TOPEKA, KANSAS — Today, Representative Steven Johnson, chairman of the House Insurance & Pensions Committee, announced Kansas taxpayers will save $25 million in the coming year. Johnson led the effort to use low bond rates to help finance the unfunded liability in the Kansas Public Employee Retirement System (KPERS).
“We continue to take steps to improve the fiscal position of KPERS,” said Johnson. “During the session, House Bill 2405 passed with broad support in both chambers, authorizing $500 million in bonds to refinance the pension liability given low rates.”
The bond was priced at 2.65% yesterday when it was issued. The bond reduces the interest owed on that portion of the KPERS liability (currently at 7.75%). That change in rate reduces interest cost for taxpayers by over $25 million for just the first year. (7.75% – 2.65% = 5.1% X $500 million = $25.5 million)
“Those are the savings we will have in the budget going forward,” said Johnson. “Through July 31st, we have reduced our liability by $987 million using this strategy with previous bonds.”
The bill passed with overwhelming supermajorities in both chambers. The final vote was 112(Y) to 10(N) in the House and 32(Y) to 6(N) in the Senate.
“When we lead with meaningful ways to reduce spending over time, we can reduce long term taxpayer obligations,” said Johnson. “Reducing taxes without addressing spending ultimately results in a tax shift rather than a lasting tax reduction.”
What this is NOT:
- It is neither an increase nor a decrease in debt. Total debt remains the same. Who pays the debt remains the same.
- It is not borrowing to meet our obligation. We have fully funded our contributions to KPERS over recent years which is critical for long term funding. (This is in addition to that required funding.)
- It is not a solution to the pension problem. The solution is setting contributions and benefits at needed levels. (It is an additional step to help the issue but not a solution in itself.)