It comes as no surprise that the House budget panel will undoubtedly make the decision to hold back a few hundred million dollars in retirement contributions “at this stage” in the budget crafting process. At this stage! What other stage is there? How many years have legislators been kicking the can down the road?
Rep. Henry Helgerson, a democrat from Wichita, expressed the fact that “this is not an enhancement, this is a debt. If this is put off for too long, the state is financially vulnerable to bankruptcy”. And yet, the mindset for years has been, “We’ll deal with this later.”
Landlords can attest to the fact that when a tenant gets behind on their payments, 99 times out of 100, there is not a happy ending. Instead of one month’s rent payment, it becomes two, then three, and in most cases it’s just a matter of time before an eviction or a “midnight exit” takes place. The state of Kansas delayed a quarterly payment in 2016, and will do the same in 2017. Current law stacks an 8% interest payment on top of the expected contribution. In fact the state has been paying less in contribution rates than needed, according to actuarial assessment, for the last 20 years. Unfortunately, with the state of Kansas, pension recipients can’t evict representatives, and being accountable only while they’re in office allows them to put off proper funding with the mindset that someone else can worry about it– until it’s too late.
The KPERS representatives are firm on the fact that providing pension benefits to its employees is a contractual guarantee that has to be paid. And they will continue to assert that right up to the time that the state pension plan runs out of money.
Jeff King, a former representative from Independence, led the Senate KPERS Committee several years back and at least made a stab at correcting this situation. Most of his efforts have either been reversed or worsened, and he did not run for re-election. This not only includes not making the expected contributions on time, but more desperate moves like issuing a one billion dollar pension bond. His parting words to the decision makers were “This kind of news makes me feel a lot better about what I’ll be doing next year.”
When governor Brownback was questioned by reporters on the KPERS situation, he stated, “Where we were when I started-we were 52 or 54% funded, and we’re 67% funded today. We are in so much better shape on KPERS today than when I came in as governor.” Well, Governor Brownback, in most people’s grade book, 67% is still a flunking grade. So little Sammy is still flunking, just not as bad. And if we use assumptions used by neutral entities, like the Pew Center, instead of the decision- makers’ lofty assumptions, we’re in bigger trouble than they will admit.
However, all of this cannot be blamed on our current governor, because this has been the mindset of our legislators for years.
We no longer only read about bankrupt pension plans in Greece or far-away places. It’s happening in these United States and it’s high time our state government stops kicking the can down the road and address these issues for the sake of the hundreds of thousands that are depending on them in their retirement.
Tim Schumacher represents Strategic Financial Partners in Hays.