December 23, 2014 - The Sedgwick County Post
By JOHN HANNA
Study sought on privatizing Kansas public pensions
Two top aides to Gov.
Sam Brownback on Dec. 19 proposed that Kansas study
privatizing the pension system for teachers and
government workers.
Budget Director Shawn
Sullivan and Secretary of Administration Jim Clark told
a joint legislative committee on pensions that greform
optionsh for bolstering the public pension systemfs
long-term health should be examined. Their list included
converting pension benefits into annuities managed by a
private insurer.
gItfs an idea worth
pursuing,h Sullivan said after presenting the proposal
to lawmakers.
The committee urged Brownbackfs
aides to gather more information about private
companiesf experiences with such moves and present it
once legislators open their next annual session Jan. 12.
But members of both parties were skeptical.
Clark said with converting pension obligations
into annuities, a private company assumes the long-term
financial risks for a fee, while the state can provide
competitive benefits at a lower cost.
Rep.
Steve Johnson, an Assaria Republican, said the idea has
merit, but, gI am not optimistic that there would be a
buyer of that liability at a lower cost.h
And
Rebecca Proctor, interim executive director of the
largest union for Kansas government employees, said
private companiesf need for profits would compete with
the pension systemfs drive gto generate benefits for
employees.h
gAny time you put a profit motive
in a state service, itfs a problem,h she said.
Kansas last year turned over administration of
its Medicaid program for the poor and disabled to three
private insurance companies. Assessments have been
mixed, though Brownback argues the state has controlled
costs while providing better health coverage.
Earlier this month, the governor said that he
is working on proposals for ensuring the long-term
financial stability of the Kansas Public Employees
Retirement System. His comments followed bipartisan
criticism of his diversion of nearly $41 million in
state funds from KPERS to general government programs to
help close a projected $279 million shortfall in the
current budget.
The pension system says
benefits for retirees are only 60 percent funded through
2033, but a 2012 law mandated higher contributions to
KPERS by both the state and workers so that the
retirement systemfs obligations become fully funded by
then. Critics contend the diversion of state funds
represents backtracking, but Sullivan told the committee
that the governor plans to do it only once even though
the state also faces a shortfall in its budget for the
fiscal year beginning in July.
Sullivan and
Clark also proposed that the state study issuing up to
$1.5 billion in bonds and putting the funds into KPERS
to immediately boost the level of funding for its
long-term obligations.
Also, they want
additional study of proposals to move toward a
401(k)-style plan for new workers, an idea GOP
conservatives have pushed in the past. The 2012 law
included a plan for new employees that moved away from
traditional benefits based on a workerfs salary and
years of service but wasnft a true 401(k)-style plan.
Critics of traditional public retirement plans
argue that the statefs liability is open-ended, with
taxpayers on the hook. Retiree and public employee
groups contend changes are designed to shift the
financial risk to workers. –AP