Under the cover of darkness

Late on Saturday evening, the Senate and House of Delegates rushed through a 21 page conference report of SB 497, SB 498, and HB 1130 (Senate Finance Committee summary) that brought sweeping changes to the Virginia Retirement System. Passage came within minutes with little discussion and no fiscal impact statement. From early reports (many of which are vague because even those who voted on the bill aren't clear about the impact of all its provisions) it seems the General Assembly is putting the burden of reform on many local and state employees. Some key points -

Employees who are not vested (less than five years service) and those hired after July 1, 2010 will see three changes that will reduce benefits -

• The multiplier used to compute benefits will be reduced to 1.65% from 1.70%,
• The cost-of-living-adjustment will be capped at 3% rather than 5%,
• Average Final Compensation will be based on the average of the highest five years instead of the current three years.

Employees with currently less than 20 years of service who retire before age 65 will have to wait until that age for any cost-of-living-adjustment.

Beginning January 1, 2014 new hires will have a pension system that is part defined benefit (with 1% multiplier) and part defined contribution. The employee will pay 4% of salary into the defined benefit portion and 1% into the defined contribution portion. The employer will match up to 3.5%.

It appears there are no changes for those who are currently retired nor for those with 20+ years of service.

According to the Virginia Education Association, teachers as well as state and local employees will pay more and get less in benefits -

The Joint Legislative and Audit Commission’s actuarial analysis indicates that a 60-year-old teacher making the average teacher salary will receive $9,129 less in annual benefit if they make the minimum required contribution and $874 less if they make the maximum contribution. In short, future teachers will pay more to get less.

Senator Creigh Deeds explained in a recent email newsletter why he voted against the VRS bills -

I am concerned that we are imposing on local governments a mandate with an unknown cost. I asked pointed questions during the briefing about the effect of the plans on retirement benefits and about the cost to local governments and did not receive answers that quieted my concern. I am also concerned that we are providing a disincentive for people to work in public service. It is important that we not only maintain trust with those people who are already vested in VRS (and these bills do not affect those people who are vested), but that we provide an incentive for highly qualified and talented people to come to work in public service. The bottom line is that there were too many unanswered questions for me on all of these bills.

Senator Deeds went on to state that the best way to restore VRS is to "simply pay into the system what the trustees propose" and what actuaries say is prudent.

Over many years the General Assembly and governors have intentionally underfunded VRS and used the money for other pet projects. The result is a retirement system having $24 billion in unfunded liability and falling below the sound benchmark of 80% funded. Now our "citizen legislators" want to balance the books on the backs of many state employees, local employees, teachers, law enforcement offices, and judges. And because of the rush job on these bills they can't even tell us the effects on the fund's viability or  on hiring and retaining a qualified workforce to carry out core services of the Commonwealth.

Even retirees and those with 20+ years of service, who apparently are held harmless by these bills, should remain vigilant. With so many unknowns and inadequate funding their benefits could be in jeopardy when the 2013 legislature convenes.

Counting the Dwindling Corn

Governor Tim Kaine announced a series of steps to meet the 2010 budget shortfall of $1.35 billion. Some savings were found in various efficiencies and reducing spending in state agencies based on those agencies' own recommendations. Many of those will not be immediately felt by the public although over time services will be impacted.

Several of the governor's actions, required by the magnitude of the shortfall, will directly impact families, programs, core services, and state employees. Among them:

• Some 929 state jobs will be eliminated requiring 593 layoffs.
• Higher education will be hit to the tune of 13-15% reductions. For UVA that is about $19 million - which has to hit everything from buildings and grounds to instruction. It will be especially difficult for community colleges which cannot turn students away. Expect bulging classes, the elimination of some classes/programs, more snow-covered parking lots and sidewalks.
• A one-day furlough for most state employees - in short, a four-day Memorial Day weekend, with one day unpaid. The loss of a day's pay will be tough on some families, but not as tough as more layoffs that would occur absent the furlough. A little shared pain seems the better of bad options. Public safety and some other areas will be exempted.
• A reduction of $104 million in payments to the Virginia Retirement System. VRS has a reputation of being well managed, but like every other investor has been hammered by the stock market (which is thankfully rebounding). VRS is a sacred trust to state employees and while the state can't raid the funds directly, this backdoor reduction in funding will weaken the system. The Commonwealth must do, as the governor promises, readjust the contribution rates to assure the long term viability of the system.

Kudos to the governor for not taking the boning knife to K-12 education. Along with public safety, K-12 is the most vital of government services. So far, because of the efforts of Governor Kaine and federal stimulus funds, education has been largely spared. Education is the key to our future, our economy, the very fabric of our society and every effort must be made to protect public schools.

Which brings us to a crucial point - it does make a difference who is in the Executive Mansion setting priorities. Bob McDonnell says he'll pay for roads by shifting over $5 billion from education. That's BILLION. McDonnell promises to raise teacher salaries - but it is a shortsighted smoke and mirrors (shift and shaft) scheme that cuts school services such as nurses, counselors, speech pathologists, and other support personnel.

The more we see and hear of Bob McDonnell, the clearer it becomes that the man will say and promise about anything in his desperation to wield power. Talking out of both sides of his mouth... he's ultra-conservative to one audience and a reasonable moderate to another group in the very same day! A vote for Bob McDonnell is like buying a pig-in-a-poke - you never know who, or what, is the real Bob McDonnell.

VEA endorses Deeds

The Virginia Education Association, after examining the legislative records, reviewing questionnaires, and interviewing both candidates has endorsed Creigh Deeds for Governor. VEA President Kitty Boitnott, speaking for the VEA fund, said of Deeds:

"Creigh Deeds has an 18-year record in the General Assembly of support for public education. He's been a voice for Virginia's students and educators and has worked tirelessly to maintain and strengthen the commonwealth's public schools. We're excited to back him, and look forward to his continued support and encouragement from him as governor."

This is a major endorsement for all sorts of good reasons. The VEA is politically active and has members (and retirees) in every community and has expertise in issues affecting K-12 education.

School House Rock

According to Education Week's Annual Quality Report, Virginia schools rank 4th in the nation with a grade of "B." Virginia is up from 5th place last year and trails only Maryland, Massachusetts, and New York. According to the report, Virginia ranks high in standards, accountability, and students' chances of success and was above the national average in all areas except funding equity where the Commonwealth got a "C+."

Funding disparity has long been an issue facing the General Assembly and is raised year after year by school boards and the Virginia Education Association. While the Virginia Constitution calls for the same quality education for each child, per pupil spending in wealthy areas like NOVA far outpaces that in rural communities such as those found in the Shenandoah Valley.

The Education Week report does highlight one area of concern for Virginia and many other states - a growing shortage of English as a Second Language (ESL) teachers. While this shortage hits some regions harder than others, the need is apparent in most school divisions. Harrisonburg schools, for example, have nearly two dozen languages spoken by students. Currently, Virginia has one ESL teacher for every 49 English language learners. Demand for ESL teachers is expected to increase by over 60% during the next five years.

Education Week's report is worth crowing about! It is good news for Virginia students, parents, and educators and signals there is no need for vouchers or tax credits for private schools. Especially in times of budget cuts, the state's commitment must be 100% for public education. Public dollars for public schools which meet the standards of public accountability.