5% to retirement? Not gonna happen

Local, Politics, Virginia 1 Minute

Governor Bob McDonnell has been releasing his budget proposals over the last few days. Yesterday, he announced his proposal that all workers contribute 5% of their salaries to the state’s retirement plan.  As The Virginian-Pilot reported, the state has been making this contribution on behalf of the employees since 1983, when it did so in lieu of raises. State employees have not received raises in the last several years; as a part of the governor’s proposal, they are to receive a 3% raise, making the net contribution by employees 2%. I suspect the General Assembly won’t go along.

Wednesday morning, I attended an event at which Chesapeake Delegate John Cosgrove (R-78th) spoke. Without prompting, Cosgrove brought up the issue of employee contributions to the state’s retirement plan. He opposes having existing employees contribute, saying that it was a promise by the state that it would make those contributions on their behalf.

If Republicans like Cosgrove are against it, there’s no way such legislation makes it out of the House of Delegates.

In hindsight, I’ll bet the legislature wish they could do over the 1983 decision to contribute rather than give raises. Had they done so, they wouldn’t have been able to underfund the pension liability so much over the years. A JLARC report issued earlier this week puts that underfunding at $17.6 billion. That includes, of course, the $620 million diverted this year by the legislature. But hindsight is 20/20.

Besides, the precedent for this has already been set, as Del. Cosgrove alluded to in his remarks: in 1984, the Federal government changed its retirement benefit, putting new employees on a different system than the existing ones.

This morning, the Governor made his budget presentation and it included a total of $191 million in “cuts, savings and reappropriations,” including the estimated $311 million from the employees for their retirement.

The General Assembly has its work cut out for it.

UPDATE: The full text of the Governor’s speech is here.

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7 thoughts on “5% to retirement? Not gonna happen”

  1. Pingback: Tweets that mention 5% to retirement? Not gonna happen « VIVIAN J. PAIGE | All Politics is Local -- Topsy.com

  2. Vivian, note that nowhere in McDonnell’s speech to the money committees this morning did he mention a budget amendment to repay the $620 million “deferred” payment from last year. He’s asking state employees to fund the raid on their own pension plan.

    2. I was on my way here to mention the point Steve raised.

      Pensions are an important issue for state governments around the country; California, for instance, would be on much firmer footing if they weren’t liable for some massive pensions (and also if their leaders actually asserted some leadership rather than doing literally everything by referendum only). But you aren’t going to solve a $17.6 billion problem by playing a shell game with the same $300 million each new fiscal year.

      The Governor should learn from California’s track record and have the courage to start an honest conversation about a long-term solution rather than playing another hand of three-card monte.

      1. Governor’s office now says that the payments on the deferral are scheduled to begin in 2013 and be made over 10 years and that is seperate from the extra 2% per year (5%-the 3% raise) in his plan.

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