the ceremony. "That's why I think it's time we really look at going to a different system that is sustainable."
The new law raises the state's annual contribution by about $15 million in July 2013, according to KPERS and legislative researchers. The increase will continue to ramp until July 2017, and phasing into to $95 million, according to new estimates assuming a growing employee payroll.
The law also directs the state to identify surplus real estate and sell it when possible, with 80 percent of the money raised going to close the KPERS funding gap.
Teachers and government workers also face making concessions, starting in 2014. Most would be forced to choose between paying a higher percentage of their salaries into KPERS or seeing their future benefits cuts. Others, hired after June 2009, would be forced to choose between different cuts in future benefits.