Governor Bob McDonnell is proposing in his biennial budget that the Virginia General Assembly provide the largest employer contribution to VRS in its history.
“The plain truth is our state retirement system is underfunded, and this situation threatens the system’s long term solvency. We must fund VRS at substantially higher levels so benefits will be there for the hardworking teachers, police officers, firefighters, state employees – our neighbors, friends and family members – who are depending on the system for their retirements,” McDonnell wrote in a statement.
“To do this, our budget will propose the largest employer contribution to the Virginia Retirement System in history, recommending a total of $2.21 billion in new funding to the systems for state employees and teachers. This much needed increase more than doubles the employer contributions from the FY2011/2012 budget. We cannot afford to wait in addressing this issue – the time to act is now.”
Here are the details of the proposal:
* Fully funds the regular contribution rates, assuming an 8.0 percent rate of return, 2.5 percent inflation, and 30-year amortization.
* The total VRS rate is 8.76 percent for state employees and 11.66 percent for teachers, of which 1.0 percent and 1.43 percent, respectively, are included for the payback of deferred contributions.
These numbers assume payroll for state employees as of July 1, 2011 and total creditable compensation for teachers for fiscal year 2011. The data are for employer contributions, which do not include contributions from state or local employees.
* Total Employer Contributions to VRS for FY2013 and FY2014 will be $2.21 billion ($875.9 million GF). Specifically, VRS will receive total employer contributions of $596.9 million ($270.3 million GF) for state employees and $1.61 billion (state and local) ($605.6 million GF) for teachers during this upcoming biennium.
* Total Payback of Deferred Contributions to VRS for FY2013 and FY2014 will be $264.5 million ($104.7 million GF) million, which is included in the total employer contributions described above. Specifically, VRS will receive payback of deferred contributions of $67.1 million ($30.4 million GF) for state employees and $197.4 million ($74.3 million GF) for teachers during this upcoming biennium. As promised, this budget fully funds the first two installments of the 10-year payback of deferred contributions.
“I will not pass on a broken system to another governor,” said McDonnell.
