Old McDonnell Has a Surplus

Smoke and mirrors. Maybe Penn and Teller can help explain the inventive financial arrangement. Let’s get this straight. By not contributing to the state retirement system, the state will make employees eligible for a 3% bonus at the end of 2010. The state taketh and the state giveth away.

It should be a familiar budgetary trick. Social securiterize any reliable cash flow and its future expenditures and then blame the program for failing to maintain an appropriate reserve. This particular version has taken a very long time to come full circle. First Virginia avoids pay raises for state employees by assuming the employee contribution for the Virginia State Retirement System (VRS). That was 1983. Now we place a requirement to contribute on future employees by offering the hope for a bonus for current employees in the event of a budget surplus that can be achieved by shorting the state retirement contributions and very likely their retirements. So, it took 27 years but the state employees have managed to trade a permanent pay raise for a one time bonus at the cost of the of their retirement system’s liquidity by underfunding it and on the backs of future state employees.

“If they fail to repay it, and it threatens the health of the system, they’ll be getting pressure from various employee groups.” – R. Ronald Jordan, executive director of the Virginia Governmental Employees Association

Now there’s a statement that should reassure anyone who can’t balance a checkbook. But a real feel good moment comes when a Republican financial guru steps in:

“No state employee and no local employee should lose a minute of sleep worrying about the stability of the VRS.” – Del. Jimmie Massie, R-Henrico, House Appropriations Committee

Trust him. He is an investment adviser and believes the stock market will more than recover the losses suffered by the retirement system during the recession. This is a guy on the team that keeps telling us the future is dimming every moment that a Democrat is in the White House. But maybe we won’t even have to repay that $620 million loan after all. Or maybe state taxpayers will be baling the VRS out when the $47.7 billion dollar Republican cash cow becomes a ponzi scheme and collapses.

In the interest of the employees he represents, R. Ronald Jordan should be singing to the Governor “EE-I-EE-I-NO.”