Wrangling inside Capitol produces controversial tweak to KPERS’ investment cap
TOPEKA — The Kansas Senate voted to support a 50% increase in the lump-sum death payment for retirees in the Kansas Public Employee Retirement System and elevation to 20% the maximum amount of the pension system’s portfolio tied to alternative private equity or infrastructure investments.
Members of the Senate disagreed on financial implications of both changes, but voted 25-14 on Senate Bill 172 to raise the death benefit to $6,000 from the current $4,000. The adjustment would be paid with KPERS contributions and investment income. Over a 20-year period, the cost could be $108 million.
“This hasn’t been changed for 30 years — since 1993,” said Sen. Rick Billinger, the Goodland Republican and chair of the Senate Ways and Means Committee. “I know folks are concerned we’ll take $108 million and add it to the unfunded liability.”
He asked senators to consider KPERS had assets of $27 billion and an 11% return on investment last year. The long-term unfunded actuarial liability of KPERS, or the difference between trust fund assets and anticipated future benefit payments, stood at $9.6 billion in July 2023.
“In my opinion, raising the unfunded liability is a nonstarter,” said Sen. Jeff Longbine, an Emporia Republican who agreed a bump in the death benefit was overdue. “We’ve worked so hard to go backward. We still have a long way to go.”
Democratic Sen. Pat Pettey of Kansas City, Kansas, said the Legislature should authorize the benefit adjustment. She said decades without an increase meant elevating the payment to $6,000 would still fall short of paying the cost of a funeral.
Investment portfolio
Meanwhile, the Senate voted 24-13 to forward to the Kansas House contents of Senate Bill 23, which raised the cap on alternative investments by KPERS from the current 15% to 20% of total pension system assets.
The original objective of the bill was to remove the investment cap and let KPERS trustees decide how to handle that part of the portfolio, but a compromise was reached to merely lift the upper limit to 20% of the portfolio.
“Let the buyer beware,” said Sen. Mark Steffen, a Reno County Republican who asserted some in the Senate lacked investment sophistication. “I do feel like there’s been a lot of lipstick put on alternative investments. They are inherently about swinging for the fences.”
Alan Conroy, executive director of KPERS, said investment market volatility pushed KPERS’ alternative investment portfolio to 14.1% before settling at 13%. The Legislature adopted a cap of 10% in 1992 and increased it to 15% in 1993.
“If KPERS were to reach the 15% alternatives cap under current statute, new investments in private equity and infrastructure would stop and could not be resumed until exposure fell below the cap,” he said. “This would restrict KPERS’ ability to diversify these investments across economic cycles, increasing risk and may result in KPERS losing access to top tier investment managers, potentially reducing return.”
Dealing with pornography
Leawood Sen. Kellie Warren, the Republican chair of the Senate Judiciary Committee, convinced peers to unanimously approve a bill requiring websites displaying pornography to deploy commercial-grade age verification software and block people younger than 18.
Under Senate Bill 394, websites would be subject to the age-confirmation requirement if more than one-fourth of content viewed in any calendar month could be interpreted as harmful to minors. Internet service providers in Kansas wouldn’t fall under the bill’s mandate.
“We’ve heard a lot about the harm of viewing and getting addicted to pornography,” Warren said.
She was asked by Democratic senators whether the the statute would be used by Attorney General Kris Kobach to attack websites dedicated to literature or fine art and whether the verification system could expose personal information about adults to hackers.
Sen. Tom Holland, D-Baldwin City, asked if the annual Sports Illustrated swimsuit photography edition posted online could be defined as pornography under the proposed website crackdown.
“Would that qualify as basically being harmful to minors? Could you not make the argument that that is sexually titillating?” Holland said.
Warren referred senators to existing Kansas statute defining material harmful to minors as content containing any description, exhibition, presentation or representation of nudity, sexual conduct, sexual excitement or sadomasochistic abuse. She said the attorney general would be responsible for investigating public reports of noncompliance with the law and the courts would make determinations based on that evidence.
The attorney general would be allowed to seek civil penalties against websites ranging from $500 to $10,000 for each underage visit to the offending website. The parent or guardian of a minor who gained access to pornography on certain websites would be allowed to file a lawsuit and seek damages of $50,000 or more.
“This bill is narrowly tailored so it doesn’t run afoul of First Amendment concerns,” Warren said.
“Are we talking about things like ‘Lady Chatterley’s Lover’ or ‘Catcher in the Rye?’” asked Holland, who suggested champons of the bill could be trying to transform Kansas into a “nanny state.”
Sen. Renee Erickson, R-Wichita, said the legislation was written to impose age restrictions on website pornography that resembled ratings adopted for admission to movies.
“I’m just kind of befuddled by the questions about this,” she said. “If it’s not age appropriate, children shouldn’t be viewing it.”
Passenger rail expansion
Sen. Carolyn McGinn, a Republican from the community of Sedgwick, successfully pitched a bill that would commit the state to investing $50 million over 10 years in expansion of passenger rail service in Kansas through a partnership between the Kansas Department of Transportation and the federal government. The Senate voted 34-6 and sent Senate Bill 349 to the House.
McGinn said there was potential the Heartland Flyer corridor — discontinued in 1979 — could be returned to service by Amtrak and extend from Fort Worth, Texas, to Oklahoma City, Wichita and Newton. There would be stops in the Oklahoma cities of Edmond, Perry and Ponca City as well as stops in Arkansas City, Wichita and Newton. That would connect rail passengers to the Southwest Chief currently running from Los Angeles to Chicago.
Last month, the Federal Railroad Association granted up to $500,000 for development of the Heartland Flyer plan. That placed the extension in a cue for a piece of $1.8 billion in U.S. rail corridor grants.
“Now is the time for us to start preparing for how we’re going to continue this service over time after Amtrak and the federal government help us get it started,” she said.
The legislation would commit KDOT to allocation of state funding for rail service projects and operations of Amtrak or any common rail carrier approved by the Federal Railroad Administration through 2035. There was an expectation federal grants could be secured to cover the initial five years of passenger rail expansion in Kansas, with the state providing funding after that period.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
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