At the time, skeptics called it a shell game.
Kansas would borrow $1 billion to prop up its pension program on the assumption interest earned with the additional infusion would cover its debt service.
That was in 2015 when Kansas legislators persuaded themselves the scheme was a slam-dunk, banking on an 8 percent interest rate.
The real rate of return was 0.2 percent, officials with the Kansas Public Employees Retirement System disclosed Monday.
So now, the state not only has a $65 million annual obligation to pay back the $1 billion loan at a 4.5 percent interest rate but it also continues to have an underfunded retirement program.
Earlier this year, in fact, it failed to make one of its quarterly payments to KPERS of about $97 million — saying it would pay it “later” at 8 percent interest.
We’re not holding our breath.
FOR A BRIEF period, Kansas was on the right track to fund KPERS. In 2012, legislators upped the ante by both the state and employees in contributions to the program, which at the time was facing an immediate $715 million shortfall.
But then the 2012 income tax cuts took effect, and the state reneged on its commitment, while teachers and other public employees did not have that luxury.
By 2014, the state was funding only 62.3 percent of the program, meaning it was taking in far less than what it owed in obligations to its 300,000 public employees, including those currently on the payroll and those who have retired.
A healthy retirement account is 85-percent funded.
But instead of saying, “hey, these tax cuts are killing us,” legislators opted to put the state further in debt while artificially propping up KPERS.
NOW THE GAME is up.
And, no surprise, Kansans are left holding a bag of empty promises.
— Susan Lynn
