Starting this month in Kansas, thousands of city, county and state employees — plus many teachers — will have to divert an extra 1 percent of their paychecks into their pension plans.
The increase was included in a bill the Legislature passed in 2012 to help shore up the badly underfunded Kansas Public Employees Retirement System. Its assets in recent years have covered an appalling 60 percent or less of its liabilities to retirees, one of the worst rates in the nation.
Workers have borne much of the burden of trying to restore KPERS to better financial health. Their contributions have moved from 4 percent of pay in 2013 to 6 percent this year.
Unfortunately, Gov. Sam Brownback recently announced he planned to renege on the state’s part of the 2012 bargain. Brownback said he would cut $58 million from the state’s contribution of taxpayer revenues into KPERS in the current year. It’s an element of a desperate scheme to balance this year’s budget.
It was the wrong move, though not a surprising one, given the financial woes Brownback has helped create for Kansas. State revenues have plummeted since he and the Legislature unwisely approved excessive income tax cuts.
Even worse news could lie ahead for members of KPERS, which includes employees of Johnson County government, Overland Park, Olathe, other cities and local school districts. Brownback and lawmakers might try to make major changes in state support for pensions as they stare at the need to slice $430 million or more from next fiscal year’s budget, starting July 1.
It’s encouraging that even some fellow Republicans are pushing back.
State Sen. Jeff King said the governor “is threatening to undo all the hard-fought work we’ve done in the last few years.”
State Treasurer Ron Estes said Brownback’s plan increases the risk that KPERS would consume “an even larger amount of our state’s budget at the expense of other vital state services to Kansans in the future.”
That criticism hits the mark, and makes it even more urgent that the Legislature roll back the income tax cuts in the 2015 session.
Naturally, even though the Legislature created the latest KPERS crisis, some members are rushing in with plans to “solve” it. These ideas deserve a studied review in 2015, not a rush to passage.
KPERS Executive Director Alan Conroy and his staff must be vigilant as they evaluate different reforms and how they would affect members.
Get ready especially for more talk about enacting a 401(k)-style plan. It would still require state and employee contributions, but would not guarantee a fixed amount of money per year after retirement.
Private companies now offer 401(k) plans far more frequently than traditional pensions, so this approach deserves a look. However, it would still leave tens of thousands of workers in the poorly funded KPERS system. The state in future years would be on the hook for pouring in enough money to provide promised pensions.
Taking the easy way out and reducing state contributions to KPERS to help make ends meet continues an irresponsible tradition in Kansas. Under different governors and legislatures, the state for too many years has inadequately funded its pension systems.
That has created a sense of dread among many public employees, even while they are obligated to funnel more of their own money into the plans.