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Archive for Friday, December 21, 2012

Kansas Chamber of Commerce plans to push again for pension overhaul

December 21, 2012

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The Kansas Chamber of Commerce plans to push legislators next year to reopen a debate over public pensions and start a 401(k)-style plan for new teachers and government workers.

Two chamber officials said Friday in an interview with The Associated Press that a further overhaul of the state pension system is on the group’s legislative agenda because pension costs help boost state spending.

The powerful chamber plans to formally release its agenda next month, but Vice President Kent Eckles and Legislative Affairs Director Eric Stafford provided details during the interview.

Legislators approved measures earlier this year and last year to deal with a projected $9.2 billion long-term funding gap faced by the state pension system. But lawmakers stopped short of putting new hires in a 401(k)-style plan.

Comments

Catalano 2 years ago

The "powerful" chamber? No editorializing there. They don't need any help from AP, please.

question4u 2 years ago

Already nearly 200,000 business owners in Kansas will pay no state income tax. Now the Chamber of Commerce's "agenda" is to worsen retirement benefits for state employees who do pay state income tax.

Dave Trabert 2 years ago

The latest valuation report released by KPERS in July shows that the ‘official’ unfunded liability went from $8.2 billion to $9.2 billion for 2011. Sadly, that’s not the worst part. KPERS also acknowledges having another $900 million in losses that won’t be recognized for several years, so the market-value basis of the unfunded liability is $10.1 billion. But even that is not the ‘real’ unfunded liability.

The KPERS unfunded liability is based on a completely unrealistic investment assumption that says plan assets will earn an 8% annual return. The actual rate of return in 2011 on the market value of plan assets was less than 1% - incidentally, in January a leading pension expert told the California pension system to assume no more than 4 percent over the next decade.

A little over a year ago, KPERS said that a half-point reduction in the investment return assumption would add $1.3 billion to the unfunded liability. On that basis, the ‘real’ unfunded liability with an assumed return of 6% would be $15.3 billion; a 4% assumed rate of return would put the unfunded liability at $20.5 billion. An analysis last year by The Pew Center on the States put the real unfunded liability at $21.9 billion.

Legislators haven't put enough in the plan in past years, but that will only get worse until KPERS Trustees admit that an 8% return on investment is unrealistic. They only make matters worse for future retirees and taxpayers by pretending that plan assets will return 8%.

Pension reform opponents understandably want to protect the benefits earned to date. But they probably haven't been told by their union leaders (some of whom have fully-protected, individually-owned defined contribution plans) that there are circumstances under which even existing retiree benefits can be disrupted in a defined benefit plan.

Cities are already declaring bankruptcy because they cannot meet pension obligations. Bankruptcy isn't an option for states (today) but there are circumstances under which states could petition the courts to modify current and future benefits. See http://www.kansaspolicy.org/researchcenters/budgetandspending/budgetandspendingstudies/75658.aspx It's a high bar to clear, but a partial repeat of the 2008 downturn could render a seriously underfunded plan like KPERS incapable of meeting its obligations and force Kansas to consider a full plan restructure.

Plans that are chasing 8% returns assume more risk than those seeking 4% returns. Exorbitant federal debt levels and runaway federal deficits could lead to serious downturns in the financial markets. The past cannot be undone but substantive reforms today that only impact benefits not yet earned by current employees could be the best way to ensure the retirement incomes of current and future retirees.

chootspa 1 year, 12 months ago

In other words, your plan is to make the little old ladies eat cat food by continuing to starve the KPERS program of assets, and then "oopsies! No money for you!" Because we all know you're not proposing that the pension plan be funded to acceptable levels in the future. That might involve taxing the people that pay you to tell everyone that not taxing their millions makes poor people rich and full of jobs.

Nice union bashing, too. I see you got the memo from the Kochs that union bashing is this year's little black dress. You do realize that teacher's unions are lead by other teachers and also elected by fellow teachers, right? If they want to start an IRA on top of their KPERS plan, they're just taking advantage of tax benefits and planning ahead. Maybe they want to go on a vacation to visit the grandkids when they retire. Saving now seems like a good plan. It's the sort of thing people usually encourage when they're not trying to imply something sinister about another teacher trying to represent the interest of other teachers.

JayhawkFan1985 2 years ago

The Kansas chamber of commerce is a front organization for the GOP mafia including the misnamed Americans for prosperity. Groups like these are hate groups. They hate that the Koch brothers have to actually pay taxes. They hate teachers, fire fighters, police officers, highway construction workers, etc. They hate middle class prosperity, seeing them as the undeserving poor. These guys are like the buzzards who circled Rome before it collapsed triggering 1000 years of the dark ages.

Jefferson_County 2 years ago

+1 Too bad Kansas will be the last place that the Republican Party will implode. Looks like it's already happening at the federal level.

tomatogrower 2 years ago

The Chamber used to be an organization that would help attract businesses into Kansas. Now they are a wholly owned subsidiary of Koch Industries. Let's ruin the state's education, roads, and police system. Then companies will start rolling into the state? Not.

Centerville 2 years ago

People who refuse to face the truth of public pension problems are really going to be torqued when the Ponzi scheme known as 'Social Security' comes to it's long-predicted end. There are people to this day who don't believe that they worked to pay people who were retired at the time. Even though it was stressed in the 30s that this was how it would be funded and that the payout was to be only supplemental to, not the sum total of, anyone's retirement income. I wonder if FDR was chuckling as he warned people of this, understanding that human wishfulness would make it seem something that it isn't.

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