TOPEKA — A committee in the Kansas House found bipartisan support for the idea of earmarking $450 million to lowering the unfunded liability of the Kansas Public Employee Retirement System.
On Thursday, about 24 hours after the initial vote, a majority on the House Appropriations Committee reversed course. The decision had something to do with the idea of maintaining a hefty cash balance that could be devoted to tax reform or spending priorities. Gov. Laura Kelly vetoed a $1.6 billion tax bill, but Republicans in the House and Senate were expected to pull together an alternative within the next few weeks.
Representatives initially drawn to the KPERS idea said reconsideration was in order.
“Yesterday afternoon, you could say I had an epiphany,” said Rep. Sean Tarwater, a Stilwell Republican. “It’s best to leave this money on the sidelines until we do have a tax plan.”
GOP Rep. Bill Sutton of Gardner confessed to second thoughts: “I’d agree what we did yesterday wasn’t the best direction.”
KPERS has $9.6 billion in unfunded liabilities, but that didn’t mean there wasn’t sufficient cash to meet obligations to retirees for years. The retirement system holds $27 billion in assets. The unfunded liability represented the gap between the trust fund’s assets and future benefit payments, and was a number useful in long-term planning.
The Democratic governor had proposed the Legislature use $450 million of the state’s multibillion-dollar budget surplus to pay off bond debt acquired by KPERS when the system borrowed to invest in the market under a scheme to generate supplemental revenue and chip away at the unfunded liability. A GOP-led House subcommittee didn’t like her idea of eradicating KPERS debt tied to relatively low interest rates.
“We just didn’t feel like it was something that needed to be done,” said Rep. Kyle Hoffman, R-Coldwater.
In the alternative, Rep. Henry Helgerson, D-Wichita, did convince the full appropriations committee Wednesday to apply $450 million to the unfunded liability. Good business sense was abandoned Thursday in favor of sitting on a stockpile of cash that could be part of a mega-tax bill, he said.
“A tax plan that will push us over the edge,” Helgerson said.
