Base decisions about funding Kansas’ KPERS on sound finance, not activist politics | Opinion
Chances are that when you look at an employee of the state of Kansas, you’re looking at a servant-leader. Every day, these employees pour their hearts into their work, putting the needs of others above their own interests. They are typically paid less than their private sector counterparts. They accept these jobs fully aware that their earning potential may be cut as much as a third. The pay differential can be as much as half for those with highly specialized skill sets.
As part of the trade-off, state employees are promised a pension for their retirement years. It’s a commitment made to them by the state. As former employees of the state of Kansas, my mom and dad are pension holders. As a former assistant state treasurer, I have a stake as well. Now, as a newly appointed trustee of KPERS, the Kansas Public Employee Retirement System, I have the honor and responsibility of helping to ensure that the fund is kept on a sound footing and to make certain that the state can always uphold its commitment to people like both my parents and all the employees who spent their careers serving fellow Kansans.
KPERS, with its 325,000-plus members and more than $25 billion in assets, is fully able to meet its obligations to those who have already retired. Projecting forward, however, the system is challenged by a long-term shortfall. And as of today, KPERS is only 72% funded.
The impact of two recessions is a contributing factor to the shortfall. Another is a 25-year-long underestimation of the level of employee contributions necessary to fund future benefits. Adjusting employer contribution levels will be part of the solution. A laser focus on fiduciary responsibility will also be crucial to delivering on the promise of retirement, disability and survivor benefits to state employees and their beneficiaries.
For KPERS trustees, that fiduciary responsibility means that, among other things, they must work solely in the financial interests of members to ensure optimal performance and long-term sustainability of the funds and to exercise caution to minimize the risk of loss. Upholding that duty is a particularly daunting task in the face of a disturbing trend across the country. Some major investment firms’ fund managers have leveraged the funds of many states to serve ideological agendas, regardless of whether or not their actions maximize financial returns.
Activist fund managers, for example, have attempted to reframe fiduciary responsibility to mean railing against climate change. Putting their own political agendas ahead of the interests of investors and pension fund participants represents an egregious breach of trust. It will be important, therefore, that trustees carefully monitor asset managers’ proxy voting, portfolio company engagements and public commitments to ensure transparency and prevent manipulation for political purposes.
As a KPERS trustee, I am committed to working with my fellow trustees to ensure that the public worker retirement system is on track and fully funded for state employees’ future retirement. Part of that commitment means that fund managers’ decision-making processes must be focused on members’ financial health rather than extraneous considerations such as personal political preferences.