SB 0761 - Fiscal Note

Fiscal Note - SB 0761 - Modifies provisions of the Kansas City Public School Retirement System

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3307-03

BILL NO. Truly Agreed to and Finally Passed HCS for SB 761

SUBJECT: Retirement: Schools

TYPE: Original

DATE: May 12, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None	$0	$0	$0
Total Estimated Net Effect on All State Funds	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None	$0	$0	$0
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Kansas City Schools	($1,206,861)	($2,413,723)	($2,413,723)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Joint Committee on Public Employee Retirement have reviewed this proposal and have determined that it represents a "substantial proposed change" in future plan benefits as defined by section 105.660(5), RSMo. Therefore, an actuarial cost study must be provided prior to final action by either legislative body or committee thereof.

Office of Administration officials assume that any fiscal impact would be determined by the Kansas City Public School Retirement System.

Kansas City Public School Retirement System officials obtained an actuarial cost analysis of the provisions in this proposal. The actuarial analysis indicates that the following provisions would have a cost impact to the System:

• Changing the minimum normal retirement age from the minimum of age 60 or 80 credits to a minimum of age 60 or 75 credits, with each year of creditable service and each year of age equal to one credit.



• For members retiring on or after June 30, 1999, increasing the normal service retirement allowance formula from 1.75% of average final compensation (AFC) times years of creditable service, subject to a maximum of 60% of AFC, to 2.0% of AFC times years of creditable service, subject to a maximum of 60% of AFC.



• Changing the minimum disability retirement allowance from 25% of AFC to the lesser of 25% of AFC or the member's service retirement allowance calculated on the member's AFC and the maximum number of years the member would have earned had the member remained an employee until age 60.



• Changing the class of retirants eligible for cost-of-living increases from those retirants who, as of the date of such increase, are at least age 65 and have been retired at least 14 months to all retirants as of the fourth January following the date the retirant commenced receiving benefits.



• Increasing the member contribution rate from 5.9% to 7.5% effective January 1, 1999.



• Increasing the employer contribution rate from 5.99% to 7.5% effective January 1, 1999.

The actuarial analysis indicates that the total minimum employer contribution rate required to fund the proposed benefit changes (excluding the proposal's mandatory contribution rate ASSUMPTION (continued)

increase) would be 4.73% of covered active payroll, a 0.37% increase over the current 4.36% minimum required contribution, or $591,442 annually. Therefore, the actuaries indicate that the employer contribution rate of 7.5% required by the proposal would be adequate to fund the plan with the proposed increase in benefits.

Oversight has calculated the increase to the Kansas City School District's contributions using the 7.5% rate required by the proposal (a 1.51% increase) and a covered payroll of $159,849,189. Assuming an effective date of January 1, 1999 for the increased contribution rate, the school district's contributions would increase by $1,206,861 in FY 1999, and $2,413,723 for both FY 2000 and 2001.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
KANSAS CITY SCHOOL DISTRICT
Costs-increased contributions to Kansas City
Public School Retirement System	($1,206,861)	($2,413,723)	($2,413,723)

FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

The proposal would make several changes to provisions within the Kansas City Public School Retirement System, including changing the normal retirement age, increasing the normal service retirement allowance formula, changing the minimum disability retirement allowance, changing the class of retirants eligible for cost-of-living increases, and increasing both the members' and employers' contribution rates to 7.5%.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Joint Committee on Public Employee Retirement

Office of Administration

Kansas City Public School Retirement System

Jeanne Jarrett, CPA

Director

May 12, 1998