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Minutes for HB2399 - Committee on Insurance and Pensions
Short Title
Amortizing the state and school KPERS unfunded actuarial liability over a 24-year period and eliminating certain level-dollar employer contribution payments.
Minutes Content for Wed, Feb 24, 2021
The Chairperson opened the hearing on HB2399 and asked David Wiese, Assistant Revisor, Office of the Revisor of Statutes, to provide an overview of the bill. (Attachment 1)
Adam Proffitt, Budget Director for the State of Kansas, provided testimony in support of the bill. He opened by stating that this bill seeks to re-amortize the KPERS State/School group legacy unfunded actuarial liability (UAL), by extending the current amortization schedule by ten years. He stressed that the contents of the bill were key components in the Governor's recommended budget, and that implementation of this bill will lead to stability and predictability in the state's budget in the coming years. Mr. Proffitt went on to say that while state revenues have improved over the past several months, the state, along with the rest of the nation, is still in a period of economic uncertainty. He said that we must be judicious with state general fund (SGF) expenditures and continue to identify areas of SGF savings. Re-amortizing the UAL is one tool that will provide immediate relief to the SGF, and it also would provide for a more manageable level of employer contribution rate to the plan. He reiterated that by having a more manageable contribution rate schedule, it would provide greater confidence that the state will be able to continue to meet its obligation to this fund, even in an economic downturn. Mr. Proffitt responded to Committee questions. (Attachment 2)
The Chairperson asked Melissa Renick, Assistant Director for Research, Kansas Legislative Research Department, to provide an overview of the fiscal note.
Alan Conroy, Executive Director for the Kansas Public Employees Retirement System, provided general information on the bill. He began his testimony by stating that amortization of unfunded actuarial liabilities is a normal part of funding a public sector pension plan. He went on to say that amortization is used to systematically pay off an unfunded liability over a reasonable period to ensure that the pension plan funding is continually improving. Mr. Conroy outlined that the bill extends the amortization period for the KPERS State/School legacy UAL by ten years. HB2399 also deletes the remaining payments for delayed employer contributions from FY2017 and FY 2019 and adds the balance to the legacy unfunded UAL. He clearly stated that HB2399 does not affect retiree benefits or employee contributions. Mr. Conroy reviewed the current amortization policy and then he responded to Committee questions. (Attachment 3)
Jarold Boettcher, retired KPERS Trustee, provided testimony in opposition to the bill. Mr. Boettcher introduced himself and provided insight to his background, which included 17 years as a KPERS Trustee. He expressed that the KPERS story today is not a new one, but an old story that unfortunately continues. He believes that the KPERS problems are due to a historic failure to deal with large, increasing long-term obligations which were largely created by short term decisions. He went on to say that the current path was set in 2012, with legislation which reflected realistic and responsible thinking, and he urged the Committee to allow progress to proceed on the big picture. Mr. Boettcher concluded by saying that this funding crisis and others to follow, cannot be resolved in the short term by diversion of funds elsewhere. Mr. Boettcher responded to Committee questions. (Attachment 4)
Ernie Claudel, Lobbyist representing Kansas Association of Retired School Personnel and Kansas Coalition of Public Retirees, provided testimony in opposition to the bill. He stressed that the passage of HB2399 would again create under-funding of KPERS, which his clients believe is extremely undesirable. He stated that there is already a re-amortization plan in place, that was initiated in 1993. This plan was set to run for 40 years, with the goal of eliminating the UAL by 2033, if no other legislation is enacted. Mr. Claudel cited the KPERS Actuary stating that this policy is counterproductive to the long-term health of KPERS, and for that reason his clients strongly urge the Committee to reject HB2399. (Attachment 5)
After asking if there were any other conferees and seeing none, Chairperson Johnson closed the hearing on HB2399.
