By The Iola Register, Sept. 9
Despite a robust return on its investments, the Kansas pension program is getting deeper in debt.
The KPERS pot can meet only 56.4 percent of its future obligations to teachers, fire fighters and judges, according to a report by Alan Conroy, executive director of the Kansas Public Employees Retirement System. That’s down from 59.2 percent in 2011, an additional $1 billion in the red.
Financial gurus recommend a state’s retirement budget be funded at 80 percent of its commitments. Anything below 60 percent should raise a red flag.
Conroy said deferred losses from the recession of 2008 continue to plague the fund, which now has a market value of $14.4 billion, up from $8.8 billion at the recession’s nadir in 2009, but still far below the amount needed to carry the system into the future. To date, KPERS is $10.2 billion under-funded if it is to keep its commitment to public employees up through 2033.
The logistics of a healthy retirement plan go against politics. It’s much easier for politicians to promise a healthy retirement plan than to fund it. For the past 20 years legislators have neglected to adequately fund KPERS.
The lure of a retirement plan is what brings and keeps many public-sector employees on the payroll, many who accept several times below in pay what they could earn in a private sector job. A biology teacher, for example, could parlay that knowledge into a higher-paying medical profession, which is another reason we want our best and brightest teaching our children.
That said, most in today’s private sector must rely on their own financial savvy to build a nest egg.
Today, only 20 percent of non-government employees enjoy any kind of corporate pension plan. The steep jump in the cost of health insurance premiums -— double-digit increases for many of the past 10 years — is the biggest reason corporate America can no longer provide pensions for its employees.
The demographics of today’s America also explain why current pension programs are growing more unbalanced.
Simply said, a healthier populace wreaks havoc on a retirement plan. The majority of today’s government employees are retiring at relatively young ages at 85-90 percent of their pre-retirement income.
The “plan,” just like Social Security, was to provide for senior citizens in their last few “golden years.”
To add to the dysfunction, those retiring are not being replaced by new hires.
Budget cuts, especially in education, result in fewer people paying into KPERS to support a greater number of retirees.
Today, 31 percent of Kansas teachers are 50 and older. The prospect of them retiring anytime soon presents two hurdles: A teacher shortage, because the number of possible retirees far outpaces the number of graduates from the state’s universities and colleges to take their places; and a bigger drain on the KPERS pot.
Legislators have entertained implementing a 501(k) retirement plan where employees, rather than the state, handle the investment of their benefits. So far, that’s been opposed by a majority of legislators in favor of a hybrid cash balance plan, where both the state and employees share in the financial risk of investments.
Ultra-conservatives are still fighting for the state to go whole hog with the 501(k) model. That would be sound logic only if salaries were raised substantially to weather the ups and downs of the stock market. With the take, there’s got to be some give.