Gov. Laura Kelly’s plan to restructure payments into the state’s pension fund to finance her recommended budget is not likely to advance very far, the chair of the Senate’s budget-writing committee said Tuesday.
“I don’t think it’s going anywhere,” Republican Sen. Carolyn McGinn said of the governor’s proposal to reduce pension fund contributions while extending the payment schedule.
McGinn said the fact that the board of the Kansas Public Employees Retirement System came out against the plan didn’t help, plus she had concerns about extending the time for getting most of the pension system’s unfunded liability covered.
“I’m not real thrilled about it,” said McGinn, who was among six Republican Senate leaders who signed onto a statement last week opposing the governor’s proposed budget.
Currently, most of the unfunded pension liability would be covered by 2033. Under Kelly’s plan, the state would stretch out its payments into the pension system so the unfunded liability wouldn’t be covered until sometime between 2048 and 2050.
The Kelly administration has defended the plan, saying it allows them to manage retirement system payments while funding key core services, education, child protective services and corrections. Kelly also wants to expand Medicaid.
The administration said restructuring the payments will make $145 million available in the next fiscal year and make the state’s payment schedule more sustainable in the future.
McGinn’s comments came after the Ways and Means Committee heard testimony on a bill that would direct $115 million from the state’s general fund into the pension system.
The bill, sponsored by 18 Senate Republicans, would send the money to the pension fund’s school group, which has a funded ratio of 61.6 percent — a level that one senator described as near “red code” status. The school group’s total unfunded liability is $5.7 billion.
The money would come out of the $905 million surplus that the state expects to have on hand when the current fiscal year ends June 30.
The money would be paid in the current fiscal year, which Republican Sen. Jim Denning said would be the first time in 25 years that the state has made its actuarial required contribution to the pension fund. “That’s a milestone,” he said.
Republican state Sen. Molly Baumgardner of Louisburg said the bill makes up for the state’s decision in 2016 to skip a $97 million retirement system payment that now totals $115 million when interest is added in.
“Everyone involved in KPERS is looking to the Legislature to honor its obligation to ensure we are reducing our unfunded liability,” Baumgardner said. “We need to get our unfunded liabilities off the books so we are not wasting … taxpayer dollars.”
How the bill transferring the $115 million into KPERS would affect the governor’s spending recommendations was not immediately clear, although it would likely require some reshuffling of her priorities. The governor’s office said it would need to review the legislation before commenting.
Critics have said that Kelly’s proposed spending plans have depended on her restructuring of the retirement system’s payment schedule.
“I think the governor is going to have to go back and reassess some of her priorities,” McGinn said. “She’ll just have to reprioritize and reassess.”
McGinn said she wants to give the KPERS bill a look.
“Any time we’re paying off past debt … we need to see if it’s something we can do,” McGinn said. “I need to see how it factors in with our bottom line. There are other things out there: possible reductions in taxes, possible more money for schools.
“I need to see what that bottom line is going to look like.”
