Friday, December 18, 2009

Broken Promises?

It appears Governor Tim Kaine will suggest breaking a sacred promise to state employees and propose that the Commonwealth force state employees to pay part of the contribution to the Virginia Retirement System. Currently the state pays the 5% "employee contribution" and has done so since the late 80s (I may need correcting on the date) in lieu of pay increases. At the time, the state and most local governments and school divisions "promised" this was a permanent commitment.
Governor Kaine will propose that the state reduce the employee contribution rate to 3%. Last fall he reduced contributions to VRS by $104 million - he helped balance the budget, but weakened the balance sheet of the retirement system with that move.
If the Governor, Governor-elect, and the General Assembly go along, faith will be broken and state employees even more demoralized than they are currently. Trickle down - local school boards and local governments will follow suit, breaking the promise they also made to employees. Most state employees, teachers, and others in VRS understand why they've gotten no recent raises, and won't in the foreseeable future.... but, they won't understand this broken promise to balance the budget.


Progressive said...

I don't envy Bob McDonnell. What a mess.

Belle Rose said...

Update: This is from the Governor's press release:

"Currently, the Commonwealth pays both the employer share and the employee share of retirement contributions. Beginning in FY 2011, all state employees will be required to pay one percent of salary as their share of the total contributions required for membership in the Virginia Retirement System defined benefit retirement program. This rate will increase to two percent of employee salary in FY 2012. The state will pay the remainder of the employee share as well as continue to pay the entire employer share. Local governments and school boards will have the option to require their employees to contribute at the same rate as state employees.

At the same time, the retirement age for newly hired state and local employees will be increased from age 50 to age 55.

Taken together, these changes put state and local governments in a position to preserve strong pension benefits, while prefunding the retirement system in the manner bond ratings agencies have come to expect from a Triple A state. But, we must also acknowledge that these changes impose additional burdens on governmental employees who have been doing more work with fewer people and seeing their take home pay reduced through increasing health care premiums and pension contributions. This is not what we hoped to announce, but these changes are necessary to manage through this very difficult fiscal situation."