SESSION OF 2023
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2102
As Amended by House Committee on Financial
Institutions and Pensions

Brief*
HB 2102, as amended, would appropriate $250.0 million
from the State General Fund (SGF) to the Office of the State
Treasurer (Treasurer) in FY 2023 for the purpose of
repurchasing some, or all, of the outstanding portion of
Kansas Development Finance Authority (KDFA) Series 2021K
bonds. Proceeds from those bonds were applied to the
unfunded actuarial pension liability (UAL) of the Kansas
Public Employees Retirement System (KPERS). The bill
would pay down existing debt obligations related to those
bonds and does not directly impact the UAL.
The bill would authorize the Treasurer to purchase any
outstanding bond in the following manner:
● Expenditures of those funds must be made for:
○ Paying the costs of purchasing, including
transaction costs and excluding accrued
interest;
○ Purchasing any one or more maturities, either
whole or in part, pursuant to one or more
purchases; and
○ Purchasing such bonds at prices reflecting a
discount of up to 79.5 percent of the principal
amount at maturity, in excess of $500,000.
Any funds remaining at the end of FY 2023 would
reappropriate into FY 2024 for the same purposes.
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
 The bill would be in effect upon publication in the
Kansas Register.

Background
The 2021 Legislature passed HB 2405, which
authorized the KDFA to issue bonds, in one or more series, in
an amount not to exceed $500.0 million, plus all amounts
required to pay the costs of issuance. Proceeds from those
bonds were applied to the KPERS UAL. The interest rate of
those bonds could not exceed 4.3 percent. The bill became
effective upon its publication in the Kansas Register (April 29,
2021).
The bonds were issued for a total cost of $504.5 million,
including costs of issuance, for a total interest rate of 2.65
percent. The KPERS Trust Fund received a transfer of $500.0
million on August 26, 2021. Series 2021K is structured as
level fiscal year debt service with a $300.0 million term bond
maturing on May 1, 2051.
HB 2102 was introduced by the House Committee on
Financial Institutions and Pensions at the request of
Representative Hoheisel. As introduced, the bill would
appropriate $250.0 million SGF to the Treasurer to
repurchase outstanding portions of Series 2021K bonds at
prices reflecting a discount of up to 75.0 percent of the
principal amount at maturity.

House Committee on Financial Institutions and Pensions
In the House Committee hearing on February 6, 2023,
the State Treasurer testified as a proponent, stating the
repurchase of Series 2021K bonds takes advantage of the
low interest rate obtained on those bond issues and the
dramatic increase in interest rates since that time. The State
Treasurer also indicated other debt repayment options are
limited by provisions in bond issues, and repurchasing Series

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2021K bonds is one of the options currently available to the
State. Lastly, the State Treasurer described a potential
consideration to set the maximum price offered for those
bonds at 80.0 percent of the principal amount at maturity,
which would allow repurchase of up to $300.0 million of the
bonds for $240.0 million.
The Director of the Budget also provided proponent
testimony, stating the bill would retire upwards of $300.0
million of KPERS pension obligation bonds and save millions
of dollars in future interest payments. The Director indicated
the bill would also strengthen the State’s position with credit
rating agencies by eliminating debt associated with the public
employee retirement program. Lastly, the Director
emphasized the $2.0 billion SGF ending balance in the
Governor’s budget recommendation would provide the
necessary funding source to finance this tender.
A representative of the KDFA provided neutral testimony,
stating this repurchase opportunity exists because Series
2021K was priced when bond yields were low and they have
since increased significantly in response to inflationary
pressure as well as Federal Reserve countermeasures to
inflation.
On February 15, 2023, the House Committee amended
the bill to increase the maximum price offered to 79.5 percent
of the principal amount of those bonds at maturity in excess
of $500,000. The amendment would also exclude accrued
interest when determining costs and authorize the
reappropriation of these funds from FY 2023 into FY 2024.
The amendment was offered in consultation with the KDFA
and State Treasurer.

Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, enactment of the bill
would result in a $250.0 million appropriation from the SGF to
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the Treasurer. The Treasurer estimates any additional duties
resulting from enactment of the bill could be absorbed within
existing agency resources. The KDFA estimates that, if
bondholders tender all of the $300.0 million FY 2051 term
bond, $300.0 million in future debt service principal payments
would be retired. Additionally, the KDFA estimates interest
savings to total $177.4 million and that the remaining amount
on the bond would be $199.5 million ($175.3 million for
principal and $24.2 million for interest). The bond would be
paid off in FY 2036.
Appropriations; Pensions; bonds; State debt; KPERS; KDFA; State Treasurer


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