Gov. Laura Kelly recommended Monday the state government pay off nearly $500 million in debt owed the Kansas Public Employees Retirement System and refinance the pension system's unfunded long-term liability to free up state tax dollars for other purposes.
The Democratic governor said she would urge House and Senate members convening next week in Topeka to consider a package that included the debt and refinancing pieces.
The GOP-led Legislature adopted a 20-year payment plan for debt repayment and had expressed limited support for reamortizing long-term pension liabilities.
Kelly said in a statement the 2020 Legislature ought to promptly resolve a $477 million obligation to KPERS that under current law wouldn't be eradicated for two decades. Making a bulk payment to KPERS would save the state treasury about $200 million in interest payments.
"We must act decisively to meaningfully reduce state debt, rebuild the state savings account and protect Kansas’ ability to pay its bills in the long term," she said.
Kelly said steps reducing the state's short-term annual payment to KPERS would be "sound, fiscally prudent tool often used in other states."
"I’ve always said that no political party holds the monopoly on good ideas," Kelly said. "Key elements of my plan were initially offered by Republican leaders in the past, and after reviewing carefully, I concluded that their idea merits consideration."
If the refinancing proposal were enacted, the governor said, all retiree benefits would be safe despite extension of the time necessary to allocate sufficient money to cover liabilities far into the future.
It would free up a projected $220 million in each of the next 15 years for appropriation to other areas of state government. However, the maneuver would cost the state billions of dollars to meet the unfunded liability in KPERS over a 25-year period rather than the current estimate of 15 years.
"It costs $4.4 billion more for those 10 extra years," said Alan Conroy, executive director of KPERS.
He said Kelly's proposal on refinancing wouldn't apply to the judges, police and fire or the local government sectors of KPERS.