May 28, 2023

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Lawmakers, Governor Draw Battle Lines on KPERS Repayment

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With unanimous consent in both the Kansas House and Senate, a bill that will repay $115 million to Kansas’s public pension system (KPERS) is headed to Gov. Laura Kelly’s desk. Kelly didn’t include the repayment in her budget proposal.

“After years of delayed, reduced and eliminated pension payments to prop up a failed tax experiment, it is encouraging to see lawmakers act responsibly to fix past mistakes,” Kelly said in a statement following the House’s 117-0 vote. “However, Senate Bill 9 does little to address ballooning KPERS payments in future years, and it does nothing to stabilize finances as a whole.”

If her budget wasn’t busted before, it’s circling the drain after today’s vote.

“It just got worse,” says Michael Austin, director of the Center for Entrepreneurial Government at Kansas Policy Institute, which owns the Sentinel. “Remember, she wanted to delay KPERS payments, and the Legislature just decided to spend more.”

Lawmakers in both the Senate and the House canned her proposal to reamortize KPERS a few days ago. That proposal essentially would have pushed back by 30 years planned KPERS payments to eliminate the pension’s unfunded liabilities. It would have reduced payments by $145 million in the short term, but would have cost taxpayers an additional $7.4 billion in the long term.

In a statement, Kelly said her proposal was “a common sense, structurally balanced budget that tackled our most urgent priorities, paid down debt, rebuilt our state savings, all without raising taxes.”  The facts show otherwise, however.  As The Sentinel previously reported, Kelly’s budget does not comply with state law because it spends more than allowed.  Kansas Legislative Research data published by Kansas Policy Institute also shows Kelly’s budget would deplete state savings and create a $1.3 billion revenue shortfall through FY 2023.  And since her plan would have increased pension unfunded liabilities, her claim of paying down debt doesn’t hold up.

Her budget makes a large repayment of a state loan from the Pooled Money Investment Board, or PMIB. Lawmakers are likely to scrap that recommendation, according to Rep. J.R. Claeys, because the PMIB loan is interest-free, and the state is currently repaying it in small annual increments. By making a $115 million payment to KPERS instead, the lawmakers are saving taxpayers $24,000-a-day in interest.

“We’re paying on an interest-bearing credit card. The Governor’s proposal was paying down the 0 percent interest card,” Claeys, a Salina Republican, said.

The decision to propose a budget that pays back the PMIB loan while delaying KPERS payments is probably politically motivated, according to Claeys. He chairs the House General Budget Committee. Borrowing again from the PMIB would likely go unnoticed by voters in an election year.

“By repaying PMIB, the Governor would preserve a bucket of money that would be available to her when her budget goes in the red in two years,” he said. “If she were to turn to KPERS in two years to plug those holes, there would be a political fallout for that.”

Kelly’s statement doesn’t say whether she will sign the legislation to repay the $115 million from KPERS.

“After years of delayed reduced and eliminated pension payments to prop up a failed tax experiment, it is encouraging to see lawmakers act responsibly to fix past mistakes,” she said in a written statement.

Senate President Susan Wagle fired back saying the Governor is choosing to point fingers rather than admit that her budget is a “recipe for another tax increase.”

“She will evaporate our savings while she continues to rob the state highway fund, refinance KPERS on the back of state employees, all while risking our state retirees’ hard-earned pensions,” Wagle said in a statement.

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