Kansas Must Pay Back KPERS

In 2014, Kansas reduced it its contribution to KPERS, the state’s pension system, by $40.7 million. It did this by dropping the employer contribution rate to 9.5 percent from 12.1 percent. KPERS, at that time,  had an unfunded pension liability of $7.4 billion which, before cuts, was projected to go down to zero over the next 20 years.The cut did not affect payments to current retirees, but it meant  that the state wouldn’t be able to pay all it owes in future pensions.

On May 1, 2016, Kansas decided it would delay another $92.6 million in KPERS payments. The money was to to be repaid no later than Oct. 1 with an 8 percent annual interest, which was KPERS’s average rate of return. On May 03, 2016 Moody’s gave Kansas an issuer rating of Aa2 and revised its outlook to negative. The rating is important as it affects the interest rate at which Kansas bonds are issued. Moody’s  Aa2 rating recognized Kansas’ stable tax base and fundamental economic capacity to balance its budget and fund its pension liabilities. The rating also incorporated the state’s financial shortfalls caused in part by large tax cuts, as well as a long history of underfunding its pension plans. The payment to KPERS was not paid in October of 2016 as promised.

The 2019 Legislature made a great step toward repaying KPERS by passing SB 9, which paid $115 million into the pension fund. That repaid  the $92.6 million payment that was deferred in 2016, but required $13 million in accrued interest. The 2019 Legislature also followed through on a $56 million payment which was promised in 2018. Going forward, these payments will save us millions of dollars in interest and shows the state’s dedication to having a solid pension fund.

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