The Kansas General Assembly passed a bill to issue $1 billion in pension obligation bonds for the $16 billion Kansas Public Employees Retirement System, Topeka.
The measure, aimed at boosting assets and reducing the state’s contributions to the pension fund, passed the Senate on Thursday, a day after the House passed the bill.
The bill passed was a compromise bill and is less than the $1.5 billion previously proposed by Gov. Sam Brownback and approved by the House in March. It is the same amount that was approved by the Senate in February.
A spokeswoman for Gov. Sam Brownback said the governor has not yet received the bill “but looks forward to reviewing it.”
The General Assembly authorized a $500 million bond issuance for KPERS in 2003. Kristen Basso, a KPERS spokeswoman, previously told Pensions & Investments the “investment return on the proceeds has exceeded the bond rate by more than $174 million.”
On how the bond proceeds would be invested, Ms. Basso said the process is still early on as the bill just passed. However, investment staff will develop an investment plan with direction from its board of trustees and input from its investment consultant, Pension Consulting Alliance.
KPERS had $9.8 billion in unfunded liabilities and a 60% funding ratio as of Dec. 31, 2013.
Under the bill, the state is expected to save $63.6 million total in pension contributions from its general fund in fiscal years 2016 and 2017, a conference committee report said.
State Rep. Steven Johnson said the $1 billion is a “reasonable amount” and the current low-interest-rate environment makes the bond issuance attractive.
While pension obligation bonds will not “fix” an underfunded system, they do address some of the unfunded liability, Mr. Johnson said. Under the bond issuance, KPERS’ unfunded liability could decrease to $6.28 billion from $7.26 billion, the conference committee report said.
The bonds could be issued in one or more series as early as May.