In just over a month, the state of Kansas could be borrowing a billion dollars to inject into the state’s pension plan, the Kansas Public Employees Retirement System. A group made up of the governor and legislators has given final approval to the plan. The money would be given to KPERS to invest.
The idea is that Kansas would borrow a billion dollars and the return from investing that cash will be more than the interest paid to borrow the money. The bonds would only be issued if the interest rate is less than 5 percent.
Republican House Majority Leader Jene Vickrey believes the move will pay off.
“If you look at our performance even through the downturn in ’08, ’09, we still performed at over 8 percent,” says Vickrey.
Democratic Senator Anthony Hensley says Kansas should not be taking on loan payments right now.
“I think we’re the last people in the world that should be borrowing money to invest in the stock market when we don’t have money in reserve to make the debt service payments,” says Hensley.
This strategy has worked for Kansas in the past. But if the investment return ends up being less than the cost of borrowing the money, then the whole move will have been a money loser.