RSSRecent Entries
Recent Comments
- By alabama from the entry 'Your schools or your property'
- By Ed H from the entry 'Tax on the menu?'
- By virginia health insurance from the entry 'Six for Life?'
- By chuck from the entry 'The rest of Virginia'
- By Bamug from the entry 'Your schools or your property'
Monthly Archives
By Michael Martz
February 10, 2010 3:47 PM
The Virginia Retirement System sure is popular at the State Capitol these days.
Tim Kaine gave the state and local school divisions a fourth-quarter holiday from pension contributions to balance this year’s budget. Bob McDonnell wants to scale back a proposed pension plan increase by half in the first year of the biennium to raise $25 million he can spend on economic development.
And now, the Assembly’s money committee is playing around with assumptions about the system to use a major piece of legislation as a vehicle to save big money in the bleeding two-year budget. The legislation is the product of Del. Lacey Putney, chairman of the House Appropriations Committee and a major player in anything to do with the VRS’ $48.3 billion enterprise. His proposal, House Bill 1189, would make major changes in how much new employees would pay toward their pensions, how benefits are calculated and cost-of-living adjustments are made, and when state employees, teachers, state police, judges, and some other law officers become eligible for full retirement. He’s only talking about employees hired after July 1.
McDonnell promised during the gubernatorial campaign that he wouldn’t make current state employees pay a portion of their 5-percent share of pension contributions, now borne entirely by the state as part of a budget deal more than 25 years ago in exchange for no raises. Kaine proposed to break that deal by shifting 1 percent in the first year of the budget and 2 years in the second. Finance Secretary Ric Brown, who helped write the Kaine budget, told me more than two weeks ago that McDonnell had made no decision about the current employees’ share.
“I don’t think he’s taken a definite position on that,” Brown said in an interview on Jan. 26.
In the long run, actuaries estimate that Putney’s proposed changes could reduce costs by $3 billion over 10 years because of the magnitude of state and local payrolls that would be affected. And the chief aim of the bill is addressing the long-term challenge of funding future obligations to retirees. The problem for budgetmakers is that VRS estimates a modest impact in the near term—$22.1 million in the first year and $52.7 in the second. So, it’s not clear how the state can save hundreds of millions of dollars in the next two years on a measure that applies only to people who may or may not be hired.
Here’s one scenario from a veteran budget watcher who asked not to be identified because he’s not a retirement actuarial expert. By greatly reducing the state’s long-term expenses, the legislature could rewrite budget assumptions to push some of its actuarial obligations into the future. Presto, chango! The commonwealth’s budget obligation for funding those potential liabilities also moves into the future, leaving more money to fill the $1.9 billion hole left in the budget from Kaine’s ill-fated attempt to scuttle the car tax once and for all by substituting an income tax surcharge.
We may see soon. The Putney bill is up for consideration by an Appropriations subcommittee tomorrow afternoon.
Deal of the Day
Advertisement
Advertisement
