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Session of 2025
HOUSE BILL No. 2298
By Representatives Weigel and Helgerson
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AN ACT concerning state moneys; creating the liability reduction fund of
the Kansas public employees retirement system and transferring
$1,000,000,000 from the budget stabilization fund to such fund; using a
portion of the interest earnings of the liability reduction fund to provide
a cost-of-living adjustment to certain retirants of Kansas public
employees retirement system and systems thereunder; authorizing
certain transfers of such employer contribution savings from the state
general fund to the budget stabilization fund; establishing requirements
for the expenditure or transfer of moneys from the budget stabilization
fund; amending K.S.A. 2024 Supp. 75-6706 and repealing the existing
section.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. (a) The retirement benefit, pension or annuity
payments accruing after June 30, 2025, to each retirant shall be increased
by a cost-of-living adjustment in an amount as provided in subsection (b).
Such payments shall be paid by the retirement system to the retirant
utilizing a portion of the interest earnings of the liability reduction fund
created in section 2, and amendments thereto.
(b) Each retirant whose date of retirement is on or before July 1,
2020, and who is entitled to receive a retirement benefit, pension or
annuity payment from the retirement system on July 1, 2025, shall have
such retirement benefit, pension or annuity increased by 2% of the
retirement benefit, pension or annuity payment in effect on July 1, 2025.
(c) As used in this section:
(1) "Insured disability benefit recipient" means any person receiving
an insured disability benefit under K.S.A. 74-4927, and amendments
thereto;
(2) "retirement system" means the Kansas public employees
retirement system, the Kansas police and firemen's retirement system, the
state school retirement system and the retirement system for judges; and
(3) "retirant" means any:
(A) Person who is a member or special member of the retirement
system pursuant to the provisions of K.S.A. 74-4901 et seq., and
amendments thereto, and who retired on or before July 1, 2020;
(B) person who is a joint annuitant or beneficiary of any member
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described in subparagraph (A); and
(C) insured disability benefit recipient.
(d) The provisions of this section shall be a part of and supplemental
to K.S.A. 74-4901 et seq., and amendments thereto.
New Sec. 2. (a) There is hereby created in the state treasury the
liability reduction fund. The purpose of such fund shall be to reduce the
unfunded actuarial liability of the Kansas public employees retirement
system. Subject to subsection (b), such fund shall be administered by the
board of trustees of the Kansas public employees retirement system. All
expenditures from the fund shall be made in accordance with appropriation
acts upon warrants of the director of accounts and reports issued pursuant
to vouchers approved by the chairperson of the board, the executive
director of the system or the executive director's designee.
(b) The state treasurer shall retain control of the moneys of the
liability reduction fund and shall credit such moneys to the budget
stabilization fund for the purpose of responding to an extraordinary
occasion pursuant to K.S.A. 75-6706, and amendments thereto, when
authorized by an appropriation or other act of the legislature or by the state
finance council, acting on this matter which is hereby characterized as a
matter of legislative delegation and subject to the guidelines prescribed in
K.S.A. 75-3711c(c), and amendments thereto. The crediting of such
moneys from the liability reduction fund to the budget stabilization fund
shall occur only after all other moneys in the budget stabilization fund
have been expended or transferred to respond to an extraordinary occasion.
(c) The board of trustees shall be responsible for the management and
investment of the moneys in the fund and shall discharge the board's duties
with respect to such moneys solely in the interests of the liability reduction
fund and shall invest and reinvest such moneys and acquire, retain,
manage, including the exercise of any voting rights, and dispose of
investments of such moneys within the limitations and according to the
powers, duties and purposes as prescribed by this section.
(d) Moneys specified in subsection (c) shall be invested and
reinvested to achieve the investment objective which is preservation of
such moneys and accordingly providing that the moneys are as productive
as possible, subject to the standards set forth in this section. No such
moneys shall be invested or reinvested if the sole or primary investment
objective is for economic development or social purposes or objectives.
(e) In investing and reinvesting moneys specified in subsection (c)
and in acquiring, retaining, managing and disposing of investments of the
moneys, the board of trustees shall exercise the judgment, care, skill,
prudence and diligence under the circumstances then prevailing, which
persons of prudence, discretion and intelligence acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of
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like character and with like aims by diversifying the investments of the
moneys so as to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so, and not in regard to
speculation but in regard to the permanent disposition of similar moneys,
considering the probable income as well as the probable safety of their
capital.
(f) In the discharge of such management and investment
responsibilities the board of trustees may:
(1) Contract for the services of one or more professional investment
advisors or other consultants in the management and investment of such
moneys and otherwise in the performance of the duties of the board of
trustees under this section; and
(2) arrange for the custody of such moneys as the board of trustees
considers advisable with one or more member banks or trust companies of
the federal reserve system or with one or more banks in the state of
Kansas, or both, to be held in safekeeping by the banks or trust companies
for the collection of the principal and interest or other income or of the
proceeds of sale.
(g) The board of trustees shall require that each person contracted
with under subsection (f) to provide services shall obtain commercial
insurance that provides for errors and omissions coverage for such person
in an amount to be specified by the board of trustees. The amount of such
coverage specified by the board of trustees shall be at least the greater of
$500,000 or 1% of the funds entrusted to such person up to a maximum of
$10,000,000. The board of trustees shall require a person contracted with
under subsection (f) to provide services to give a fidelity bond in a penal
sum as may be fixed by law or, if not so fixed, as may be fixed by the
board of trustees, with corporate surety authorized to do business in this
state. Such persons contracted with the board of trustees pursuant to
subsection (f) and any persons contracted with such persons to perform the
functions specified in subsection (c) shall be deemed to be fiduciary agents
of the board of trustees in the performance of contractual obligations.
(h) (1) Subject to the objective set forth in subsection (c) and the
standards set forth in subsection (d), the board of trustees shall formulate
and adopt policies and objectives for the investment and reinvestment of
such moneys and the acquisition, retention, management and disposition of
investments of the moneys. Such policies and objectives shall be in writing
and shall include:
(A) Specific asset allocation standards and objectives;
(B) establishment of criteria for evaluating the risk versus the
potential return on a particular investment; and
(C) a requirement that all investment advisors, and any managers or
others with similar duties and responsibilities as investment advisors, shall
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immediately report all instances of default on investments to the board of
trustees and provide such board of trustees with recommendations and
options, including, but not limited to, curing the default or withdrawal
from the investment.
(2) The board of trustees shall review such policies and objectives,
make changes considered necessary or desirable and readopt such policies
and objectives on an annual basis.
(i) All interest or other income of the investments of the moneys
invested under this section, after payment of any management fees, shall
be deposited annually in the state treasury to the credit of the liability
reduction fund. The board shall prepare a summary report that shall be
submitted to the joint committee on pensions, investments and benefits no
later than January 1 of the year that follows the end of the fiscal year in
which the reporting is required.
(j) Such interest or other income of the liability reduction fund shall
be considered assets of the Kansas public employees retirement system
within the actuary's annual valuation under K.S.A. 74-4907(2), and
amendments thereto.
(k) The provisions of this section shall be a part of and supplemental
to K.S.A. 74-4901 et seq., and amendments thereto.
Sec. 3. K.S.A. 2024 Supp. 75-6706 is hereby amended to read as
follows: 75-6706. (a) On July 1, 2017, the budget stabilization fund is
hereby established in the state treasury. The legislature shall strive to
maintain a balance in the budget stabilization fund that is between 15%
and 20% of the amount of expenditures from the state general fund in the
preceding fiscal year.
(b) On or before the 10 th day of each month commencing July 1,
2017, the director of accounts and reports shall transfer from the state
general fund to the budget stabilization fund interest earnings based on:
(1) The average daily balance of moneys in the budget stabilization
fund, for the preceding month; and
(2) the net earnings rate of the pooled money investment portfolio for
the preceding month.
(c) On and after July 1, 2017 2025, except for the transfer authorized
in subsection (e), no moneys in the budget stabilization fund shall be
expended pursuant to this subsection or transferred unless the expenditure
either or transfer has been approved by an appropriation or other act of the
legislature or has been approved by the state finance council acting on this
matter which is hereby characterized as a matter of legislative delegation
and subject to the guidelines prescribed in K.S.A. 75-3711c(c), and
amendments thereto , in order to respond to the following extraordinary
occasions:
(1) Financial emergency caused by a natural disaster;
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(2) deep downturn in state revenues of greater than 10% from the
immediately preceding fiscal year; or
(3) crippling healthcare emergency caused by the deaths or illnesses
of a significant percentage of the state's population.
(d) (1) The legislative budget committee shall study and review the
policy concerning the balance of, transfers to and expenditures from the
budget stabilization fund. The legislative budget committee study and
review shall include, but not be limited to, the following:
(A) Risk-based budget stabilization fund practices utilized in other
states.
(B) The appropriate number of years to review the state general fund:
(i) Revenue variances from projections; and
(ii) expenditure variances from budgets.
(C) The entity to certify the amount necessary in the budget
stabilization fund to maintain the appropriate risk-based balance.
(D) Plan to fund the budget stabilization fund.
(E) Process and circumstances to reach the appropriate risk-based
balance, including the amount of risk that is acceptable.
(F) Circumstances under which expenditures may be made from the
fund.
(2) The legislative budget committee may make recommendations
and introduce legislation as it deems necessary to implement such
recommendations.
(e) On July 1, 2021 2025, the director of accounts and reports shall
transfer all moneys in $1,000,000,000 from the budget stabilization fund to
the state general liability reduction fund of the Kansas public employees
retirement system.
(f) On July 1, 2026, and each July 1 thereafter, the director of the
budget, in consultation with the executive director of the Kansas public
employees retirement system, shall determine and certify to the director of
accounts and reports the amount of annual employer contributions from
the state general fund to the Kansas public employees retirement system
that were the actual cost savings as a result of the transfer of moneys
authorized in subsection (e) minus the annual cost of the cost-of-living
adjustment authorized in section 1, and amendments thereto. The baseline
shall be calculated from the December 31, 2024, actuarial valuation of the
Kansas public employees retirement system. Upon receipt of each such
certification, or as soon thereafter as moneys are available, the director of
accounts and reports shall transfer such certified amount from the state
general fund to the budget stabilization fund. When the director of the
budget transmits such certification to the director of accounts and reports,
the director of the budget shall transmit a copy to the director of
legislative research.
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Sec. 4. K.S.A. 2024 Supp. 75-6706 is hereby repealed.
Sec. 5. This act shall take effect and be in force from and after its
publication in the statute book.
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