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Posted at 12:45 PM ET, 02/ 2/2011

Senate panel kills pension reform bills; issue bound for budget talks

By Rosalind S. Helderman
Rosalind S. Helderman

The Democratic-led Senate Finance Committee agreed Wednesday to kill bills to reform Virginia's public pension system, indicating that the issue needs more study and negotiation with representatives of public employees before adoption.

But the issue is hardly over for the year. Senators agreed that the House of Delegates will likely embed reforms pushed by Gov. Bob McDonnell (R) as budget amendments to the state's two-year spending plan. The House unveils the plan on Sunday.That means that public pension reform will be a key point of contention between the GOP-led House and the Senate during budget negotiations at the end of the month.

The Senate panel agreed to bypass two proposals by Sen. John Watkins (R-Chesterfield) that would have made changes to the Virginia Retirement System. Under one proposal, state employees who currently make no contribution to their retirement fund under a deal worked out in 1983 would begin making payments to their plan.

The bill would phase in a five percent contribution by employees over five years, pairing it with a one percent annual pay increase designed to off-set the payments. The bill would also offer employees the option of moving from their defined benefit retirement plan to a new 401(k)-like defined contribution plan.

The second bill would only initiate the defined contribution option.

"At some point, we're going to have to swallow this toad," Watkins told the committee, noting that the plan now has billions in unfunded liabilities and the state will have to dramatically ratchet up its contributions in future years to compensate if no reforms are made. "It's not going to get tastier. Instead, it's getting bigger."

McDonnell has proposed that employees start paying a five percent contribution to their plan this year. He has a proposed a three percent pay raise to off-set the contribution, but employees would still see a two percent pay cut, after four years of frozen wages. He proposed embedding the proposal into the state budget.

"This topic will not go away," said Sen. R. Edward Houck (D-Spotsylvania), as he proposed bypassing the bill but pursuing further study.

"I guarantee it will be looked at," chimed in committee chairman Sen. Chuck J. Colgan (D-Prince William).

"I think it will be looked at within 10 days," Watkins responded, referring to the upcoming budget negotiations.

Democrats on the panel said they agreed that VRS needs reform but that the issue needs more study and employees need more input.

By Rosalind S. Helderman  | February 2, 2011; 12:45 PM ET
Categories:  General Assembly 2011, House of Delegates, Robert F. McDonnell, Rosalind Helderman, State Senate  
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