A measure passed by the Kansas House this week may need some tuning up, but it proposes some positive steps toward shoring up the state’s pension system for teachers and government workers.
As did some other plans, the bill passed by the House would spell the end of the guaranteed benefit plan for new employees entering the Kansas Public Employees Retirement System. Those employees would have to choose between a 401(k)-style plan and a guaranteed fixed-return plan.
The big difference in the House plan is that it sets a specific strategy to address a projected $8.3 billion gap between expected KPERS revenue and the benefits the state has promised to retirees through 2033. An amendment proposed by House Minority Leader Paul Davis, D-Lawrence, and accepted by the House would use a large portion of the revenue from three state-owned casinos to meet the state’s pension commitment.
A casino in Dodge City, along with two new casinos that have opened since the first of the year near Kansas City and Wichita, are expected to generate more than $80 million for the state in the fiscal year that begins July 1. The state already has dedicated $10.5 million of that money to boost engineering programs at state universities, and the House bill would commit three-fourths of the remaining money to KPERS. Although it’s hard to put a solid dollar amount on that revenue, Davis predicted it could produce several billion dollars over the next 20 years.
Although Kansans could think of many other positive ways to use that casino revenue, the state needs to make good on the promise it has made to retiring employees. To help rein in future costs for KPERS, it’s also reasonable for the state to make changes in the plan for new employees. Many private businesses offer 401(k) retirement plans, and that seems like a valid option for state employees. The option of a fixed-return retirement savings plan needs further consideration. The 5 percent annual return guaranteed in that plan is well above any current interest rate on insured savings accounts. Legislators should have learned not to promise retirees more than the state can reasonably expect to financially support. If the state wants to offer a guaranteed-return plan, the plan’s earnings should be flexible and tied to some national economic measure such as the Consumer Price Index.
The Senate is continuing to work on its own KPERS plan. That plan is likely to include some different ideas, but the plan outlined by the House deserves serious consideration. It sets a solid plan for helping the state address the current KPERS shortfall as well as some valid options for putting the system on a firm footing for the future.