Virginia’s retirement system, considered fiscally sound just two years ago, is now $20 billion short of what it owes public employees, a massive liability that threatens the fund’s stability as Gov. Bob McDonnell prepares to send his first budget request to the General Assembly.
State lawmakers struggling to cover multibillion dollar holes in the state’s budget since 2008 reduced what they were paying into the pension fund, shorting it by $1.6 billion this year alone, the Virginia Joint Legislative Audit and Review Commission, a bipartisan government oversight panel, reported Monday. At the same time, the fund’s investments soured. That one-two punch means the gap between how much the fund has and what it owes grew from $12 billion in 2009 to $20 billion in 2011, a 69 percent increase over the two years.
With McDonnell’s backing, lawmakers lowered already flailing pension contributions by $620 million in 2010 for the two-year budget ending June 30, 2012. There is no minimum requirement for the state to make toward retirement benefits, and since 1992 the General Assembly has fully funded its obligations to the fund for public employees only four times and just twice for teachers. Auditors recommended lawmakers establish a minimum contribution level.
Public pension funds typically have on hand at least 80 percent of the money they owe retirees, but Virginia’s account is at 71 percent for public employees and just 67 percent for teachers. Those levels “are indications of problematic finances,” said Anirban Basu, CEO of Sage Policy Group in Baltimore.
