Virginia Gov. Bob McDonnell proposed Thursday that all state employees begin paying into the state’s retirement system starting in July 2011, the first time workers would be required to do so since 1983. Virginia’s Joint Legislative Audit and Review Commission this week told state lawmakers that all state-supported retirement plans were short a total of $17.6 billion.
| Gov. McDonnell’s plan |
| Other elements of the governor’s proposal include: |
| • Provide a one-time bonus to all state employees of up to 2 percent in December 2011 |
| • No changes in health insurance premiums or benefits for state employees |
| • Reduce the employer contribution for optional retirement plans from 10.4 percent to 8.5 percent for employees hired before July 1, 2010. |
McDonnell said on a conference call with reporters that he was determined not to pass the problem on to future governors.
“Investment returns, even in the strongest of bull markets, cannot be expected to close a gap of this magnitude,” he said. “Our retirement system needs additional funding, and that is what we are going to provide.”
Employees hired before July 1, 2010, would receive a 3 percent pay increase to help offset that cost.
The changes would provide an additional $300 million to the retirement system in fiscal 2012.
The state contribution for defined-benefit programs would also increase by 2 percent starting next July, at a cost of $122 million. Localities would have the option of requiring a 5 percent employee share, but only if it’s offset by a salary increase of 3 percent or more.
McDonnell himself opposed a measure this year that would have allowed local employees to contribute toward their retirement, but said Thursday that the retirement system’s shortfalls required action. Only 75 percent of the pension system’s future liabilities are funded and that is projected to dip to 61 percent by 2014.
The state deferred more than $600 million in payments to the retirement system to help balance the fiscal 2011-2012 budget, but is supposed to pay it back with interest over about 10 years.
In response, Del. David Englin, D-Arlington, announced plans Thursday to introduce a “VRS Lock Box Amendment” intended to prevent the General Assembly from dipping into the retirement fund again.
