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VRS worried about assembly raid / Plans are to acquire funds for teacher raises
Wednesday, February 23, 2000
BY JEFF E. SCHAPIRO
Times-Dispatch Staff Writer
The Gilmore administration and the Virginia Retirement System fear that the General Assembly is attempting to raid the $38 billion public-employee pension fund to bankroll pay raises for teachers.
“Sooner or later the taxpayers are going to have to replace that money with even more money,” said Edwin T. Burton III of Earlysville, chairman of the nine-member board that oversees the VRS.
The House and Senate drafts of the budget include language freeing millions for the possible raises by allowing local and state government to make required contributions to the VRS one year in advance rather than two.
Assembly budget-writers defended the proposal, saying that the VRS can make do with less cash up front because of the fund’s double-digit growth. Because of the bull market, the VRS earned nearly $4 billion in the past year -- up more than 12 percent.
The hefty growth is crucial to the VRS, which provides pensions for 87,000 retired state and local workers, because the fund pays more in benefits than it collects in contributions from government and employees. Investment returns cover the difference.
Secretary of Finance Ronald L. Tillett said yesterday that the legislature’s proposal is short-sighted because the VRS is still not fully funded. In other words, the VRS -- now 90 percent funded -- couldn’t pay all of its bills if it suddenly went out of business. “If you’re not a full-funded system, why would you . . . pull money out of the system?” he said.
Del. Vincent F. Callahan Jr. of Fairfax, Republican co-chairman of the House Appropriations Committee, countered that the assembly plan is fiscally responsible because government contributions to the VRS would be based largely on actual, rather than projected, need. “It’s about using current figures,” said Callahan. “It’s totally legitimate.”
Still, VRS officials worry that the proposal represents an assault on the fund’s independence, now anchored in a constitutional amendment inspired by the political, legal and financial upheaval that rocked the VRS from 1990 to 1996.
However, the state constitution also designates the assembly as the primary custodian of the VRS. Or as Callahan put it, “We granted them their independence, but we grant them the money, too.”
It was not immediately clear how the recommendation, expected to be endorsed tomorrow when the House of Delegates and Virginia Senate act on their versions of the $48 billion budget, would go over with public employees.
Glen D. Pond, former VRS administrator and now a lobbyist for the18,000-member Virginia Governmental Employees Association, said that the measure might not have a “negative effect” on the fund, but that any savings should be returned to retirees in the form of enhanced benefits.
A spokesman for the Virginia Education Association could not be reached for comment. Teachers account for a giant share of the VRS’ 278,000 members.
Though alarmed by the legislature’s recommendation, VRS officials privately concede it is probably legal because it does not represent a direct assault on the system’s assets, which are held in trust. Indeed, the assembly would not be taking back money, just reducing payments to the fund.
The proposal is estimated to save about $113 million over the next two years. There is a subtle but significant difference in the House and Senate versions of the initiative. The House Appropriations Committee came up with about $90 million in
cash to help localities boost teacher salaries by 2.4 percent. The Senate Finance Committee only recommended local governments adopt the new bookkeeping measure to underwrite the raise.
“We are not fully funded, and taking money from us when we are not fully funded is a mistake,” said Burton, a University of Virginia economics professor first appointed to the VRS by Gov. George Allen and reappointed by Gilmore.
© 2000, Richmond Newspapers Inc.