Virginia lawmakers are counting heavily on an economic upswing to minimize the harm of underfunding the state’s retirement system, one of the central planks of their budget-balancing strategy.
The House and Senate, now working to reconcile their opposing two-year spending plans, are proposing to save as much as $500 million over two years by lowering the state’s contribution to the Virginia Retirement System, with a host of structural changes. The state faces a budget shortfall of more than $4 billion through mid-2012.
Officials see the plan as preferable to adding to the already substantial series of planned layoffs and service reductions. And they are relying on an economic recovery to increase the value of the $48 billion pension fund’s investments enough to negate the lighter contribution from the state.
Also in Richmond:
» The Republican-led House voted to send to the governor a bill allowing patrons to carry concealed weapons into bars, provided they don’t drink. The chamber also approved bills that would allow gun permit renewals by mail and for firearms to be stored in glove boxes without a concealed-carry permit.
» A subcommittee in the House shot down a Senate bill that would have extended anti-discrimination protections to gay state employees. The legislation was meant to replace an executive order by the previous two governors, recently discontinued by Gov. Bob McDonnell.
Virginia has repeatedly shortchanged its pension liabilities over the last nine years, according to a study from the Pew Center on the States released last month analyzing how all 50 states were handling their employee retirement plans.
It’s a “calculated risk,” but one worth taking — as long as an accompanying set of changes proposed by the House of Delegates are established, said Ronald Jordan, executive director of the Virginia Governmental Employees Association.
“The risk is that the economy doesn’t grow, that you have a recovery that stays flat for five, 10 years, that it doesn’t get back to being as robust as it was before,” Jordan said.
Lawmakers bolster their case by pointing to the recent rebound the retirement system saw as the stock market made major gains last year. From June 2009 to the end of December, the fund saw “an almost 20 percent increase,” Del. Chris Jones, R-Suffolk, said on the House floor.
To accompany the budget plan, a bill from Del. Lacey Putney, chairman of the House Appropriations Committee, would change the formula for calculating benefits and retirement age and require new state employees after July 1 to pay their 5 percent share of retirement contributions, which is now paid for by the state. The House rejected the Senate’s changes to the bill.
