State Shifts Burden to Localities…Again

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    It’s no secret any longer that the Virginia Retirement System, once one of the soundest pension systems in the nation, is now underfunded to the tune of $17.6 billion. The budget just passed in the General Assembly short session didn’t help the situation.

    Legislators wiggled budget figures in order to squeeze out $108 million in additional money for VRS. Typical of the state government in too many cases, much of that money –  $62 million – was “found” by telling localities to pay that much for teacher pensions in yet another unfunded mandate.

    While state employees, through bookkeeping sleight of hand, were given a 5% raise and then required to pay 5% of gross pay into VRS, localities were not given the option of requiring teachers and other local employees in the system to pay a portion of their retirement. Yet again, the fiscal cowards in Richmond have shifted the burden of beginning to shore up VRS to local government, which has few budgetary options other than raising property taxes or slashing needed services even further than they already have. By the way, making state employees pay that 5% won’t garner any savings for the state in this budget. Instead, it is expected to cost the state an additional $15 million in extra Social Security taxes to cover the raise.

    While the stock market is helping the fund right now by rebounding, no one expects that to be enough to get the pension fund back to a level that actuaries believe is needed to pay for the increasing number of pensioners, as the baby boomers retire in ever increasing numbers.

    In December when McDonnell presents his first biennial budget, he and the legislature will have to figure out a way to come up with the first installment due on the loan of $620 million used to “balance” the present budget. As Republican Sen. Walter Stosch told the Times-Dispatch, the balanced budget was an illusion, “like saying I didn’t pay my mortgage and I saved money – you’ve got to pay it back sometime.”

    There must come a day, or at least I can hope for that, when the delusional GOPers who sold the American public on the idea that we can cut taxes, never raise them again, and still have all the public services we want and need to have, will be revealed as con artists. Ronald Reagan, Grover Norquist, the supply-side economists, etc., were nothing more than new versions of the snake oil salesmen of the past. At some point Virginians must face hard economic truths:

    To solve our transportation crisis, we will have to have new revenue. We can’t “borrow and spend” as a permanent solution. To solve the growing VRS pension shortfall, the state must begin to pay into the system the amount that actuaries say is needed to meet future obligation and never again use the pension fund as a convenient bank to keep from facing fiscal problems head on.

    Secretary of Finance Richard Brown told the Times-Dispatch that using actuarial funding rates would require a minimum of $891 million in the next biennial budget. Remember, that is on top of beginning to pay back the borrowed money. Virginia’s budget crunch is far from over.

    • Teddy Goodson

      Violating the government’s contract with its employees is perfectly sensible, inasmuch as those greedy and lazy, incompetent public workers don’t deserve such lush rewards anyway—- just ask Governor Walker of Wisconsin, and other Republican governors and law-makers. Sanctity of contract works only among businesses, not for labor relations. Kiss up and kick down is the Republican philosophy. Watch for this philosophy coming soon to a jurisdiction near you.

      Actually, it is well past time for Virginia and other states to find more sources for revenue, especially for local jurisidictions, where almost all the government’s budget money comes from taxes or fees in some way based on real estate, and local property owners are constantly being asked to pay for public expenditures. For Virginia, I have long advocated for an small (say no more than one-quarter to three-eights) increase in state income tax rate, which could be used specifically for (and dedicated to) a direct return to originating localities for local jurisdictional use, or, say, applied to transportation.  Another possibility is a small increase in sales tax, maybe time-limited and dedicated to paying off those clever bonds of our Dear Leader McDonnell. We could call the tax the McDonnell Tax.  

      It would be nice if Republicans learned that The Best Things In Life Are Not Free.