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The
Kansas Coalition of Public
Retirees
A coalition of public
associations in Kansas
INTRODUCTION:
During the 2006 and 2007 sessions of the Kansas Legislature, several
attempts were made to
secure passage of a one-time 3.0 percent cost-of-living adjustment (COLA)
for public employees
receiving benefits from KPERS (Kansas Public Employees Retirement System).
All attempts at the
COLA were unsuccessful. Following
the 2006 session, a group of 18 associations representing a broad
base of KPERS membership formed a coalition to develop strategies and form a
consensus on the
amount and funding possibilities for a COLA.
As work progressed during the 2007and 2008 legislative sessions, more groups
with significant
retiree constituencies joined the coalition, including:
Educators and school personnel, public
employees, firefighters, law enforcement and the Judiciary.
To date 39 associations have joined this
coalition.
While the
Coalition understands the current budget situation the State of Kansas is
facing, here
is the impact on a KPERS retiree:
In figures provided by one of our retiree members, since
February, 2002
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Natural gas has increased by 60%
Electricity has increased by 20%
Medicare health care increased by 80%
BCBS supplemental premium increased by 13%
Dental insurance increased by 40%
Property taxes (home) increased by 17% |
INSIDE THIS REPORT:
Briefly, the report addresses:
·
The last across-the-board COLA was approved by
the 1998 Kansas Legislature
at 3.0 percent for KPERS’ recipients who retired prior to July 1, 1997.
·
The coalition recommends a 3.0 percent
across-the-board COLA for KPERS
recipients retired on or before December 1, 2008, effective July 1, 2009 (FY
2010). This is a modest increase
that will help offset the escalating costs of
inflation yet pose no financial threat to the KPERS fund.
·
As of June 30, 2008, a total of 67,102
individuals are receiving annual KPERS
benefits of $945,704,000.
·
Since the last COLA in 1998, annual average
inflation through September, 2008
(as measured by the Consumer Price Index, CPI), has eroded the buying power
of the KPERS retiree by 33.49 percent. If
trends continue without a COLA in
the near term, a person just retiring and who remains retired for 30 years
will see
his/her buying power deteriorate by 75 percent.
·
The funds needed to finance a 3.0 percent COLA could be obtained in any
number of ways, including: Gaming revenues, improved rate of return on
KPERS investments, increased fines and levies in courts, increased tax on
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tobacco and alcohol products, extending the
amortization period, or a sales tax
increase.
·
KPERS staff reports that 85-90% of KPERS recipients
continue to reside in
Kansas and contribute to the economic base of their communities and of
the
State. Estimated annual
sales tax receipts alone from KPERS retiree’s amounts
to approximately $62.6 million (based on 7 percent tax rate).
·
With a 3.0 percent COLA flowing back into the economy and
assuming a 7
percent sales tax rate, the actual increase in sales tax
dollars generated are $1.8
million per year.
By applying a 7 times multiplier, the $1.8 million should
generate more than $12.6
million. Additionally, these
new dollars would relieve
the burden on local social service costs to
the public.
·
A summary of public employee retirement plans in other
states illustrates that 64
percent (32 states) provide automatic COLA
adjustments or make COLA
increases based on an adjustment indexed to the
Consumer Price Index.
CONCLUSION:
In this report, the case is made for a 3.0
percent across-the-board COLA for KPERS recipients,
which is long
overdue. In addition to the
obvious and immediate benefit to recipients of a small
closure of the
inflationary gap, there are broader benefits to local communities and
the State as the
buying power of these recipients is increased.
Members of this broad-based coalition
believe it is well past time for the Kansas Legislature to
act to
correct a shameful inequity and fund a modest 3.0 percent COLA for KPERS
recipients.
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Members of the Kansas
Coalition of Public Retirees
KARSP (Kansas
Association of Retired School Personnel)
KNEA
KNEA
Retired
PECK
(Public Employees Coalition of Kansas)
SEAK
(State Employees Association of Kansas)
USA of KS (United School Administrators)
KSCFF (Kansas State Counsel of Fire Fighters)
Kansas Fire Service Alliance
KAPE ( Kansas Association of Public Employees)
Fraternal
Order of Police (Topeka Chapter)
Kansas State Fraternal Order of Police
Kansas
Association of Chief’s of Police
Kansas
Peace Officer’s Association
Kansas
Retiree’s/Kansas Retired
Kansas
Sheriff’s Association
Kansas City,
KS Retired Fire & Police
KAEOP (Kansas Association of Educational Office Professionals)
Kansas
District Judges Association
Kansas
District Magistrate Judges Association
Kansas Association of Counties
Kansas Association of Community Colleges
Kansas Association of School Boards
Kansas
Department of Labor Retirees
Kansas Correctional Officers Association
Kansas State High School Activities Association
Kansas State Troopers Association
Kansas Counties and District Attorneys Association
League of
Kansas Municipalities
Association
of Retired KPERS Employees
Association
of Retired Highway Employees
Association
of Retired City of Topeka Employees
Association
of Department of Education Employees
Association
of Retired Insurance Department Employees
Olathe
District Schools Retired Employees Association
Johnson County Association of Retired School Personnel (JCARSP)
Leavenworth Area Retired School Personnel
Kansas Association of District Court Clerks & Administrators
HERO
(Health and Environment Retirees Organization)
KOSE (Kansas Organization of State Employees)
Chairperson: Dennis Phillips
dipiaff83@yahoo.net;
(785) 554-3442
Vice-Chairperson: Ernie
Claudel
eclaudel1@comcast.net
(913) 481-6923
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Coalition Recommendations for a Benefit Increase
LAST
COST OF LIVING ADJUSTMENT (COLA):
During the 1998 Legislature a 3 percent COLA was granted to
those who retired prior to July 1,
1997. The increase
recognized the long term career public servant with 25 years or more of
service
under the old School retirement system (KSRS).
Since that date the consumer price index has risen
appreciably, other costs have increased and the purchasing power of the
retiree dollars has decreased.
Thus, the group is recommending a permanent annual benefit increase to
recover some of the lost
purchasing power.
RECOMMENDED
COLA:
The coalition feels that a 3 percent permanent annual across the
board increase is appropriate
and feels it can be financed. The
increase would include the retirees of the Kansas Public Employees
Retirement System (KPERS), the Kansas Police and Fire system (KP&F),
the Retirement System for
Judges and the KSRS (Kansas School Retirement System).
A
3 percent COLA (Cost of Living Adjustment) is a modest increase when you
consider cost of
living increases, inflation, health care costs, health insurance
premiums and increased costs to every
day living over the last ten years.
The committee has included (in the next section) Consumer Price
Index information that indicates, during the time period 1998 to 2008
the index increased by
approximately 33 percent.
PERMANENT
COLA:
The coalition further recommends a permanent COLA affixed to the
consumer price index in
the future. Consideration
was given to such a plan by the Senate in the 1970’s and it should be
revisited. As the
situation exists presently, if a retiree lives 30 years in retirement,
75 percent of the
retiree’s buying power will be lost due to inflation.
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Possible Revenue Sources for Funding
REVENUE
SOURCES:
The coalition is acutely aware that
any increase in retirement benefits requires new funding to
cover
the cost. Realizing
the need for new dollars the coalition, after a lengthy
discussion, suggests
the following list of possible revenue
sources:
l
ELARF (Expanded Lottery Act Revenue Fund)
l
KPERS fund investment increases (when appropriate)
l
Improved rates of return on the systems’
investments
l
Increased fine and ticket revenues
l
Increased tax on alcohol and tobacco products
l
Change the amortization period (longer payment
period of the mortgage)
l
Refinance the bonds
The coalition realizes that some of the above suggestions
may be distasteful to some and not to
others.
For those finding these suggestions undesirable, a
combination of the above could be used to
generate the necessary
funds to cover the cost of an increase.
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The Impact of KPERS Retirees on the Kansas
Economy (2007)
KPERS and the Kansas Economy
“One in every 6 working
Kansans is employed by State or Local Government.”
KPERS Public Employment represents a significant economic
force in the Kansas Economy.
State and Local Government employment (CY 2007) represents more than
16 percent of statewide total
employment (public and private).
Police, fire personnel, judges, school teachers and State
workers are
employed to insure the safety of our citizens and administer a
wide variety of programs. Most
of these
workers are covered by the KPERS retirement program.
The table below illustrates the size of the
State and local workforce.
Kansas
Employment annual average non-farm Jobs CY 2007
Total Kansas Employment (public and
private)
............................ 1,379,000
100.0% a/
Government Employment (state and
local only)
233,300
16.9%
State
53,900
Local
179,400
a/ Source:
“Kansas Employment
and Wages”, KDOL Annual Average 2007. www.dol.ks.gov
The
KPERS Retirement Population 2007, Key
Facts
“KPERS recipients are the
largest single block of retired workers (and voters) in Kansas.”
With
a significant number of working Kansans covered by KPERS, it
follows that a large
number of retired Kansans receive KPERS retirement payments.
Number of KPERS Retirees (End of Year SFY 2007)
66,063 b/
Amount of KPERS Payments
$868,179,029 b/
b/ Source: “ KPERS Annual Report 2007” pp
112 and 131
www.kpers.org/annualreport2007.pdf
Estimated
Kansas
Taxes Paid by KPERS Retirees (2007)
“KPERS Retirees Pay
Millions in State Sales and other Taxes each year”
Estimated
average Kansas sales tax
rate…………………………………. 7.0 per cent
KPERS benefit payments for SFY 2007
……………………...........…… $868,179,020 b/
A 3.0 per cent COLA would increase
retiree payments by ...........................$26,045,000(EST.)
Sales tax would rise by (.07 times
$26,045,370) ............................................$1,823,000
(EST.)
The increased KPERS payments
will have an increased and as yet undetermined positive
multiplier effect an all sectors of the Kansas
economy.
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History
or KPERS Benefit Increases (1972-2008)
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2008
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$300 one-time payment for all retirees who retired on or before July 1,
1998, with 10 or more years of service.
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2007
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$300 one-time payment for all retirees who retired prior to July 1, 1997,
with 10 or more years of
service.
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2003
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Annual Retirant Dividend Payment (13th Check) made permanent for
retirees who retired prior to July 2, 1987.
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2001
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KSRS recipients with
20 years service will have their benefit increased to $500 effective
July 1,
2001 (Approximately 66 Members).
Retired members may name funeral homes as a beneficiary for the $4,000
death benefit.
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2000
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One-time
benefit to be paid in September equal to 50% of the
retirement benefit payment to those who retired prior to July 1,
1999. Any federal
withholding will be ½ of the tax table amount of
the full benefit amount.
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1998
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Increase
of 3% for those who retired prior to July 1, 1997.
Increase of $100 to those who retired prior to Jan. 1, 1971 (BMs) who
have at least 25 years
of service, and 3% will be added to this.
Disability recipients also receive the 3% increase.
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1997
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No
Benefit Increase.
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1996
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No
Benefit Increase Effective
8-20-1996 $4,000 death benefit became
taxable.
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1995
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No Benefit Increase.
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1994
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An increase of the
higher of either 1.5%; or a combination of $.50 for
each year of service and $50 for each year of retirement.
Applies to those who
retired before July 1, 1993: RO,
SR, DR, SB,
PD, PR, PS, BM, BR, CR, IP, ID, and FD (If
not listed here, the
retirement type is not eligible for this raise.)
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1993
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Increase
of 5% or $10, whichever is greater, to retired members with
fewer than 15
years of service. Increase of 15% or $50, whichever is
greater, to a maximum
of $200, to retired members with 15 or more
years of credited service.
Retired death benefit increased to $4,000
from $2,500 – Excludes FDs and
IDs.
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1992
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Increase of $15 for those who retired prior to July 1, 1991 (included
disability recipients)
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(History of benefits continued)
| 1991 |
Increase
of 1% or $10, whichever is greater, for those who retired
prior
to July 1, 1990 (Included disability recipients) |
| 1990 |
Increase
of 4% for those who retired prior to July 1, 1989. |
| 1989 |
Increase
of 4% for those who retired prior to July 1, 1988. |
| 1988 |
Increase
of 3% to those who retired prior to January 1, 1987. |
| 1987 |
Increase
of 2% to those who retired prior to January 1, 1986.
Death benefit increased from $2,000 to $2,500 for deaths
after July 1, 1987. |
| 1986 |
Increase
of 3% to those who retired prior to January 1, 1985.
Retired
death benefit increases to $2,000 for those who died after
July 1,
1986. |
| 1985 |
Increase
of 5% to those who retired prior to July 1, 1984.
Death
benefit increased from $1,000 to $1,500 for those who died
after July
1, 1985. |
| 1984 |
Increase
of 10% to those who retired prior to July 1, 1981.
Made permanent the 10%
increase established in 1982. |
| 1983 |
BMs-10%
increase to retired members who retired prior to July 1,
1981, and a 50% increase in the savings annuity
portion. Death
benefit increased to $1,000 for deaths after July 1, 1983. |
| 1982 |
Increase
of 10% to those who retired prior to July 1, 1981, payable
through 1987. July 1, 1982 pop-up option was
established. If a
spouse died prior to the 7-1-82 date, there is no pop-up. |
| 1981 |
No
Benefit Change. |
| 1980 |
Thirteenth
check increase equal to regular monthly benefit for those
who retired prior to 1987 - July 1, 1980, and before July 1
in each
subsequent year, to be paid annually through 1987. |
| 1979 |
No
Benefit Change. |
| 1978 |
Permanent
increase for all who retired prior to January 1, 1977, as
follows:
Those who retired prior to January 1, 1973 - 7.34%
1973 - 5.5%
1974 - 4.4%
1975 - 2.2%
1976 - 1.1% |
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(History of benefits concluded)
| 1977 |
Same
provisions as the 1976 legislation. |
| 1976 |
Thirteenth
check - one-time additional payment for those retired prior
to January 1, 1975, equal to 5% of total annual retirement
benefit. In
no event shall the additional benefit be less than $20 or
more than
$200. |
| 1975 |
No
Benefit Change. |
| 1974 |
No
Benefit Change. |
| 1973 |
Legislation:
HB 1566
Benefits increased 32% for those who retired in 1962-1963
Benefits increased 28% for those who retired in 1964-1965
Benefits increased 22% for those who retired in 1966-1967
Benefits increased 15% for those who retired in 1968
Benefits increased 9% for those who retired in
1969
Benefits increased 2% for those who retired in
1970
Highway Patrol & KBI retired members:
Benefits increased 50% for those who retired before 1962
Benefits increased 32% for those who retired in 1962-1963
Benefits increased 28% for those who retired in 1964-1965
Benefits increased 22% for those who retired in 1966-1967
Benefits increased 15% for those who retired in 1968
Benefits increased 9% for those who retired in
1969
Benefits increased 2% for those who retired in1970
KSRS retired members (BMs): rate increased to $6.50 for each
year of
service credit with at least 9.5 years of service credit and
a maximum of
35 years of service credit. |
| 1972 |
Increase
of 5% for members who retired before July 1, 1971 |
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What Do Other States Do??
Public employee retirement plans commonly provide some type
of cost-of-living adjustment to
compensate retirees for reductions
in purchasing power. Some
plans provide automatic increases based
on a fixed percentage or
tied to increases in the Consumer Price Index (CPI) while other
plans base
adjustments on excess earnings or some combination of
these factors. Other
plans provide
discretionary, or ad hoc, increases to adjust for
inflation.
The distribution of COLA provision for 86 (some States have
different systems for teachers and
other public employees) public
retirement systems is summarized in the following table (based on
information compiled by the National Association of State
Retirement Administrators in 2006):
Summary
of Post-Retirement Benefit Increase Provisions
| Adjustments indexed to CPI |
30 |
34.9% |
| Automatic percentage
increase |
25 |
29.1% |
| Based on investment
performance |
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| Or CPI plus
performance factors |
10 |
11.6% |
| Ad hoc increase |
21 |
24.4% |
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| Total |
86 |
100% |
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