Kansas must reform KPERS

New research from Kansas Policy Institute reinforces what some have known but many have discounted: The Kansas Public Employee Retirement System is in poor financial shape, and it’s going to cost Kansans a lot to fix it. It is urgent that we enact substantive and meaningful reforms now, rather than later. KPI writes the following in introducing its new study Preventing Bankruptcy in the Kansas Public Employees Retirement System.

Preventing Bankruptcy in the Kansas Public Employees Retirement System

It turns out that the $9.2 billion hole found in Kansas’ public pension program will balloon under new accounting standards used by governments across the country.

Under the current standards, Kansas’ pension system (KPERS) is funded at 59.2%, 80% is a generally accepted barometer of pension health. These numbers demonstrate that Kansas has one of the worst funded pension systems in the country.

Unfortunately, the new standards will only make things worse as our funding ratio will drop to 46.1 percent under the new standards.

Each person in Kansas will have to pay $3,285 to fill our KPERS hole under the old standards and things will only get worse.

The executive summary of the study follows.

Recent evidence reveals that the Kansas Public Employees Retirement System (KPERS) is one of the most underfunded pension plans in the country (59 percent funding ratio at the end of 2011) and that there is a high probability the plan will not have sufficient funds to meet pension obligations over the next decade. This funding ratio will deteriorate further under the new accounting standards discussed below. The solution to this funding crises is to bring pension benefits into line with the costs of pension plans for individual employees. A number of states have successfully enacted structural reforms in their state pension plans to accomplish this objective, including defined contribution and hybrid plans.

Unfortunately the recent reforms enacted in KPERS creating a cash balance plan for new employees fails to accomplish that objective. This study provides a roadmap for pension reform in Kansas, the major conclusions of the study are:

1. Use the New GASB Accounting Standard

The new GASB standards to be implemented in 2013 and 2014 will require realistic actuarial assumptions and reporting. It is time for Kansas and other states too incorporate this more realistic data in transparent and timely reporting and to use this data in policy formulation.

2. Enact Structural Reforms

Using more realistic actuarial assumptions, via new GASB standards, most states, including Kansas, will find that they face a funding crises in their state and local pension plans. Kansas legislators must follow the lead of state and local governments that have successfully replaced these defined benefit pension plans with defined contribution or hybrid plans.

3. Bring Public Sector Pension Benefits In Line with Private Pension Benefits

Public sector workers receive wages and salaries equal to or greater than comparable employees in the private sector. The pension and other post employment benefits received by public sector workers are significantly above that received by private sector workers. The outcome of recent pension reforms is to bring convergence of pension benefits in the public and private sector.

4. Legal Challenges to Public Sector Pension Reform

Structural reforms enacted to solve the funding crises in state and local pension plans have been and will continue to be subject to legal challenges, and Kansas is well positioned to meet these legal challenges.

5. Bankruptcy, Not Bailouts

In Kansas there will be tremendous pressure to bailout failed state and local pension systems to avoid bankruptcy. Bailouts of pension plans create all the wrong incentives. If state and local governments cannot manage their pension plans and other financial affairs bankruptcy forces them to address these issues.

6. Launch an Education Campaign

Successful pension reform in other states such as Utah and Rhode Island has required a bi-partisan effort in the legislature and support from all the stakeholders. Generating this support for pension reform in Kansas will require an education campaign. Kansas citizens must understand that the current defined benefit pension plan is not sustainable. Solving the funding crisis in KPERS will require burden sharing by all the stakeholders, including current employees, retirees and new employees.

The full study is at Preventing Bankruptcy in the Kansas Public Employees Retirement System.


3 thoughts on “Kansas must reform KPERS”

  1. You think the silver haired legislators give legislators problems, how about 20,000 retired cops? Redo the formulas. Most people talking about the KPERS deal dont know what they are talking about. Graves witheld the state portion because it was soooo solvent, he saved the taxpayers money. During his term he also let the retirees do the stupid lump sum deal, and allow double dipping of old retires from the Feds, and other non-KPERS jump aboard. Now when a highway patrolman “retires” from KP&F, he can go to work for a city or county and get on the KPERS wagon & retire after 5 years at age 62, and get that lump sum deal. OR retire from the FBI, go to work for a KPF agency, then go to work for a KPERS agency, and triple dip!! Figure out what a deal Winston Brooks pulled off. You can go to the KPERS sight and figure any age and years service.

  2. Graves did a lot to hurt KPERS and the Kansas Legislature stood along side to help. They have included themselves along the line by projecting their salary into the system, including more days than they have worked into the equation, involved themselves in investments, allowed the double dip and tier group payout of benefits, removed State funding. A system that WAS sound,,,, is now one of the Worst in the Nation.

    Should we trust that our Elected Officials will really work for Our Interests or their own. They are Not working to Cut Spending they are currently working to Shift the Tax Burden,,,,and FEES.

  3. Most people talking about the KPERS deal dont know what they are talking about.

    Right you are on that “todyaso” and you do not know it all nor do I. My below dates and % is plus or minus but the facts are correct.

    In the 90’s the legislature cut the states donation by around 12% + while not cutting the working folks REQUIRED contributions, they remained the same as did the municipalities contributions. When the bubble deflated the states contribution remained the same, they did not bring the states contribution back to what it was before the economical bust.

    Three things before that did KPERS nor KP&F no good, bringing the teachers, the judges and the politicians into the system. That also was when times were good with no regard to when it may not be.

    The double dipping was worse at a time when teachers could do 20 years in one job, retire and do 20 in another. That was stopped several years ago in legislation.

    I am not down on the teachers or anyone else but they and the judges got into the system due to their unions and their lawyer buddies in the legislature and now “toldyaso” seems to be putting it all on “fire and Police” or rather the “cops”.

    Before EVERYONE was allowed into the system the system was solvent and still would be if it had been left alone by the politicians who seem to be getting a pass by many when their steady incompetence has put the system in the condition we now find it in.

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