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VRS, taxpayers get huge boost, thanks to bull
Wednesday, May 26, 1999
BY JEFF E. SCHAPIRO
Times-Dispatch Staff Writer
The bull market is helping cut taxpayers' out-of-pocket cost of providing pensions for 90,000 retired state and local government employees.
Because of big returns on investments, the Virginia Retirement System says the General Assembly and most local governing bodies can trim their cash contributions to the pension fund.
In the two-year spending cycle that begins July 1, 2000, state and local government can cut their contributions by $70 million. VRS now receives about $1 billion a year from the state and localities.
"For the first time, the benefits of the stock market run-up have translated into improved contribution rates," said Edwin T. Burton III, chairman of the VRS board of trustees.
"We're prepared for weak markets, and we don't anticipate turning these rates around," Burton said.
In the past five years, the VRS has more than doubled its holdings to $33 billion. But the Wall
Street boom is crucial to generating the cash the VRS needs to pay its bills.
That's because the VRS spends more on pensions annually than it collects in contributions. Investment returns pay the difference, which in recent years has run as high as $100 million.
The typical pension paid out by the VRS, the nation's 32nd largest retirement fund, is about $1,000 per month. More than 275,000 public workers have retirement accounts with the VRS.
The nine VRS trustees recommended the reduced contribution rate, despite a 2 percent boost in benefits, liberalized retirement rules, sweetened health coverage and financing of future increases for inflation. Those increases, in the so-called cost-of-living allowance, are being fully bankrolled for the first time in 20 years.
The hottest performers in the VRS portfolio have been stocks, primarily U.S. equities. Fifty-three percent of the fund is set aside for American stocks, a heavier than usual share that helped the VRS toward a $4.1 billion profit in 1998.
© 1999, Richmond Newspapers Inc.