TOPEKA, Kan. — Democratic Gov. Laura Kelly worked Monday to rescue a key budget proposal that would reduce Kansas’ annual payments to its public pension system by trying to sell the plan to wary retired teachers and government workers.
Kelly’s plan faces widespread opposition among Republican lawmakers, who view it as her way of freeing up state funds for additional spending on public schools and government programs. Her plan would reduce planned payments to the still-underfunded pension system for 17 years, delaying the closing of a long-term funding gap by 15 years.
The GOP-dominated Legislature shorted annual pension payments in recent years to help close budget shortfalls but balked in 2017 when then-GOP Gov. Sam Brownback proposed giving the state an additional decade to close the pension system’s funding gap. Kelly, formerly a veteran state senator from Topeka, was a strong critic of Brownback’s policies.
But Kelly told about 80 retirees gathered for an annual Statehouse rally that her proposal would give the state manageable annual payments to the Kansas Public Employees Retirement System and make it more stable. She insisted she isn’t trying to free up money for new spending and said retirees have heard “a lot of misinformation.”
“Whatever else you’re hearing is not true,” Kelly told the retirees. “I’ve just told you the truth.”
Legislators have wrestled with public pension costs for decades, and KPERS remains less than 70 percent funded, with its long-term funding gap projected at $8.9 billion. A 2012 law committed Kansas to aggressive increases in annual payments to close the gap by 2034 or 2035.
The governor’s office released projections Monday showing that the total annual payment is set to jump from $542 million to $681 million during the budget year beginning in July, then rise steadily to $923 million after 15 years.
Kelly’s office said her plan would cut the payment during the next fiscal year by $160 million to $521 million. For the 2035 budget year, it would be $654 million, or $269 million less than now planned. The governor said the lower payments are “much more sustainable.”
Asked whether she’s working an alternative in the face of GOP opposition, she told reporters, “I don’t need a Plan B on this.”
“The budget is balanced without any of this happening,” Kelly said.
Kelly’s proposed $18.4 billion budget for the state’s next fiscal year would leave cash reserves of $686 million, so there would be no shortfall if her pension plan failed. But she also argued that cash reserves are a hedge against a future economic downturn and made a point of not proposing to have annual spending outpace annual revenues.
Senate Vice President Jeff Longbine, a moderate Emporia Republican, said Kelly needs the pension proposal “to make her budget work.” Told that the governor disputed that assessment, Longbine replied, “OK, then why are we doing it?”
“It’s like refinancing your house in year 25 of a 30-year mortgage and taking the five years and spreading it out over 30,” Longbine said. “Nobody in their right mind would do that.”
Under Kelly’s plan, the state would not close the pension system’s long-term funding gap until 2049 or 2050. The pension system’s officials estimate that over that longer period, the total spending on pensions would be $7.4 billion higher.
Ernie Claudel, a retired Olathe teacher and school administrator who serves on the KPERS Board of Trustees, called Kelly’s plan a “terrible idea” last month. He is co-chairman of the retirees’ group that sponsored Monday’s rally and said he stands by those comments.
But Chris Huntsman, a retired Topeka teacher who attended the rally, said financially stressed families do refinance homes to lower mortgage payments and keep up with other bills.
“It’s not desired, but it keeps the family solvent,” Huntsman said.