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Senators seem skeptical about proposed pension changes

Rosalind Helderman

Leading senators reacted coolly this afternoon to twin proposals to make major adjustments to the state's pension system for state and local employees.

The Senate's Finance Committee shuffled a bill to subcommittee that would reduce benefits for employees hired after July 1, 2010. But since the Senate must write a budget by Sunday, the senators were signalling that they are unlikely to include the proposal in it.

The bill, already approved by the House of Delegates, would save $70 million over the next two years as the state faces a $4 billion budget shortfall by making changes to the pension system for new employees hired after July 1. It could accrue far more substantial savings in the future, as older employees retire and are replaced by new hires.

Proposals in the bill include requiring new employees to work longer than current employees before they would become eligible for retirement and requiring them to pay 5 percent of their pay into the plan.

Senators also seemed somewhat wary of a seperate pension proposal unveiled by Gov. Bob McDonnell Wednesday that would essentially underfund the pension plan by $508 million over the next two years, repaying the figure in future years. The pension proposal amounted to more than 20 percent of the budget savings McDonnell proposed Wednesday.

Speaking to senators at a meeting of both party's caucuses this afternoon, McDonnell's secretary of finance downplayed the possibility that Virginia's vaunted AAA bond rating could be downgraded because of the pension change. But senators seemed skeptical.

And at an afternoon meeting of the Finance Committee, Finance Secretary Ric Brown allowed that it will be far easier to explain the change to rating agencies in New York if the General Assembly simultaneously approved the long-term structural changes to the plan approved by the House of Delegates that would over time reduce the state's payment obligations.

Said Del. Chris Jones, who was helping to present the House bill, "You can't do one without the other without it having an impact on the bond rating, in my opinion."

By Rosalind Helderman  |  February 18, 2010; 5:13 PM ET
Categories:  Rosalind Helderman  
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"...underfund the pension plan by $508 million over the next two years, repaying the figure in future years."

sounds like Bob's trying to make a point here that the state must pass meaningful pension reform like dumping the 'defined benefit' pension for a 'defined contribution' plan... otherwise it just does not get funded, especially not from the sweat of a rapidly collapsing private sector.

Posted by: millionea7 | February 19, 2010 12:08 PM | Report abuse

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