RICHMOND — Virginia Gov. Bob McDonnell is asking maintenance workers, health officials and state troopers to contribute a larger chunk of their paychecks toward their own retirements as he scrambles to cover a $20 billion shortfall in the state pension fund. Under a plan McDonnell introduced Thursday, state workers would have to give an additional 1 percent of their salaries – a total of 6 percent – to the Virginia Retirement System starting July 1. Employees would also have the option of contributing to a new hybrid retirement plan that includes 401(k)-style accounts. McDonnell also wants to make a change that could reduce pension payouts by using the employee’s final 60 months on the job to determine it instead of the last 36 months.
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The changes would generate $3.6 billion for the pension fund over the next 21 years and $58 million in the upcoming two-year budget.
A state audit released last month showed the pension fund’s shortfall widened from $12 billion in 2009 to $20 billion in 2011 because of a down economy and because lawmakers failed to fully fund the system most years. The audit found that Virginia’s pension fund for public employees is 71 percent funded and at just 67 percent for teachers, and at risk of declining. Well-funded funds are 80 percent.
“Everybody knows the system is broken,” McDonnell said. “We’ve got to be able to tell state employees that certainty is going to be there.”
It’s the second time in two years the governor asked more of public workers as he attempts to shore up the state’s pension system. McDonnell previously proposed state and localities make a $2.2 billion contribution to the retirement system in his 2012-14 budget, the largest one-time contribution in state history.
The General Assembly for the first time last year required public employees to pay 5 percent of their salaries toward retirement, though that was offset by a 5 percent pay raise.
General Assembly Democrats didn’t have an immediate reaction to McDonnell’s proposal.
Republican House Speaker Bill Howell, who earlier ruled out raising employee contribution rates any higher, said Thursday that he “didn’t have any problem with just a 1 percent raise.”
“People are living longer and the base supporting these people is getting smaller,” Howell said. “It’s really for their own protection.”
