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March 7, 2011
For Immediate Release
Contact: James Franko
KPERS (at least) $9.3 Billion In The Red

New study outlines solutions to ensure future viability of government pensions without drastic tax increases or service cuts

Wichita - March 7, 2011 - A family of four would have to write a check for $13,200 to pay off their pro-rata share of the unfunded liabilities in the Kansas Public Employees Retirement System.

Kansas taxpayers are on the hook for $9.3 billion according to a new study from Kansas Policy Institute and retired University of Colorado professor Dr. Barry Poulson, an Adjunct Fiscal Policy Fellow at KPI.  Reports of a $7.6 billion unfunded liability do not account for $1.7 billion in losses that have already occurred - loses largely driven by the recession and acknowledged by KPERS. 

"Kansas must enact pension reform quickly to ensure the future viability of the system and to prevent catastrophic funding shortfalls in the near future," writes study author Barry Poulson.  "[State] contributions into the state/school plan would have to increase from $393 million to $640 million annually, a 63 percent increase.  Kansas legislators are not likely to find an additional $247 million in the current budget to fully fund that portion of the KPERS pension plan."

Even while the Legislature works to close a projected $500 million budget deficit, they have only begun to grapple with unfunded liabilities and the threat they pose to the state.  "A Comprehensive Reform of the Kansas Public Employees Retirement System" outlines several reforms that are already being successfully implemented in other states facing a similar pension situation;
  • Stop enrolling new-hires in KPERS, instead place new-hires in defined contribution plans such as those covering the majority of private sector employees.
  • Increase employee contribution rates - currently at 4.07% for the state/school plan.
  • Decrease Cost of Living (COLA) Adjustments.
  • Increase a combination of retirement age, years of service, and vesting requirements needed to qualify for KPERS benefits.
  • Change 'Final Average Salary' calculation to avoid artificially inflated benefits.
Dave Trabert, president of KPI, offered the following, "Kansas is hurtling down an icy road with this kind of debt hanging over our heads.  I hope we can safely hit the brakes before we drive the state off a cliff.  Either Kansas faces this reality now or our kids face catastrophic tax increases and/or spending reductions."
KPERS Unfunded Liabilities 2004-2009

From Table 2 on Page 6 of new study.   Reflects "Market Value of Assets."

Trabert continued, "Governor Brownback and the Legislature have made fixing this problem a priority and I hope they have the will to see it through.  As the governor said in his first State of the State address, 'We cannot hope for the best and paper over the worst.'"
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Kansas Policy Institute is an independent think-tank that advocates for free market solutions and the protection of personal freedom for all Kansans.  Our work centers on state and local economic policy with primary emphasis on education, fiscal policy and health care.  We empower citizens, legislators and other government officials with objective research and creative ideas to promote a low-tax, pro-growth environment that preserves the ability of governments to provide high quality services. 
To speak with Kansas Policy Institute, please contact James Franko (316) 634-0218.