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 http://budget.kansas.gov
Adam C. Proffitt, Director Laura Kelly, Governor
Division of the Budget
April 11, 2025
The Honorable Nick Hoheisel, Chairperson
House Committee on Financial Institutions and Pensions
300 SW 10th Avenue, Room 582-N
Topeka, Kansas 66612
Dear Representative Hoheisel:
SUBJECT: Fiscal Note for HB 2298 by Representatives Weigel and Helgerson
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2298 is
respectfully submitted to your committee.
HB 2298 would (1) create a cost-of-living adjustment (COLA) for certain KPERS retirees;
(2) transfer $1.0 billion from the Budget Stabilization Fund to the newly created KPERS Liability
Reduction Fund and authorize certain transfers of employer contribution savings from the State
General Fund to KPERS; and (4) establish requirements for the expenditures or transfer of funds
from the Budget Stabilization Fund.
The bill would create a COLA for KPERS retirees who have a retirement date on or before
July 1, 2020, and who are entitled to receive a retirement benefit on July 1, 2025. The bill would
increase the retirement benefit by 2.0 percent on July 1, 2025. The payments would be made from
interest earnings of the Liability Reduction Fund, described below.
The bill would create the Liability Reduction Fund and would be administered by the
KPERS Board of Trustees. On July 1, 2025, $1.0 billion would be transferred from the Budget
Stabilization Fund to the Liability Reduction Fund. On July 1, 2026, and each subsequent year,
the Director of the Budget, in consultation with the Executive Director of KPERS, would
determine an amount to be transferred from the State General Fund to the Budget Stabilization
Fund. This amount would represent the actual cost savings from the transfer of the $1.0 billion in
funds to the Liability Reduction Fund, minus the annual cost of the COLA, authorized by the bill.
The baseline calculation for this transfer would be from the KPERS December 31, 2024, Actuarial
Valuation.
The bill would make changes to current law regarding the Budget Stabilization Fund. The
bill would state that the Legislature would be required to strive to maintain a balance in the Budget
Stabilization Fund between 15.0 percent and 20.0 percent of expenditures from the State General The Honorable Nick Hoheisel, Chairperson
Page 2—HB 2298
Fund in the previous year. The bill would require any expenditures or transfers, other than the
$1.0 billion transfer authorized by the bill, from the Budget Stabilization Fund to respond to the
following extraordinary conditions: (1) financial emergencies caused by a natural disaster; (2) a
deep downturn in state revenues greater than 10.0 percent from the immediately preceding fiscal
year; or (3) a crippling healthcare emergency caused by the deaths or illnesses of a significant
percentage of the state’s population.
For administrative costs, KPERS indicates that the enactment of the bill would require the
agency to calculate the COLA benefit changes for more than 114,000 affected KPERS retirees and
beneficiaries. This would be accomplished through the pension administration system and would
require development time and testing to ensure the accurate calculation of benefits. However, this
would be accomplished within the agency’s existing resources, with no additional funding needed.
In addition, KPERS would need to create an investment program for the Liability
Reduction Fund. The agency would assume that the management of the fund would be similar to
the existing investment program for the State Treasurer’s Unclaimed Property Fund. Any
additional administrative expenditures required would be charged to the Liability Reduction Fund
and would not affect expenditures from the KPERS Trust Fund.
To calculate the actuarial cost for the COLA authorized by the bill, the KPERS actuary
used the projected actuarial liability to the corresponding increase in the actuarial required
contribution rates for the five KPERS groups—State/School, Local, Kansas Police & Firemen
(KP&F)—State, and KP&F—Local, and Judges. The KPERS actuary used an amortization period
of ten years for its calculations for all groups, except for the KP&F groups. An amortization period
of 15 years was used for the KP&F groups because of the younger members who would receive
the COLA for a longer period. The amortization payments are estimated using the same
methodology as is used in the actuarial valuations, using level-percent of payroll for all groups
other than the Judges Group, which the estimate uses a level-dollar payment method.
Estimated Fiscal Effect--Cost of Living Adjustment
dollars in millions
EstimatedContributionFirst-YearSecond-Year
KPERS IncreaseRate AdditionalAdditional
Group in UALIncreaseContributionContribution
State/School 184.9$ 0.39% 23.1$ 23.8$
KP&F--State 4.6 0.55% 0.4 0.4
Judges 1.9 0.69% 0.3 0.3
Subtotal--State Groups191.4$ 23.8$ 24.5$
Local Group 46.1$ 0.24% 5.6$ 5.8$
KP&F--Local 34.6 0.46% 3.1 3.2
Subtotal--Local Groups80.7$ 8.7$ 9.0$
Total--All KPERS Groups 272.1$ 32.5$ 33.4$ The Honorable Nick Hoheisel, Chairperson
Page 3—HB 2298
Based on the above cost projections, the amount that would be required in FY 2026 to fully
fund the proposed COLA would be $272.1 million. If the COLA would be amortized over the
recommended period under each option, the first-year cost in FY 2026 is estimated to be $32.5
million for all KPERS groups. KPERS assumes that the initial amortization payment would be
made in FY 2026 with recertified employer contribution rates once the bill would be enacted.
KPERS also assumes that employer contributions to amortize the increase in the unfunded
actuarial liability would not subject to the statutory cap on employer contribution increases, based
on existing Kansas law that requires any additional benefit to begin payment in the following fiscal
year.
Under the provisions in HB 2298, the initial transfer of $1.0 billion from the Budget
Stabilization Fund to the Liability Reduction Fund, along with any investment income of the
Liability Reduction Fund, would be included in the KPERS School Group’s assets when
determining the required employer contribution rates. However, to determine the transfer amount
from the State General Fund to the Budget Stabilization Fund each year, the employer contribution
rate would be calculated both with and without reflecting the Liability Reduction Fund in the
KPERS assets. The difference in the employer contribution amount between the two asset
valuation methods would be transferred from the State General Fund to the Budget Stabilization
Fund each year. Because this change would affect future contribution calculations, the agency’s
cost analysis for the State/School Group is based on the results of a projection model prepared
using the December 31, 2023, actuarial valuation and reflects the proposed change in the December
31, 2024, valuation and subsequent valuations.
Because the bill would require the Liability Reduction Fund to be included in the assets in
the KPERS annual actuarial funding valuation, the bill would also affect the recertification of the
State/School Group employer contribution rates for FY 2026. KPERS estimates that the employer
contribution rates for the State/School Group would be re-certified from 12.07 percent to 10.82
percent for FY 2026 and from 11.71 percent to 10.48 percent for FY 2027. The actual difference
in the dollar amount of employer contributions, based on these rates for each fiscal year, would be
the amount to be transferred from the State General Fund to the Budget Stabilization Fund.
The savings in State General Fund employer contributions because of this calculation
would be transferred from the State General Fund to the Budget Stabilization Fund. The difference
of 1.25 percent in FY 2026 is estimated to be approximately $72.2 million in total State/School
Group contribution savings. In FY 2027, the contribution difference is 1.23 percent, or
approximately $72.5 million in total contribution savings. The State General Fund portion of the
total contribution is approximately 70.0 percent to 80.0 percent, meaning the State General Fund
transfer would be $50.0 million to $58.0 million in both FY 2026 and FY 2027.
For long-term fiscal considerations, the creation of the Liability Reduction Fund would
increase the funding risk to KPERS. HB 2298 would require the annual actuarial valuation to
include the value of the Liability Reduction Fund in the State/School Group assets when
determining the employer contribution rates. The agency notes that there is no provision in the
bill for those funds to be transferred to the KPERS Trust Fund, the System would be systematically
underfunded by calculating employer contribution rates using a higher asset value than is in the
KPERS Trust Fund. In addition, the bill would provide that funds may be transferred out of the The Honorable Nick Hoheisel, Chairperson
Page 4—HB 2298
Liability Reduction Fund in extraordinary circumstances. If that were to occur, it would be
reflected in the next actuarial valuation and the unfunded actuarial liability would increase with a
corresponding increase in the employer contribution rate. The result would be an increase in the
State/School Group employer contribution rate, likely coinciding with other budget challenges.
The Office of the State Treasurer indicates that any additional workload associated with
the provisions of the bill would be accommodated using its existing budget and staff. Any fiscal
effect associated with HB 2298 is not reflected in The FY 2026 Governor’s Budget Report.
For the Local Group, local employer contributions would increase from the COLA and the
assets of this group would not be affected by the Liability Reduction Fund. Local Group employers
would see an increase in the total employer contributions of about $5.6 million in FY 2026 and
$5.8 million in FY 2027, spread across more than 1,400 local employers. KP&F—Local Group
employer contributions would increase approximately $3.1 million in FY 2026 and $3.2 million
FY 2027 across 100 KP&F—Local Group employers.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Jarod Waltner, KPERS
John Hedges, Office of the State Treasurer