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Kansas legislature

Kansas Legislature

$1.5 billion KPERS bond proposal advances in Legislature

April 5, 2013

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— Legislators on Friday moved toward issuing $1.5 billion in bonds in a gamble to shore up the state pension system.

The Senate Ways and Means Committee recommended approval of a bill that would allow the issuance of the bonds at a maximum interest rate of 4 percent.

The House has already adopted House Bill 2403, which would set the maximum interest rate of the pension obligation bonds at 5 percent. The differences in the two bills will likely be negotiated in a House-Senate conference committee.

Supporters of the plan say the state can borrow money at 5 percent or 4 percent or lower, and then invest those funds, hopefully getting a higher rate on investment, which historically has been 8 percent.

The profit would then be plowed back into the Kansas Public Employee Retirement System to help fill a gap between anticipated revenues and long-term promised benefits to teachers and government workers.

"This is a good idea for the state," said State Treasurer Ron Estes. "The net cost to the taxpayer will be less over the next 20 years if we do issue bonds."

Some legislators said they thought the plan needed further analysis.

"We are taking action long before we have the information we need to make an educated decision on this," said Sen. Laura Kelly, D-Topeka.

Comments

irtnog2001 1 year ago

If these bonds will be tax exempt I don't see how this works. Any profits made on the spread will have to be paid to the IRS per arbitrage requirements.

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JayhawkFan1985 1 year ago

Pensions are no more than deferred compensation. These dumb bastards now are planning to borrow money to meet what is essentially a payroll expense. That's like eating the seed grain. They should have fixed kpers, which is a legal and contractual obligation BEFORE slashing taxes. DUMB BASTARDS...

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Richard Heckler 1 year ago

Supply Side Economics hard at work increasing the Kansas debt. Reaganomics has never been about smart economics instead Wreckanomics is the negative result after 33 years.

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billybob1 1 year ago

Run for the hills. If this isn't a signal of a market top, I don't know what is.

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KSSWEDE 1 year ago

Didn't we do this to the tune of $500 million when Sebelius was Governor. I recall $500 million went to KPERS and another $500 million was for KDOT's transportation plan. As I remember there was no principle paid on either bond issue for 5 years. That was convenient for her as she would be long gone before the big bill came due.

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jafs 1 year ago

I thought they were going to use some other revenue, from gambling perhaps, to help shore up KPERS?

While you can get higher returns than 4-5% in the stock market, that's generally riskier and more volatile, and long term averages don't take into account short term losses. What happens if they lose a bunch of money in the market?

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toe 1 year ago

The state can declare bankruptcy and extinguish this debt. This is what Sacramento is arguing and CALPERS is saying they do not have to give the funds up to the bond creditors that provided the funds. This is a win win for the State when it goes broke. Every city should do this, too. Sacramento leads the way.

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chootspa 1 year ago

How about the Kansas legislators resume taxation at a reasonable level to cover their debt obligations and not go on crazy casino gambling binges?

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Pepe 1 year ago

If getting an 8% return on investment is as easy as these guys seem to think, why would anyone buy their bond that pays 4%? In other words, why would I buy their bond paying 4% instead of just investing my money in whatever they plan on investing it it to get 8%? This scheme sounds a little bit harebrained.

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Grump 1 year ago

Will KPERS invest it as it sees fit, or will it be invested with a friend of Sam's; in a Texas or Florida hedge fund maybe?

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irtnog2001 1 year ago

Doesn't sound legal to me. There are arbitrage rules that may make it taxable.

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Keith Richards 1 year ago

Wow that sounds rather risky! Basically the same thing as a homeowner taking out a second mortgage on their house to invest in the stock market.

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