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Minutes for HB2405 - Committee on Insurance and Pensions
Short Title
Authorizing the issuance of $1,000,000,000 of pension obligation bonds to finance a portion of the unfunded actuarial liability of KPERS.
Minutes Content for Mon, Feb 22, 2021
The Chairperson opened the hearing on HB2405 and asked David Wiese, Assistant Revisor, Office of the Revisor of Statutes, to provide an overview of the bill. Mr. Wiese also stated that a sentence had been omitted from the bill so that a technical amendment will be coming if/when the bill is worked. (Attachment 7)
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 of the Kansas Public Employees Retirement System, provided testimony in support of the bill. Mr. Conroy stated that the bill authorizes the Kansas Development Finance Authority (KDFA) to sell one or more series of revenue bonds of $1,000,000,000, net of fees, for deposit in the KPERS Trust Fund. The proceeds would be applied to the KPERS unfunded actuarial liability. He went on to say that HB2405 stipulates that the bonds are solely the obligations of KDFA and are not an obligation or indebtedness of KPERS. KDFA and the Department of Administration are responsible for establishing debt service payment for the bond issuances. Mr. Conroy said that the additional assets in the Trust Fund immediately improve the funded ratio of the State/School group, and that the addition of the bond proceeds improved the funded ratio projection to 76.7%, which is a 4.8% increase over the 71.9% the fund was on 12/31/2021. Director Conroy responded to Committee questions. (Attachment 8)
Jim MacMurray, Senior Vice-President - Finance, Kansas Development Finance Authority was not scheduled to give testimony. However, he was in the room and the Chairperson called on him to answer some of the questions that arose from Director Conroy's testimony.
Ed Klumpp, Lobbyist for the Kansas Association of Chiefs of Police,Kansas Sheriffs Association and Kansas Peace Officers Association, provided testimony in support of the bill, stating that the associations he represents support all efforts to continue to lower the unfunded actuarial liability of the KPERS retirement programs. He stated that the groups he represents hope that as the Committee considers HB2405, there would be a way to include a path to a benefit adjustment for existing retirees in the use of the bonded funds. (Attachment 9)
Ernie Claudel, Lobbyist for the Kansas Association of Retired School Personnel and the Kansas Coalition of Public Retirees, provided testimony in support of the bill. Mr. Claudel began by stating that he is a member of the KPERS Board of Trustees, and that any opinions he shared today did not in any way represent the views of the KPERS Board of Trustees. He stated that the goal for a retirement system funding level is 80%, on the way to 100%. Mr. Claudel cited the positive benefit of the two previous bonds (2004 and 2015), and thinks that this appears to be an ideal time to attempt an issuance of the proposed bonds. He also stated that 87% or 92,118 retirees and beneficiaries have never received a cost-of-living adjustment of any kind. And he concluded by saying that he thinks the time is also right to use part of this proposed funding for a modest benefit increase for KPERS retirees and beneficiaries. (Attachment 10)
Vic Miller, Kansas State Legislator representing District 58, provided testimony in support of the bill. Mr. Miller stated that this bill employs one of the oldest and most effective methods of getting rich in America - borrowing money and investing it to earn a profit. He stated that the two previous bonds (2004 and 2015) have proven to be wise investments, to this point. He went on to say that with interest rates at record lows, now is the perfect time to again make a smart investment using the strength of the KPERS Trust Fund borrowing ability to do so. He hinted that there are some adjustments he would like to recommend to the bill, when it is worked. Representative Miller responded to Committee questions. (Attachment 11)
After asking if there were any other conferees and seeing none, Chairperson Johnson closed the hearing on HB2405.
Meeting adjourned at 5:45 p.m.
