After months of debate, the Kansas House has passed legislation that would radically change the public employee pension system for new employees. (I should mention that university faculty are not part of KPERS.) This change will do away with the defined-benefit system that is now the central feature of KPERS and replace it with a defined-contribution plan. It seems quite likely that the House plan will be modified when it reaches the Senate, so the exact end result remains up in the air, but there does seem to be strong support in both houses for some change.
Not surprisingly, public sector unions and interest groups oppose the change from the current KPERS system, pointing out that the proposed system will significantly reduce the value of pensions for newly hired public employees. Those who support the change argue that the state cannot afford to continue the old defined-benefit plan because it is too expensive and point out that many states and much of private industry has already abandoned defined-benefit plans and moved to some form of less expensive defined-contribution plan.
While there are reasonable arguments on both sides of this issue, there are a few issues that simply cannot be ignored. The first of these is quite simple and serious: Over the years, successive legislatures have failed to adequately fund the KPERS system. These years of underfunding have created a massive deficit in the system, a deficit the changeover itself will not solve, although the House bill proposes to use future gaming revenues to lessen the deficit. From my perspective, the Kansas Legislature’s failure to fund a major state financial obligation is no less than a case of dereliction of duty that everyone should condemn.
I see little point in blaming employees by saying that the KPERS system was too expensive. It was not employees who set up the system. Like all other employees, public and private, Kansas public employees assumed that if the state was offering the KPERS pensions, it would live up to its obligation.
In my experience, when people accept jobs, they try to get the best compensation package they can. I also don’t believe that very many public employees in Kansas have so much bargaining power that they can force the state to pay them excessive compensation. The state set up the current KPERS system and then didn’t fund it. The blame for this massive underfunding lies with the Legislature, not public employees.
Although I would lay the blame for problems with KPERS at the Legislature’s doorstep, I find it difficult to blame the current Legislature for now deciding that it cannot offer new employees benefits the state is unwilling to pay for. Unless there is some reasonable possibility that the Kansas Legislature will completely change its nature and begin to fund public pensions fully under the current set-up, the Legislature must change the system to a form it can and will pay for. That is the financially prudent and responsible way to act.
But there is a trade-off here. The KPERS system was, many folks tell me, a significant consideration in their taking a public sector job. For many employees, the generous pension benefits provided under the current KPERS structure were a major reason for taking a job with the state. If we now significantly reduce these benefits to future employees, we may well face the possibility that the state will not be able to attract the quality of employees it wants to hire. If the proposed changes become law, the next few years of state employee hiring should tell us whether that is the case.
My bottom line on the KPERS issue is that I just don’t see very much likelihood that future legislatures will be any more willing to meet the costs of the current system than past legislatures have been. If that’s the case, it’s better, in my opinion, to change to a less expensive system, albeit one that offers reduced benefits to employees, than continue to underfund the system and gamble that somehow the state will be able to pay the pension benefits it will owe. But it is also clear to me that it is wrong to blame public employees for the state’s present financial problems because of underfunding KPERS. That was the Legislature’s doing and the Legislature should accept responsibility for it.