Proposed KPERS bond buyback program could save Kansas millions in interest

State Budget Director Adam Proffitt says he strongly supports the legislation

by Rachel Mipro, Kansas Reflector
February 6, 2023

TOPEKA — A new finance bill would buy back bonds used to inject much-needed cash into the Kansas Public Employees Retirement System two years ago, potentially saving the state millions of dollars in future interest payments.

The House Financial Institutions and Pensions Committee had a Monday hearing on House Bill 2102. The bill would allocate $250 million from the State General Fund to repurchase bonds issued two years ago under House Bill 2405.

HB 2405 authorized the Kansas Development Finance Authority to issue bonds to pay off  KPERS unfunded pension liabilities. The strategy was to lower the cost over a 30-year period, addressing a $6 billion unfunded liability in the state government worker and teacher portion of KPERS. The system received $500 million in 2021 as a result of the deal.

The Legislature has used bonds as a strategy to shore up KPERS before, most recently in 2015, when then-Gov. Sam Brownback approved legislation that issued $1 billion in bonds, netting $272 million for the pension system.

Under HB 2102, the state treasurer would repurchase the pension obligation bonds at a discount, up to 75%  of the principal amount.

State Budget Director Adam Proffitt offered strong support for the bill, saying the state could use the budget surplus to fund the plan, and that buying the bonds would boost Kansas’ credit and stabilize its fiscal health.

“I think this is a very good idea,” Proffitt said. “These are the types of transactions that the governor was looking for when we put together the budget, to try to use our current budget surplus to eliminate debt or pay off one-time expenditures.”

In his fiscal note on the bill, Proffitt estimated that the legislation could help the state pay off debt 20 years faster. In the note, he said KDFA has estimated the bill could result in interest savings of $177,445,984. The remaining amount on the bond would be $199,545,121, and the bond would be paid off in fiscal year 2036, according to the note. The estimate doesn’t factor in fiscal year 2022 or fiscal year 2023 debt service payments.

State Treasurer Steven Johnson encouraged lawmakers to focus on saving money and paying down debt in preparation for the state’s next recession. Johnson said lawmakers should pay attention to KPERS debt.

“The KPERS debt is still absolutely pressing, and I don’t mean to step away from that at all,” Johnson said. “It’s not quite as pressing as it was, as we have made some progress towards it.”

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: Follow Kansas Reflector on Facebook and Twitter.

Derek Nester
Derek Nester
Derek Nester was born and raised in Blue Rapids and graduated from Valley Heights High School in 2000. He attended Cowley College in Arkansas City and Johnson County Community College in Overland Park studying Journalism & Media Communications. In 2002 Derek joined Taylor Communications, Inc. in Salina, Kansas working in digital media for 550 AM KFRM and 100.9 FM KCLY. Following that stop, he joined Dierking Communications, Inc. stations KNDY AM & FM as a board operator and fill-in sports play-by-play announcer. Starting in 2005 Derek joined the Kansas City Chiefs Radio Network as a Studio Coordinator at 101 The Fox in Kansas City, a role he would serve for 15 years culminating in the Super Bowl LIV Championship game broadcast. In 2020 he moved to Audacy, formerly known as Entercom Communications, Inc. and 106.5 The Wolf and 610 Sports Radio, the new flagship stations of the Kansas City Chiefs Radio Network, the largest radio network in the NFL. Through all of this, Derek continues to serve as the Digital Media Director for Sunflower State Radio, the digital and social media operations of Dierking Communications, Inc. and the 6 radio stations it owns and operates across Kansas.


― Advertisement ―


― Advertisement ―



― Advertisement ―

95.5 KNDY

1570/94.1 KNDY



Q 106.7 & 102.5 KQNK