Is pension reform on the horizon in Virginia? Yesterday, Virginia’s Governor Bob McDonnell proposed that the Commonwealth’s 87,000 state employees begin making annual contributions to their retirement funds to shore up the system. McDonnell is also coupling the contribution requirement with a three percent pay raise, so the net reduction in salary will be only two percent.
Currently, Virginia is one of only four states where the government workers make no contributions whatsoever to the retirement state retirement fund. According to the Washington Post, this is because of a deal made between Virginia and state employees in which the employees would forgo a pay raise in exchange for the state to carry employee costs. But the issue is on the table because an audit of Virginia’s pension plans show that the state’s pensions face unfunded liabilities of nearly $18 billion in the coming years.
It’s unclear at this time how the proposal will fare. One of the state’s government employees unions have called the proposal a “good faith effort,” but also expressed deep concerns about the employee contribution requirement. Democrats, who control the State Senate, have given a lukewarm response. Like the debates on pension reform raging in other states like Illinois and New Jersey, this is another one worth watching.