Kan. gov. signs bill addressing pension fund woes

JOHN HANNA - AP Political Writer
Kansas Gov. Sam Brownback signs legislation attacking the long-term funding problems facing the state pension system, Wednesday, May 25, 2011, at the Statehouse in Topeka, Kan. Watching him is Senate President Steve Morris, a Hugoton Republican. (AP Photo/John Hanna)
Kansas Gov. Sam Brownback signs legislation attacking the long-term funding problems facing the state pension system, Wednesday, May 25, 2011, at the Statehouse in Topeka, Kan. Watching him is Senate President Steve Morris, a Hugoton Republican.

TOPEKA, Kan. (AP) — Gov. Sam Brownback signed legislation Wednesday to bolster the long-term health of Kansas' public pension system, but he also said he's hoping a study commission set up by the new law hashes out the details of moving the state toward a 401(k)-style plan for new teachers and government workers.

The new law will inject more taxpayer dollars into the Kansas Public Employees Retirement System to help close a projected $7.7 billion shortfall between its anticipated revenues and the benefits promised to public employees through 2033. Workers also will be forced to make concessions.

A new, 13-member commission will study other issues, including whether the state should start a 401(k)-style plan for new public employees. Such a plan would tie a worker's benefits to investment earnings; the state's traditional plans guarantee benefits up front, based on an employee's salary and service time.

The Republican governor, who took office in January, and many members of the GOP-dominated Legislature support such a move, questioning whether the traditional KPERS plans can be sustained. Democrats, retiree groups and public employee unions strongly oppose such a move, fearing it will lead to less secure and less lucrative pensions.

"People are living a living a longer period of time — which is a good thing — retiring at a younger point in time, and the system can't sustain it," Brownback said during the signing ceremony. "That's why I think it's time we really look at going to a different system that is sustainable."

The study commission must make its recommendations by year's end, so that legislators can consider them before June 2012. To prevent legislators from ignoring the commission's proposals, the law says the changes designed to close the long-term KPERS shortfall won't take effect until the recommendations are considered.

The new law raises the state's annual contribution by about $15 million in July 2013, according to KPERS and legislative researchers. The increase will continue to ramp until July 2017, and phasing into to $95 million, according to new estimates that assume a growing employee payroll.

The law also directs the state to identify surplus real estate and sell it when possible, with 80 percent of the money raised going to close the KPERS funding gap.

"This will be a big load for the state, but it's absolutely necessary for us to do that," said Senate President Steve Morris, a Hugoton Republican.

Starting in 2014, most teachers and government workers would be forced to choose between paying a higher percentage of their salaries into KPERS or seeing cuts in future benefits. Others, hired after June 2009, would be forced to choose between different cuts in future benefits.

Public employee groups had described the legislation as a good compromise — much better than moving toward a 401(k)-style plan.

Jane Carter, executive director of the Kansas Organization of State Employees, said the groups don't like the forced concessions. The state doesn't provide health insurance for retirees; most workers don't get regular cost-of-living adjustments in their benefits when they retire, and the average monthly check for a retiree is $1,066.

"We don't have golden parachute retirements," Carter said.

State officials also said that KPERS falls under federal Internal Revenue Service rules, and the IRS must sign off on the changes in current KPERS plans. The pension system expects to submit a request by the end of June.

Brownback said he hopes to name his five appointees to the study commission within a few weeks. Legislative leaders will name the remaining eight members. Two each will be appointed by Morris, House Speaker Mike O'Neal, a Hutchinson Republican, and the top Democrat in each chamber.

O'Neal supports moving toward a 401(k)-style plan, and said he doesn't think the legislation approved this year went far enough.

"But certainly, we needed to move forward in getting something done," he said. "I think everybody is pretty well pleased that we've taken the steps that we've taken."