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Posted at 10:37 AM ET, 02/ 8/2011

Things aren't so sweet for Virginia's sugar-daddy

By Paige Winfield Cunningham

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.

By Paige Winfield Cunningham  | February 8, 2011; 10:37 AM ET
Categories:  HotTopic, Local blog network, Virginia  
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Comments

In 1983 we, (state employees) made a deal with the Devil (the state legislative branches) that we would forgo raises in exchange for not having contribute to the state pension fund. Now most state employees are willing to kick in the 5% now, we know the reality of the situation and are looking to our future. Trouble is, the legislature cannot be trusted to do the right thing. It's the DEVIL in the details.

Posted by: kparc1212 | February 8, 2011 12:15 PM | Report abuse

Great opening line! "Stealing from the future to fund the present is turning into a favorite pastime for Virginia lawmakers." It is a favorite pastime federal lawmakers as well. Today's deficit spending will haunt us in the future. This problem is easily overlooked b/c federal lawmakers and President Obama aren't taking $ from a known source (such as a pension fund.) They are putting all this spending on a credit card to be paid by all taxpayers in the future. It needs to stop.

Posted by: Nova12 | February 8, 2011 12:44 PM | Report abuse

And the managers that "managed" the investment vehicles that VRS invests in, are laughing all the way to the bank. They raped, plundered and ravaged the fund and get huge bonuses, while government workers without any say in the matter take it up the dumper.

This is the new free enterprise. Where profit is privatized but risk is socialized.

All of these cheats, Republicans and Democrats, should be ashamed of their rape of the middle class to establish a corporate plutocracy.

Posted by: Ve1ostrummer | February 8, 2011 1:09 PM | Report abuse

well 5% is less than inflation this year.....

since the libs created that inflation, unilaterally, without ANY CONGRESSIONAL oversight whatsoever....

funny how they are so quick to identify gop members, but never identify democrats....

must be an accident, I am sure.

I blame the libs for this one.

Posted by: docwhocuts | February 8, 2011 1:43 PM | Report abuse

Dear Ms. Cunningham:

Some of your observations/conclusions/assumptions in this otherwise fine article trouble me:

1) You write, "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."

Who said anything about RAISES? Despite the fact that JLARC concluded that state workers have been significantly underpaid in comparison to their private-sector peers, they haven't had raises in four years. They simply want to avoid 2% CUTS in their compensation. (By the way, many folks like me—college professors enrolled in Optional Retirement Programs like TIAA-CREF—also will see our compensation reduced by 2% if the Governor's plan is implemented. ORPs are completely unrelated to VRS. You may wish to poke into the ORP issue.)

2) You write, "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."

You imply that Virginia state employees are getting a special break. This is not the case at all. Prior to 1983 VRS employees paid 5% of their salaries into their retirement. The state then took over that portion of the contribution IN LIEU of giving employees a raise. It was cheaper for the state than giving workers a salary boost. VRS employees aren't getting a special deal, and they aren't being coddled.

Ms. Cunningham, aren't there some other ways that VRS can be made more stable without sticking it to underpaid state workers? Despite the fact that they didn't cause this mess, the Governor wants them to assume total responsibility for cleaning up the VRS debacle.

Might we not work to prevent lawmakers from raiding VRS? And might we not end our childish refusal to consider new sources of REVENUE? President Reagan, when facing deficits, raised taxes eleven times.

Thanks for listening.

Alex

Posted by: Alex70 | February 8, 2011 4:40 PM | Report abuse

Dear Ms. Cunningham:

Some of your observations/conclusions/assumptions in this otherwise fine article trouble me:

1) You write, "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."

Who said anything about RAISES? Despite the fact that JLARC concluded that state workers have been significantly underpaid in comparison to their private-sector peers, they haven't had raises in four years. They simply want to avoid 2% CUTS in their compensation. (By the way, many folks like me—college professors enrolled in Optional Retirement Programs like TIAA-CREF—also will see our compensation reduced by 2% if the Governor's plan is implemented. ORPs are completely unrelated to VRS. You may wish to poke into the ORP issue.)

2) You write, "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."

You imply that Virginia state employees are getting a special break. This is not the case at all. Prior to 1983 VRS employees paid 5% of their salaries into their retirement. The state then took over that portion of the contribution IN LIEU of giving employees a raise. It was cheaper for the state than giving workers a salary boost. VRS employees aren't getting a special deal, and they aren't being coddled.

Ms. Cunningham, aren't there some other ways that VRS can be made more stable without sticking it to underpaid state workers? Despite the fact that they didn't cause this mess, the Governor wants them to assume total responsibility for cleaning up the VRS debacle.

Might we not work to prevent lawmakers from raiding VRS? And might we not end our childish refusal to consider new sources of REVENUE? President Reagan, when facing deficits, raised taxes eleven times.

Thanks for listening,

Alex

Posted by: Alex70 | February 8, 2011 4:41 PM | Report abuse

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