Archive for Monday, November 17, 2014

Lawmakers worry KPERS may be target during revenue shortfall

November 17, 2014, 11:44 a.m. Updated November 17, 2014, 1:10 p.m.

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— The troubled Kansas Public Employees Retirement System has started showing new signs of health in the past two years with big gains in the stock market and changes in the system requiring increased contributions from both the state and its employees.

But new concerns were raised Monday that those gains could come undone if Kansas lawmakers decide to cut back on the state’s contributions to the pension system to address a looming $715 million revenue shortfall.

Sen. Laura Kelly, D-Topeka, asked KPERS officials Monday to come up with projections about what that would do to the system’s unfunded liability.

“Those of us who have been around here long enough know that when tough times come, we have either reduced or eliminated our KPERS contributions,” Kelly said during a meeting of the Legislature’s Joint Committee on Pensions and Investments.

Last week, state budget officials released new revenue projections showing lawmakers will need to cut $279 million in spending to balance this year’s budget. And for the next fiscal year, which begins July 1, they will need to carry those cuts forward and make another $435.7 million in spending cuts.

KPERS manages the retirement benefits for nearly 82,000 retired public employees, as well as nearly 175,000 active public employees. Those include employees of state government, public school districts and municipal governments in Kansas. There are another 19,300 “inactive” members, meaning they no longer work for an employer that is part of the KPERS system but they still have money in a KPERS account that can be used for retirement.

The system currently has an unfunded actuarial liability of just under $10 billion. That’s the difference between the current value of its assets now, plus any earnings those investments would realize, minus the cost of future retirement benefits it has already accrued. Unfunded liabilities are generally projected over a 40-year period.

But Republican leaders on the panel said there is little chance of cutting back on KPERS contributions to make up for the revenue shortfalls, although they left open the possibility that the funding may have to come from money other than the state general fund.

“We need to keep those commitments,” said Sen. Jeff King, R-Independence, who chairs the panel. “I am always open to suggestions — what we’ve seen from other states; new proposals to more efficiently make those commitments we’ve made — but keeping the commitment to paying down the unfunded liability is vital.”

One measure included in the 2012 KPERS reform bill was a provision allowing the transfer of excess casino gaming revenue to be used to pay down the system’s unfunded liability.

But Conroy said Monday that although KPERS has received more than $40 million of gaming revenue, that money was used instead of general fund money to make the state’s employer contribution, not as additional money to pay down the unfunded liability earlier.

Kelly’s question came after a report by KPERS Executive Director Alan Conroy, who said the system’s unfunded liability fell below $10 billion in May of this year, while the total market value of its assets rose above $16 billion.

Conroy said much of that has been due to strong gains in the stock market the past two years. That included a 14 percent return on investments in 2012, followed by a 17.7 percent rate of return in 2013.

As of June 30, he said, the fund’s 20-year average rate of return has been 8.9 percent, which is slightly higher than fund managers assume in their long-term projections. And that included huge losses the fund suffered during the Great Recession.

Conroy also said recent reforms enacted by the Legislature have contributed to the fund’s turnaround. In 2012, lawmakers passed a bill calling for increased contributions from both employers and employees.

Because of those changes, Conroy said, KPERS is now on pace to eliminate its unfunded liability, now estimated at $9.8 billion, in calendar year 2033.

Comments

Steve Jacob 3 years, 6 months ago

KC Star has an article today about the fight coming up within the Republican Party in the Kansas Legislator. They have to come up with at least $279M by June 30th "just to be dead broke with a zero checking account".

Some in the party say no tax increase ever, but others in the party say that's too much to cut without serious consequences.

Fred Whitehead Jr. 3 years, 6 months ago

You, the people of Kansas re-elected the chief culprit in this problem. And yet you cannot understand why we are in this dilemma. What part of Koch Industries Regime do you not understand. Puppets dance on a string and the strings lead directly to the Kochs.

Mike Riner 3 years, 6 months ago

I'm no fan of Brownback, Fred, and I seriously doubt most Lawrence voters are either. Why don't you aim your disdain to central/western Kansas-the small towns where most of Brownbacks support lies.

Bob Forer 3 years, 6 months ago

Don't take it personal, Mike. Around thirty per cent of the people in Lawrence voted for Brownback. And of course less than 40% of the registered voters in Douglas County didn't even bother to vote. There are culprits in every county in Kansas. Fred is obviously not referring to you personally. So why worry.

Richard Heckler 3 years, 6 months ago

No tax increase ever is absolute nonsense. Tax cuts at the state level create tax increases somewhere. Let's not kid ourselves.

Why not take care of KPERS? There is no logic in having some politicians who believe it is okay to cut retirement programs because they can. Where in a KPERS document provides for such reckless behavior? After all if taxpayers are bailing out Wall Street it seems retirement programs should never be part of a chopping block.

Has the Brownback administration been borrowing from this source? If retirement programs cannot afford to lose money why is KPERS invested in Wall Street?

I cannot understand why the FBI,IRS and regulatory agencies are not investigating such matters.

Beth Newman 3 years, 6 months ago

Can you imagine working all of your life understanding daily...that your retirement is being determined through a casino?? The American worker("The Masses") has been forced into this "agreement" understanding full well that what is going on right now is that this -Wall Street casino- cannot afford to fail and that the American worker unwittingly has become complicit in it's criminal activity of doing whatever it takes to make a buck for everyone(The Masses again). Unless of course it's deregulated...hard to prosecute a financial system without any rules.

Dorothy Hoyt-Reed 3 years, 6 months ago

So, Brownback claims he increased education spending, because they paid up part of the money that state owes anyway to KPERS. So if he decides to use KPERS to pay for his "experiment", then he is admitting he has cut school funding, and had cut it to begin with. Why did people vote for this jerk? After getting rid of workers and replacing them with his own, he got the to claim that child poverty had dropped. Their "mistake" wasn't reported until after the election. He counted the KPERS money as a raise to education funding, and now he's going to use it to rip off teachers. He's going to be hitting that accelerator. Are you ready to hit the brick wall, Kansas?

Lynn Grant 3 years, 6 months ago

Fred, yes Laura Kelly is a "D" but I fail to see how her question could be taken as a suggestion. More a reminder that the state has failed its commitment to KPERS many times in the past.

Cheryl Nelsen 3 years, 6 months ago

I'm tired of all the small towns and rural areas getting the blame for Brownback. Yes, they elected him, but geez, look at Johnson County. People all over are not very well educated about politics or the Koch brothers.

Dorothy Hoyt-Reed 3 years, 6 months ago

Exactly, a friend of mine who live in Johnson County sent me an email, saying that she was standing in line waiting to vote and the woman in front told her that her daughter told her to vote Republican. The woman didn't even know why she was voting Republican. Her daughter just told her to.

Andy Anderson 3 years, 6 months ago

KPERS is a service. A luxury for the taxpayers. Is it worth the expense? What have people making up KPERS, done for the state of Kansas the last 20, 40, 50 years?

Is KPERS worth the expense?

Dorothy Hoyt-Reed 3 years, 6 months ago

Taught your children. Protected your property. Put out any fires that might have spread to your house. Issued your driver's license, so you could vote. You really are an arrogant person aren't you? I sure hope you don't own a business with employees, You probably treat them like dirt.

Chris Anderson 3 years, 6 months ago

It's contract with state employees that must be honored. Do I wish that we had reformed KPERS years -- decades -- ago to put it on a sounder footing: Yes. Do we need more reforms going forward: Yes. Can the state walk away from the commitments it has already made: No.

Richard Heckler 3 years, 6 months ago

Kansas is on its' way to Michigan status. There are similarities in the governor and legislator.

These situations are calculated down to a science. Brownback will put Kansas up for sale ... mark my words.

Philipp Wannemaker 3 years, 6 months ago

I retired,on Nov 1st. I am now in process of taking the max out of my KPERS account. I can only get 50% of what I am entitled to. I'm taking it simply because brownie and the nutcase legislators are determined to destroy the fund. This means, assuming they can't stop my getting this withdrawal means simply that at least I get 1/2 of what I've been promised. The Koch brothers will get the rest. And I think anyone that is retiring anytime soon needs to do exactly the same, take the 50% payout, because brownie and the tea drinkers will take the rest.

Marc Wilborn 3 years, 6 months ago

"Investment returns make up the largest source of income for paying benefits and are vital to successful funding"

Taken from the 2014 Actuarial presentation for KPERS. Keep taking those 50% lump sum payments and there will be less money to earn future returns.

Philipp Wannemaker 3 years, 6 months ago

There will be less money for future returns because brownie and his tea drinking buddies in legislature will continue to use these fund to finance tax cuts for the rich. They will not fund it properly because they are convinced that Laffer's trickle down theory works, despite many years of proof that it doesn't.

William Weissbeck 3 years, 6 months ago

Those damn public sector unions. Get a clue folks - it wasn't their greed, but rather legislatures across the country using the non-funding of pensions to balance budgets. Private businesses can't do that - the government shuts them down and sends the owners to prison.

James Howlette 3 years, 6 months ago

No. The owners of private pensions get away with it, too. They just make the pension funds disappear, and nobody goes to jail. Or divert the money for a year (like they did to Dolly Madison workers) and never pay it back. Nobody goes to jail. And then people saving up on their own get sold a bundle of toxic assets that the investment firm knew would fail and fraudulently certified. And nobody goes to jail. The worker is screwed.

Paul R Getto 3 years, 6 months ago

Brownie and the B-Bops will steal what they can to cover their lies.

Dorothy Hoyt-Reed 3 years, 6 months ago

One thing that might save KPERS is that the legislators have given themselves a pretty sweet deal under KPERS. Their KPERS is funded as if they work all year, instead of the part time they work. I'm not even sure if they have to contribute as much. A legislator can end up getting a larger pension than a teacher, firefighter or a policeman who have worked for 30 years. Maybe they won't want to give that up.

James Howlette 3 years, 6 months ago

They'll give it up for future legislators, but not for themselves. Better hope those future legislators are kinder than they are.

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