Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                         Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                     adam.c.proffitt@ks.gov
Topeka, KS 66612                               Division of the Budget                              http://budget.kansas.gov
Adam Proffitt, Director                                                                           Laura Kelly, Governor


                                                    March 1, 2023


          The Honorable Jeff Longbine, Chairperson
          Senate Committee on Financial Institutions and Insurance
          300 SW 10th Avenue, Room 546-S
          Topeka, Kansas 66612
          Dear Senator Longbine:
                    SUBJECT:      Fiscal Note for SB 256 by Senate Committee on Ways and Means
                  In accordance with KSA 75-3715a, the following fiscal note concerning SB 256 is
          respectfully submitted to your committee.
                  Under current law, KPERS Tier 3 members’ accounts earn a guaranteed 4.0 percent interest
          rated each year and are eligible for a statutory dividend interest rate. This statutory formula
          provides 75.0 percent of the net 5-year rolling average investment return above 6.0 percent. SB
          256 would suspend the statutory formula and provide an additional 1.0 percent dividend interest
          credit to all Tier 3 member accounts on December 31, 2023, with the statutory formula resumed
          in subsequent years.
                  According to the KPERS actuary, providing an additional 1.0 percent interest credit is
          considered relatively small, since most Tier 3 account balances are modest because Tier 3 has only
          been in place since FY 2015. The KPERS actuary does not have complete data to perform a cost
          study based on providing a 1.0 percent additional interest credit for accounts on December 31,
          2023. However, based on the latest actuarial information, giving an additional 1.0 percent interest
          credit for Tier 3 accounts as of December 31, 2022, would result in an increase of the unfunded
          actuarial liability (UAL) of KPERS by $3.4 million, including $2.3 million for the State/School
          Group and $1.1 million for the Local Group. For both the KPERS State/School Group and the
          Local Group, this increase in the UAL would increase the employer contribution rate by 0.01
          percent for both groups, beginning in FY 2024.
The Honorable Jeff Longbine, Chairperson
Page 2—SB 256

       KPERS indicates that any additional administrative cost to implement the bill would be
negligible. Any fiscal effect associated with SB 256 is not reflected in The FY 2024 Governor’s
Budget Report.


                                                   Sincerely,

                                                   Adam Proffitt
                                                   Director of the Budget

cc: Jarod Waltner, KPERS
Statutes affected: 
As introduced: 74-49