By Gene Meyer | Kansas Reporter
FAIRWAY – Kansas’ red ink IOUs to future retired teachers and government workers hit a record $9.2 billion last year, pension fund actuaries report.
Money for the IOUs, which represent part of the future pension payments Kansas has promised to teachers and government workers through 2032, will come out of taxpayers’ wallets if no other solution is found.
Kansas will start offering a lower cost annuity savings plans, instead of pensions, to teachers and workers hired in 2015. That provides no relief for the pressure that teachers, public workers and taxpayers are facing now.
The system is unsustainable, one critic contends.
Kansas’ red ink — called an unfunded actuarial liability in pension accounting jargon — is $1 billion deeper than in 2010, Cavanaugh MacDonald Consulting LLC reported in its latest annual assessment of the Kansas Public Employee Retirement System’s long term financial health.
And the red ink likely will get still deeper before it begins receding, the actuaries indicated.
KPERS still has about $902 million it lost during the 2008 financial crisis to include in the mix.
“We’ve continued to absorb our 2008 losses for five years,” said Kristen Basso, KPERS communications officer. “We should absorb the last of them toward the end of 2012.”
Dave Trabert, president of the Kansas Policy Institute in Wichita, contends the system cannot be sustained because it’s fundamentally out of balance.
Currently accepted accounting practices, which allow pensions to spread losses over long periods of time or to plan unrealistically high investment returns to achieve balance, mask the true depth of KPERS’ red ink, Trabert said.
StateBudgetSolutions.org, a Florida website that, like Kansas Policy Institute, advocates open, market-based government accounting, has published estimates Kansas’ $9 billion pension shortfall may actually measure $20 billion or larger on a real-market yardstick.
Facing losses that large, Kansas “will have to change some of the future benefits,” Trabert said. “That’s not cutting what people have earned now, but doing things such as changing retirement ages, or the multipliers.”
Multipliers are formulas set in Kansas law that are applied to retiring workers’ salaries to calculate their pension benefits.
Kansas legislators voted, and Kansas Gov. Sam Brownback signed, legislation this spring that will require both taxpayers and workers to put more money into KPERS traditional pension plan and help pay down the liability for several years until all future employees are covered by new annuity-savings plans legislators ordered.
Brownback originally proposed switching to something such as defined contribution 401(k) retirement savings plans that businesses offer their employees. Administration officials declined to say Tuesday whether they would continue trying for that more taxpayer-friendly choice.
“The latest annual financials show why the state had to make changes to KPERS,” said Sherriene Jones-Sontag, the governor’s communications director. “State employees work hard to deliver services important to Kansas and they deserve a fair and funded pension system.”
Contact Gene Meyer at [email protected]