Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.
+1 212 318 2000
Europe, Middle East, & Africa
+44 20 7330 7500
+65 6212 1000
A Kansas House committee endorsed a bill Wednesday that would cut future retirement benefits for current teachers and government workers to help solve the long-term funding woes of their pension system.
The measure that cleared the Pensions and Benefits Committee on a voice vote also would increase the state's annual contributions to the Kansas Public Employees Retirement System and increase the age at which many teachers and government workers could start drawing full retirement benefits.
The bill goes against a longstanding assumption that's governed past debates over pension legislation, that the state constitution and Kansas law prevent the state from altering its public pension plans by forcing lower benefits on current participants. But committee members said they're compelled to act because of the projected $7.7 billion gap between anticipated KPERS revenues and promised benefits over the next few decades.
"It's not trimming around the edges," Chairman Mitch Holmes, a St. John Republican, said after the committee's meeting. "It goes to the fundamental problem."
The bill is likely to draw opposition from public employees' and retirees' groups, who've long argued that the problem facing KPERS is that the state has historically fallen short of its obligations on contributing to the pension system and needs to catch up by committing more money. Critics of the current pension system contend the state simply can't afford the promises it has made on pensions.
Jane Carter, executive director of the Kansas Organization of State Employees, said the bill will hurt the state's economy because most retired teachers and government employees stay in Kansas.
"When you take out that money, you just took out money from businesses," Carter said. "They spend that money here."
The bill does not include any proposal to move the state toward 401(k)-style pension plans for teachers and government workers and away from traditional plans that guarantee benefits up front, based on salary and years of service. Holmes said the idea is still under consideration, but other committee members questioned whether legislators will want to tackle the issue this year.
Instead, the bill endorsed by the House committee changes the formula for how pension benefits will be calculated for teachers and government workers after July 1, 2013. They'll get 20 percent less credit for their years of service after that date.
The decrease in benefits would be 10 percent for someone with an equal number of years of service before and after that date. For example, for a government worker who retires in 2023 with 20 years of service, with benefits based on a salary of $40,000, the monthly benefit would decrease from $1,167 a month under current law to $1,050 a month under the bill.
The measure also does away with a rule for many employees allowing them to retire with full pensions in their 50s with enough years of service. The rule says that when a person's age and years of service total to 85, they can receive a full pension -- meaning someone can retire at 55 years old after working for the state for 30 years.
Under the bill, most teachers and government employees will be able to receive their full pensions at the same time they can receive full federal Social Security benefits. By 2016, that will be 67 for most.
But the bill also revises a law that mandates steeper state contributions to KPERS, so that its commitment increases faster -- adding another $10 million to the annual bill. A proposal before a Senate committee is twice as aggressive, however.
"Any change is going to be tough. I'm not a big proponent of it, but, again, we need to move in certain directions because, right now, what's happening is not sustainable," said Rep. Louis Ruiz, of Kansas City, the Pension and Benefit Committee's ranking Democrat. "It's not awful yet."
Pensions measure is HB 2333.
Kansas Legislature: http://www.kslegislature.org
Kansas Organization of State Employees: http://www.koseunion.org/