Protesting KPERS Pensions
Posted on June 11, 2017
The Koch-funded Kansas Policy Institute has a hit piece on Kansas government pensioners, complaining because a small share of them stand to gain over $1M (but only if they live at least 20 years. (but only if they survive 20 years or so after retirement).
News flash: that amounts to $50K per year, definitely a decent amount but not out of line, e.g., for workers or managers who earned over $80K per year when they retired.
The KPERS base formula is: 1.85% (x) years of service (x) ending salary. So if you work 30 years you retire at 56% of your final salary. That’s entirely reasonable.
The piece did turn up something I’m not quite as comfortable with: a few USD superintendents retired with rather large pensions, led by USD 229 Blue Valley’s Tom Trigg, whose pension is $214K. That results partly from high salaries in the first place. Education is not all that egalitarian a field, though far better on that score than almost any other profession.
However there is also a gimmick in the formula: the USD can add deferred compensation for unused vacations and sick leave in the last year, which puffs up the basis for the pension. That is not a very rational way to do business, for various reasons. One reason is that the USD does not pay any extra costs–it is absorbed by KPERS–so they have a strong incentive to reward all of their employees with large pensions based on as much deferred compensation they can arrange. Another reason is that it creates an incentive against using vacations and sick leave.
The legislature could mitigate this problem by using (say) a final three-year average salary as its basis, somewhat like the formula for Social Security. Since that would result in a reduction in average pensions, it would be appropriate to increase the percentage from 1.85% to a slightly higher amount in compensation (on a cost-neutral basis).