Things aren't so sweet for Virginia's sugar-daddy
Stealing from the future to fund the present is turning into a favorite pastime for Virginia lawmakers. And at the center of this thievery lies our battered and bruised pension fund.
The trickery has been going on for a long time now, at the hands of the General Assembly. Every year, the Virginia Retirement System recommends that lawmakers contribute a certain amount to the pension fund to keep it fully funded. Usually, they don't listen. VRS Director Robert Schultze told me last year that if they had followed recommendations every year since 1992, he estimates the fund would be $2.3 billion richer now.
Last year, Gov. Bob McDonnell joined in the game. To help balance a $4 billion budget shortfall, he too turned to Virginia's sugar-daddy. He reduced contributions to the pension fund by $620 million, which must now be paid back with interest over 10 years.
But the governor seems to be offering restitution this year by proposing that state employees start contributing to the fund for the first time since 1983. To offset a 5 percent contribution, he wants to raise salaries by 3 percent.
But lawmakers, both Democrats and Republicans, won't hear of it. House Republicans are giving the thumbs-up to employee contributions but are insisting they simultaneously be given a 5 percent pay raise.
I'm not suggesting that many state employees don't deserve a raise -- especially those who've worked for years without getting the same kinds of raises received by their private-sector counterparts. But if McDonnell's intent is to build the fund back up while still weathering the slow economic recovery, perhaps Republicans should think twice.
On the other side, Democrats are rejecting any employee contribution into the pension fund -- even though Virginia is one of just a handful of states whose employees don't have to contribute anything to their retirement.
Why should we worry about the pension fund when it has enough money to pay current retirees? Because it's lost loads of money in recent years. Typically, the fund gains about $6 billion or $7 billion a year. Until 2008, when it dropped by $442 million. The next year, the fund really plunged -- by $9.35 billion.
For contributions to remain as they are, the fund's rate of return would need to equal 44 percent to return to full solvency, according to a December report by the Joint Legislative Audit and Review Commission.
This is why it's a bit troubling that most Virginia lawmakers are intent on helping state employees short-term but don't seem to care much about them long-term.
Paige Winfield Cunningham is an investigative reporter and managing editor at Old Dominion Watchdog. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.
Paige Winfield Cunningham
| February 8, 2011; 10:37 AM ET
Categories: HotTopic, Local blog network, Virginia
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