By Gene Meyer
February 8, 2010

(KansasReporter) TOPEKA, Kan. - Kansas' unfunded pledges to teachers and public workers' future pensions grew by $2.4 billion following investment losses in 2008, the state Legislative Division of Post Audit reported Monday.

The gap, which increased from $5.3 billion in December, 2007 to $7.6 billion 12 months later, does not threaten any Kansas Public Employees Retirement System pension checks that teachers or other state and local government workers are receiving now or in the near future, said Brad Koehn, of the Topeka CPA firm Berberich Trahan & Co., which ran the regularly scheduled system audit for the legislature's audit arm.

"But it is like Social Security," Koehn told members of the legislature's Post Audit Committee.

"If somebody doesn't do something, there will be trouble," Koehn said.

Basically, KPERS' had enough money before markets tanked in 2008 to pay slightly less than 69 percent of the retirement money promised to workers over the 30-year planning horizon actuaries use, the report found. Investment losses shrank those assets to must less than 57 percent of the promised retirement obligations.

Koehn's report suggests that KPERS can make up at least part of the shortfall with better investment results in the next four years, but didn't say how much the system might expect to recoup.

A separate analysis of the same investment losses by University of Kansas economist Art Hall last September reached a harsher conclusion that the fund was effectively broke because of the losses and chronic underfunding before that.

Koehn's report also addressed the underfunding issue. Kansas governments and the taxpayers who support them will need to increase their contributions to the retirement plans for teachers, public workers and judges by 2 percent to 4 percent a year to restore them all to health, Koehn estimated. State law currently restricts those increases to 0.6 percent.