Crit­ics say pen­sion re­form rushed through

Curbs ben­e­fits for some, cre­ates hy­brid re­tire­ment plan, adds costs to lo­cal­i­ties

The Washington Times Daily - - Metro - BY DAVID SHERFINSKI

RICH­MOND | Virginia lo­cal­i­ties, teach­ers and em­ployee groups are urg­ing Gov. Bob Mcdon­nell to veto or amend what they call a slapdash, last-minute over­haul to the state’s $54 bil­lion pen­sion fund.

The pro­posal passed by the Gen­eral Assem­bly would curb ben­e­fits and add a new “hy­brid” plan start­ing in 2014 that com­bines a tra­di­tional pen­sion with a 401(k) con­tri­bu­tion plan in an ef­fort to shore up a sys­tem fac­ing about a $24 bil­lion short­fall.

The real is­sue, said Del­e­gate Jen­nifer L. Mcclel­lan, Rich­mond Demo­crat, is not the em­ployee ben­e­fit pack­ages, but the fact that the leg­is­la­ture just twice in the past 20 years has funded the re­tire­ment sys­tem at rec­om­mended rates.

“We keep pass­ing the buck, and ul­ti­mately some­body’s got to pay the bill,” she said. “And I don’t think it’s fair to ex­pect state em­ploy­ees, lo­cal em­ploy­ees and lo­cal gov­ern­ments to pay it.”

The re­forms passed by the leg­is­la­ture will re­quire the state to grad­u­ally fund the sys­tem at rates rec­om­mended by the Virginia Re­tire­ment Sys­tem ac­tu­ary over the next six years, but it will re­duce ben­e­fits for state and lo­cal em­ploy­ees who have been on the job for less than five years and re­quire em­ploy­ees hired on or af­ter Jan. 1, 2014, to en­roll in a “hy­brid” re­tire­ment plan that com­bines a more tra­di­tional, de­fined-ben­e­fit pen­sion with a 401(k)-style el­e­ment.

S. Chris Jones, Suf­folk Re­pub­li­can and chair­man of the House Ap­pro­pri­a­tions sub­com­mit­tee on com­pen­sa­tion and re­tire­ment, said pass­ing the re­forms sig­ni­fied a bi­par­ti­san com­mit­ment in both houses to en­sure

the long-term sol­vency of the sys­tem.

“These bills are the cul­mi­na­tion of ef­forts over the past three ses­sions by the Gen­eral Assem­bly to en­act com­mon sense re­forms to the VRS for the ben­e­fit of its mem­bers, both cur­rent and fu­ture em­ploy­ees,” he said.

Ad­vo­cates had grave con­cerns about the hur­ried na­ture that went into the final con­struc­tion of a bill that will af­fect em­ploy­ees around the state. Rob­ley Jones with the Virginia Ed­u­ca­tion As­so­ci­a­tion said pen­sion re­form was thought to be dead the day be­fore the Gen­eral Assem­bly ad­journed March 10, but a pack­age ended up be­fore the House and Se­nate the next day — with lit­tle time for many to parse through the de­tails.

“We got the con­fer­ence re­port seven min­utes be­fore de­bate be­gan,” Ms. Mclel­lan said. “It was 69 pages long for one con­fer­ence re­port. How many peo­ple do you think read that? How many peo­ple do you think fully un­der­stand what was in these bills?”

“This Gen­eral Assem­bly did not do due dili­gence, and the Virginia cit­i­zens need to know that, if noth­ing else,” said Kitty Boit­nott, pres­i­dent of the VEA.

The over­haul also calls for lo­cal em­ploy­ees, be­gin­ning July 1, to pay a 5 per­cent con­tri­bu­tion into the re­tire­ment sys­tem to be off­set by a 5 per­cent raise. Be­cause lo­cal­i­ties will have to cover in­creased re­tire­ment con­tri­bu­tions and fed­eral taxes as well, though, they are left on the hook for mil­lions of dol­lars in ad­di­tional costs as they at­tempt to wres­tle with their own bud­gets.

Ear­lier this month, the Virginia As­so­ci­a­tion of Coun­ties, Virginia As­so­ci­a­tion of Su­per­in­ten­dents, the Virginia Mu­nic­i­pal League and the Virginia School Boards As­so­ci­a­tion wrote to Mr. Mcdon­nell urg­ing him to amend the bill.

Lo­cal school boards will be able to phase in the re­quire­ments over a num­ber of years, and Mr. Mcdon­nell is weigh­ing an amend­ment that would al­low lo­cal gov­ern­ments to do the same.

But the groups want him to put a reen­act­ment clause on the bill so it would be re­con­sid­ered in the 2013 ses­sion. Ab­sent that, they want him to re­move the pay in­crease re­quire­ment or leave the decision up to lo­cal­i­ties, cit­ing the mil­lions of dol­lars in costs in that pro­vi­sion, which they said does noth­ing to re­duce the sys­tem’s un­funded li­a­bil­i­ties.

“City, county and town rev­enues are ei­ther flat or still de­clin­ing, and lo­cal gov­ern­ments and school boards face in­creased costs for re­tire­ment, in­sur­ance, util­i­ties and gaso­line,” they wrote. “Lo­cal gov­ern­ments sim­ply do not have the rev­enue re­sources to pay the ad­di­tional costs that will be in­curred by the im­ple­men­ta­tion of SB 497.”

The gov­er­nor is cur­rently re­view­ing the leg­is­la­tion, ac­cord­ing to a spokesman.

AS­SO­CI­ATED PRESS

“We keep pass­ing the buck, and ul­ti­mately some­body’s got to pay the bill. And I don’t think it’s fair to ex­pect state em­ploy­ees, lo­cal em­ploy­ees and lo­cal gov­ern­ments to pay it,” said Del­e­gate Jen­nifer L. Mcclel­lan, Rich­mond Demo­crat, of the pen­sion over­haul.

BAR­BARA L. SAL­IS­BURY/THE WASHINGTON TIMES

Skip Coburn (right), ex­ec­u­tive di­rec­tor of the D.C. Nightlife As­so­ci­a­tion, urges a D.C. Coun­cil com­mit­tee dur­ing a hear­ing Thurs­day to con­sider ex­tend­ing hours that bars and restau­rants can serve al­co­hol. “We have a 24-hour city, we have a 24-hour world,” he says. Mayor Vin­cent C. Gray has pro­posed the change.

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