Sunday, December 21st, 2014

Fact-checking the pension debate

Gov. Bob McDonnell has proposed a record $2.2 billion employer contribution to the state pension over the next two budget years.
Gov. Bob McDonnell has proposed a record $2.2 billion employer contribution to the state pension over the next two budget years.

Some of the most intense debate swirling around the General Assembly this winter concerns the ailing Virginia Retirement System, which oversees pensions for 600,000 current and former state employees and teachers.

The pension is an estimated $19.9 billion short of the assets needed to pay its projected retirement liabilities over the next 85 years. Much of the problem can be traced to legislators who, seeking quick fixes to balance the state budget over the last 25 years,  rarely funded the pension at the levels recommended by the VRS Board of Trustees.

Gov. Bob McDonnell, in his State of the Commonwealth address last month, called the pension "woefully underfunded." The Republican proposed a $2.2 billion pension contribution that would be shared by state and local governments over the next two budget years. Many educators say the plan would force local school systems to cut the money spent on classroom teaching.

PolitiFact Virginia has been following the debate closely. We thought this would be a good time to review our findings.

McDonnell added to the pension system’s problems shortly after taking office in 2010. To balance the budget, he convinced the General Assembly to trim $620 million from pension payments the state was scheduled to make over the fiscal biennium that started July 1, 2010. We judged that a breach of governor’s campaign vow to "eliminate budget gimmicks."

In December 2010, McDonnell proposed requiring existing state employees to contribute a portion of their salaries to the pension. But a year earlier, while campaigning for office, McDonnell said the state in 1983 had made a promise "which cannot be broken" to give state employees a free ride on the pension. We rated McDonnell’s change in position a Full Flop.

In an MCNBC interview last July, the governor lamented that state employees "pay nothing" toward their pensions. But for more than a year, new state employees -- those hired on or after July 1, 2010 -- had been required to make retirement contributions from the day they reported to work. And 12 days before the interview, a new law went into effect that required veteran state bureaucrats to begin making contributions that will grow with their future raises. We gave the governor a Pants on Fire.  

On Dec. 19, McDonnell, proposed the $2.2 billion pension contribution to the General Assembly’s money committees. Of that sum, $600 million would go to the state workers’ retirement plan and Virginia government would pay for that. The remaining $1.6 billion would go to teachers’ pensions, with localities kicking in $1 billion and the state paying $600 million.

The governor said his plan, if approved by the General Assembly, would be "the largest employer contribution to the Virginia Retirement System in history." We rated that statement True.

McDonnell also said his plan to boost the teachers’ retirement fund "puts no mandate on local government." We rated that statement False because under the proposal, localities would be forced to more than double their teacher pension contributions over the next two budget years.

Largely because of the pension demands, Democrats say McDonnell’s proposed state budget would cut bottom-line spending on public education over the next two years. We rated that claim False. State spending on education would rise $497 million in the governor’s budget. About 70 percent money would go to increased teacher pension costs.

And because teacher retirement costs are already built into education budgets, McDonnell’s proposals would not cause local K-12 spending to fall. To the contrary, each locality would have to decide how to pay for a rising education expense.

We don’t want to diminish the hardship McDonnell’s plan would cause to cities and counties. Many local officials say the added retirement costs could force them to lay off teachers and cut other school programs. But McDonnell’s plan would not reduce the school revenues they have at their disposal.