TOPEKA — Kansas retiree advocate Ernie Claudel enthusiastically supported taking advantage of low interest rates to issue $1 billion in bonds to infuse investment cash into the Kansas Public Employees Retirement System.
“This appears to be an ideal time to attempt an issuance of the proposed bonds,” said Claudel, who works with the Kansas Coalition of Public Retirees and the Kansas Association of Retired School Personnel. “It would also seem to be the proper time to use part of this proposed funding for a modest benefit increase for your KPERS’ retirees and beneficiaries.”
The Kansas House didn’t buy the cost-of-living adjustment suggestion, but overwhelmingly approved the concept of $500 million to $1 billion in bonding — depending on where interest rates stand — to refinance a portion of the pension system’s unfunded liability.
The bond strategy in House Bill 2405 was designed to lower the cost over a 30-year period of addressing a $6 billion unfunded liability in the state government worker and teacher portion of KPERS. Proceeds from bond sales would be injected into KPERS’ investment portfolio in anticipation earnings exceeded the borrowing debt and boosted the bottom line of pension system, said Rep. Steve Johnson, an Assaria Republican and chairman of the House Insurance and Pensions Committee.
“Thirty years gives us a better chance to be confident in achieving our expected rate of return,” Johnson said. “KPERS is also very efficient in the way they invest the money. They have a solid track record for investing it.”
Rep. Vic Miller, a Topeka Democrat, said decisions in 2004 and 2015 by the Legislature to borrow large amounts of money through bonding on behalf of KPERS were risks that paid off. There is merit in repeating the process, he said.
