Nothing is a “sure thing” these days, including public pensions, which, for the most part, have been considered pretty secure in the past. The economic downturn has affected all areas of the economy, and states are beginning to look at ways to reduce debt and continue to fulfill their obligations – in ways that reflect the economy of the day. With layoffs and a “hold” in many areas on hiring, public school employee membership has been steadily decreasing, and the retirement system’s unfunded long-term liability, which exceeded $20 billion on June 30, includes $12 billion for the public school member plan. The General Assembly voted to defer a $620 million general fund contribution to VRS last year in order to help balance the state’s budget.The legislature has traditionally funded VRS at rates on an average of 10% below recommended rates; in fact, state politicians have done so in 17 of the past 20 years. The General Assembly may consider some type of defined contribution plan and increased member contributions this year.
The VRS certified rates this week that would require government employers to contribute more than double the percentage of payroll that they currently pay to pension funds. For public school members, the VRS adopted a rate of 16.77 percent of pay, or 10.4 percentage points higher than the rate in this year’s budget. Localities will pay about two-thirds of the cost of higher rates, representing as much as a 30% increase from current levels.
Sources: VEA Press Release, October 20, 2011; Times Dispatch Article, October 21, 2011; VRS Staff Presentation, October 12, 2011