The state of Kansas may issue up to $500 million in pension obligation bonds to shore up the funded status of the $9 billion Public Employees Retirement System, Topeka, said Glenn Deck, executive director. The plan's funded status has been "deteriorating over several years," and it has seen a "sizable increase" in its unfunded liabilities, despite a 9% gain on investments for the first six months of the year, Mr. Deck said. The system was 77.6% funded as of Dec. 31, according to the annual valuation report by actuary Milliman USA; it was 84.8% funded at the end of 2001.
The bond issue is contingent on further review by the state's Legislative Joint Committee on Pensions and Investments and requires approval by the State Finance Council, Mr. Deck said. The committee's next meeting is Sept. 1.
Also, as part of a pension bill signed by Gov. Kathleen Sebelius in May, the state will increase its contribution rate by 0.4% in July 2006, by 0.5% in 2007 and by 0.6% in 2008. Prior to the new law, the state's contribution increased by 0.2% annually. The state's employer contribution to the plan was 4.38% in 2002, Mr. Deck said; the rate suggested by Milliman was 7.69%. The state has not made a contribution at the actuarial rate since 1993, he said. The contribution rate is "a moving target," and the actuaries may suggest a rate of 9% in a couple of years if contributions are not increased, he said.