Topeka Gov. Sam Brownback’s support has kept alive a proposal to start 401(k)-style pension plan for new Kansas teachers and government workers even as other Republicans in the Legislature lose interest.
Public employee groups, their allies and increasingly skeptical GOP legislators have all but killed chances that Kansas will start a retirement plan similar to ones now common for private companies as a way of controlling the state’s long-term pension costs.
The House Pensions and Benefits Committee is working on an alternative that’s a big step away from a 401(k), even though Chairman Mitch Holmes and Vice Chairman John Grange have supported using that kind of plan in the past. The Senate’s pensions committee is having similar discussions.
Governor not backing away
But their work will amount to little if they don’t get Brownback on board, and he’s not backing away from his support for a 401(k)-style plan. A potential veto could be a powerful incentive for the Republicans who control both chambers to return to the 401(k) fold.
That political reality has made Holmes, a St. John Republican, hesitant about declaring work had ended on a 401(k)-style plan even after he outlined the details of an alternative that will be discussed this week.
“If the governor doesn’t like this plan, we would probably go back,” he acknowledged.
The Kansas Public Employees Retirement System projects an $8.3 billion gap between anticipated revenues and benefits promised to teachers and government workers through 2033. The shortfall led legislators last year to increase the state’s annual contribution to KPERS and require concessions from workers.
But Brownback and many legislators don’t think those changes will be enough to safeguard the pension system’s long-term health. They say the state can’t sustain traditional KPERS plans guaranteeing workers’ benefits based on their salaries and years of service.
Studying the options
Backers argue a new 401(k)-style plan advocated by a study commission last year will stabilize the pension system because the state will tie benefits to KPERS investment earnings. Brownback said in a statement last week that if the state doesn’t take such a step, its credit rating could suffer.
Critics have said starting a new 401(k)-style plan won’t address the funding shortfall in existing, traditional plans and comes with additional startup costs. An estimate said the commission’s plan would cost the state an additional $10.9 billion through 2060, although some lawmakers dispute that figure.
Also, public employee groups contend 401(k)-style plans shift the financial risk from a sour economy from the state to workers, whose benefits are likely to be less lucrative.
Their arguments have resonated, and support for a 401(k)-style plan has eroded. It’s led both pensions committees to consider similar alternatives giving new public employees some guarantees without tying their benefits to their salaries and years of experience.