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Accounting change to foist KPERS debt on locals

12/4/2013

TOPEKA (AP) -- About $10 billion in projected pension debts will move from the state of Kansas to the balance sheets of local governments after a change in national accounting standards is implemented next year, according to a state official.

Alan Conroy, executive director of the Kansas Public Employees Retirement System, told the Legislative Post Audit committee Tuesday about the Governmental Accounting Standards Board's changes, The Topeka Capital-Journal reported (http://bit.ly/1k6I9yL ).

KPERS serves state employees as well as public workers from about 1,500 cities, counties, school districts and other forms of local government such as water districts. Starting next year, those entities will need to carry the KPERS "unfunded actuarial liability" for their employees on their own balance sheets rather than having the state carry it all, as it currently does. The unfunded actuarial liability is the amount the system has promised above what it is projected to produce.

"So our balance sheet will actually look better and the locals will look worse," said Sen. Jeff Longbine, R-Emporia.

Longbine said the change could make it more difficult for local governments to borrow money for building projects.

"It could affect the bond ability or bond cost of some of our municipalities," Longbine said.

Conroy said his office was working on a breakdown for each entity based on the number of public employees, their terms of service and other factors.

"We'll provide them information that will tell them their share of the unfunded pension liability," Conroy said.

The KPERS debt ballooned because of a number of factors, including unfunded liability in the school district system that the state absorbed, underfunding by the state and the market downturn of the recession.

The 2012 Legislature passed a bill to transition new KPERS employees to a cash balance plan starting in 2015. Conroy told the committee that the plan is still projected to extinguish the KPERS debt by 2033.

Conroy said the new reporting requirements will apply only to local governments that adhere to the Generally Accepted Accounting Principles, which is about 300 of the 1,500 local governments in Kansas.