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Sebelius
signs bill for extra pension check, bonds
About 15,000 retired teachers and government workers in Kansas will receive an extra month's worth of pension benefits under a bill signed today by Gov. Kathleen Sebelius. The measure provides the additional check each year to participants in the state pension plan who retired before July 2, 1987. The average additional check will be $475, to be paid in October, according to Kansas Public Employees Retirement System officials. The bill finances the additional benefits by allowing the state to issue up to $500 million in bonds to shore up the KPERS system. Over their lifetimes, affected retirees would receive an additional $35 million. Remaining bond proceeds would be used to reduce the estimated $1.5 billion gap between what KPERS will pay in benefits over the next 40 years and what it is collecting in contributions and investment earnings. "I think this bill represents a major step toward getting our very important KPERS fund back in a actuarially sound condition and also makes sure that very important 13th check gets out to retirees who are counting on it," Sebelius said during a Statehouse news conference. Previously, state law allowed the extra benefit but did not set the amount, so that the benefit dwindled if KPERS investments did not fare as well as expected. Without the bill Sebelius signed, the extra check was expected to be about 15 percent of a retiree's normal monthly amount. "It gives them a guarantee of the full amount," said Keith Haxton, a lobbyist for the State Employees Association of Kansas. Supporters of the legislation believe KPERS can earn more on its investments than the state will pay in interest on the bonds. But a few lawmakers thought the proposal was too risky. Sen. Robert Tyson said the bill is like giving him a $1 million loan so that he can invest in the stock market. "We in government shouldn't be putting taxpayers' money at such risk," said Tyson, R-Parker. KPERS' so-called unfunded liability grew in recent years as returns on its investments shrank in the declining stock market. KPERS' assets have dropped to $9 billion from about $11 billion in the late 1990s. Officials say KPERS has enough money to pay pensions in the short term but is collecting too little to cover benefits over the next 40 years. The state is putting $179 million into the pension fund in the current fiscal year, but KPERS officials have said $280 million is needed each year to reach long-term solvency. The bill also increases the state's contribution to the pension fund, currently 4.38 percent of its payroll. Under a 1993 law, that rate was supposed to increase 0.2 percent until the state was contributing enough to cover future pension costs. Under the bill Sebelius signed, the contribution rate would increase by 0.4 percent in fiscal 2006, 0.5 percent in 2007, and 0.6 percent for 2008 and each year thereafter. Copyright ©
2002 Global Action on Aging
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