The state retirement system’s Board of Trustees for a third time is refusing to go along with Gov. Laura Kelly’s plan to finance her proposed budget by restructuring payments to the state’s retirement system.
The board of the Kansas Public Retirement System this week sent a letter to the governor and legislative leadership saying that it couldn’t support the plan to extend the payment schedule for the retirement system by 10 years.
The governor’s plan calls for lowering and stretching out payments into the state employee pension fund.
The plan would unlock $159 million for the fiscal 2022 budget, but it would cost about $4.6 billion in extra interest payments over the life of the new 25-year payment schedule.
“These changes to the funding plan impede funding progress leaving KPERS in a more vulnerable funding position for years and costing the state an estimated $4.6
billion in additional employer contributions over time,” KPERS board chair Suresh Ramamurthi wrote to the governor and legislative leaders.
The governor’s office did not respond to an email seeking comment on the letter.
The letter said KPERS’ current long-term funding plan has Kansas on a path to pay off its unfunded actuarial liability in 2033. The retirement system is more than 27 years into the original 40-year payment schedule.
“While 2033 is not tomorrow, it is within striking distance,” the letter said.
“As a fiduciary, our focus is on investing and safeguarding the funds in our care for the sole
purpose of providing benefits for our members and their beneficiaries,” the letter stats.
“For this reason, the KPERS board strongly supports any funding action that improves the system’s funded ratio and lowers the legacy unfunded actuarial liability
The letter said the KPERS board will consider the possibility of a restructuring payments next year, noting that the best time to consider reamortization is within the last 10 to 15 years of the payment period.
However, the letter said that’s contingent upon 80% of its liabilility being funded, headed to 100%
“The Retirement System is now within that timeframe, but at 70% funded, we are not yet in a sound funding position,” the letter said.
This is the most recent time that the KPERS’ board has not welcomed the governor’s plan to restructure retirement system payments.
And each of the last two years, the Legislature has rejected the reamortization plan and it’s likely to face the same opposition this year
The governor’s office has always compared the reamortization plan to how someone refinances their car or their home, pointing out that is frequently used as a tool by retirement systems in other states.
They have emphasized that the governor’s plan will not impact a single retiree’s benefits
while generating cash that could help fund taxpayer services.