Anti-government, anti-union “think tanks” launch attack on KPERS retirement system

The past week has seen a flurry of attacks on the Kansas Public Employees Retirement System (KPERS) by a cabal of anti-government, anti-union individuals and organizations.

KPERS has been an issue of concern for legislators over the last few years as short-sighted decisions by earlier legislatures had fueled growth in the unfunded actuarial liability (UAL). The UAL is the difference between assets in the system and the cost of cashing out all benefits immediately. This is common to nearly all defined benefit retirement systems because such a system is designed to use both investment income and working employee contributions to make benefit payments to current retirees.

The important thing about managing the UAL is to make sure that employer and employee contributions are adequate to meet the current need. Despite the fact that the UAL has grown, KPERS is in no danger of not meeting its obligations to retirees or to future retirees.

Over the last few legislative sessions, the legislature, under the leadership of former Senator Dave Kerr of Hutchinson and current Senate President Steve Morris of Hugoton, has tried to be more responsible to the system. Three things in particular have happened. Pension Obligation Bonds were issued to pump money into the system, the legislature ramped up the employer contribution cap to 0.6 percent each year, and a new benefit structure for employees hired after June of 2009 was instituted.

Unfortunately, just as the legislature was moving in a positive direction, the stock market plummeted. KPERS was no more immune to the recent “crash” in the market than were 401-K retirement plans. Everyone with an investment account – whether that account was a defined benefit plan like KPERS or a personal defined contribution 401-K plan or just a few mutual funds – saw their accounts drop significantly. Some private investors even saw their entire accounts wiped out.

KPERS, being a bit more conservative in their asset management, lost less than many investors but they lost nonetheless. And while returns this fiscal year have been healthy, we have not yet overcome the losses of 2008. Naturally a loss in the investment portfolio has a negative impact on the UAL.

The long and short of all this? The UAL needs to be addressed responsibly but there is no danger to the system.

When is a “study” not a study?

Simple. When it is nothing more than inflammatory spin.

KPERS has a UAL that can be responsibly managed. The system is in no danger of not meeting its obligations.

The study (which was called a “KU study” in the press) came out of the Center for Applied Economics at KU. The center is funded by Koch Industries and under the direction of Art Hall, a former Koch executive. It was written by Barry Poulson, an extreme anti-government agitator from Colorado whose Taxpayer Bill of Rights (TABOR) limiting government spending in Colorado nearly destroyed their state services until the voters suspended it in an effort to save their roads, schools, and public safety budgets. So…it’s not a KU study; it’s a Koch study.

As for Art Hall, among his other efforts is “Proposition K,” a property tax limitation for Kansas modeled on California ’s famed Proposition 13. Proposition 13 has had such a negative effect on the budget in California that it is a major contributor to the problems faced in closing their budget gap. Hall wrote Proposition K for the Flint Hills Center for Public Policy, a “think tank” looking for ways to starve the state budget here in Kansas . The Flint Hills Center is closely allied with Americans for Prosperity (AFP), a Washington , DC based “think tank” funded primarily through the Kochs that organized the anti-tax “tea parties” and is leading efforts to derail health care reform and global warming initiatives.

Poulson and Hall chose the word “bankrupt” for one purpose – to get media attention.

This so-called “study” appeals to the AFP-allied conservative legislators who are licking their chops as they dream about cutting benefits to unionized public employees and distracting them from other issues under the dome. You can be sure that they will spend the 2010 legislative session attacking public employees and railing about their pension benefits.

• State Treasurer Dennis McKinney sits on the KPERS Board. Read his reaction to the “report” here: http://www.kansasstatetreasurer.com/prodweb/press/press020.php

• Hear KPERS Executive Director Glenn Deck’s interview on Kansas Public Radio by clicking here: http://www.kansaspublicradio.org/newsstory.php?itemID=17678  

What to tell your legislators, the media, and your neighbors

The message to legislators, the media, and your neighbors is simple.

• The time has come for the state to honor its part of the KPERS contract just as the employees have done. In the past the state has almost routinely withheld the employer contributions depending instead on investment income to make up the difference or using those funds to balance the budget.

• It is wrong to demand that the employees who have honored their end of the contract shoulder the responsibility for solving this issue. Employees have NEVER missed a payment; the state has.

•  A small but dependable source of income in retirement is an appropriate reward for a career in public service.

• Public servants such as teachers, public safety officers, and fire fighters earn less than private sector employees in exchange for a defined benefit retirement system and retirement security.

• KPERS retirement is not a lavish benefit. The average monthly KPERS payment is $1100.