Virginia General Assembly thinks up new ways to screw Virginia teachers

MoonHowler

The Virginia legislators seem to be running a contest to see who can think up the most ways to screw Virginia public school educators.  Currently, Virginia teachers, after a 2 year probationary period, become eligible for a continuing contract.   Teachers still can be fired on continuing contract but not without an administrator dotting all the i’s and crossing all the t’s.  The due process is very specific.  Of course there are other ways to instantly remove a teacher for criminal activity or fiduciary impropriety. 

The Richmond Times Dispatch reports:

RICHMOND, Va. —

The House of Delegates today passed 55-43 an overhaul of the public school teacher and principal contract and evaluation system.

The plan would phase out a tenure-like system in favor of term contracts.

The measure would make it easier for school divisions to fire teachers. The plan, which was a centerpiece of Gov. Bob McDonnell’s education agenda, drew opposition from advocates for teachers.

Those not familiar with how evaluation in public school works might be misguided and think that this is a good thing.  No.  Not really.  Nothing is more subject  to politics than public education and teacher evaluations. Kissing the right asses is always important on the job but for teachers it will become critical.   Throw in the fact that seasoned teachers are more experienced and therefore cost more  and you have a very dangerous situation for veteran teachers.   If a jurisdiction needs to save money, fire all the expensive veteran teachers.  It won’t matter in the long run because the parents can all be duped into thinking that experience and know-how really don’t matter. 

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McDonnell squawks on CNBC

MoonHowler

Governor McDonnell squawked loudly for Virginia and crowed about lower unemployment numbers and Virginia’s growth. VRS compares very favorably to most other pension plans but needs some tweaking to stay solvent, according to McDonnell.

McDonnell needs to be reminded that the VRS is not the state’s personal ATM. It was very solvent for many years, since 1908 to be exact. Funny how the Republicans discover its woes after all these years. Could it be that Mrs. Cantor wants to shift the burden of payment off the state and and the localities? Isn’t that the Republican way? Maybe the state should keep paying and the employee chip in a little more. That would should good faith. I sure don’t want to hear the Republicans chest thumping about how much money they saved the state in a few years.

Virginia Retirement System back on track…or is it?

MoonHowler

The VRS had a great year.  It had an 18.5% return as of June 30 for last year.  It has nearly returned to its all-time high water mark in 2007, before the crash of 2008.  The trust fund now has approximately $55 Billion dollars.  However, the VRS  board of directors warn that its still not big enough to keep promises made to teachers and local and state workers. 

After the crash, the fund dipped to $38.9 billion dollars in March 2009.  According to Roanoke.com:

But with more government workers and teachers retiring, the investment gains don’t erase the need for lawmakers to increase contribution rates, pension administrators told the Joint Legislative Audit and Review Commission. Pension obligations represent just one of the pressures facing Gov. Bob McDonnell and lawmakers who must shape a new two-year budget next year.

“The fund is aging and will increasingly face the prospect of negative cash flows in years ahead as benefit payments exceed payments from payroll contributions,” said Diana Cantor, the chairwoman of Virginia’s retirement board.

The retirement system has nearly 340,000 active members, including state and local workers, teachers, judges and law enforcement officers. It pays out benefits to more than 156,000 retirees, a number that is increasing. Cantor noted that 5,368 teachers retired in July 2010, a 48 percent increase over the number reported the previous year.

“Recent investment gains notwithstanding, we continue to believe that contribution rates will have to rise to meet our pension obligations over the long term,” she said.

The retirement board will recommend new contribution rates after meeting with an actuary this fall. The state has underfunded the plan, routinely paying rates less than those recommended by the Virginia Retirement System’s governing board over the past two decades.

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McDonnell Ups the Pension Ante

MoonHowler

Governor McDonnell has just upped the ante with the VRS, the Virginia pension fund.  He gets off on the wrong foot by saying that the pension fund has been problematic for years and years.  That simply is not true according to reports over the years from outside sources and independent audits.  VRS has only come under fire in recent years, specifically after the crash of 2008.    McDonnell’s attempts to paint the plan as compromised and unsustainable are purely political. 

McDonnell has outlined his plan which will affect nearly 90,000 state employees, according to the Washington Post:

RICHMOND – Virginia Gov. Robert F. McDonnell (R) proposed Thursday that 87,000 state employees begin making annual 5 percent contributions – the first in nearly three decades – to the state’s retirement fund as a way to shore up the commonwealth’s pension system.

Virginia is one of only four states where government workers make no annual contributions to their retirement fund, the result of a 27-year-old deal in which the state agreed to pick up employee costs in lieu of a pay raise in 1983.

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Virginia Public Employees May Have to Pay Own VRS Contributions

MoonHowler

Virginia public employees may have to start paying their own 5% VRS contribution if some lawmakers have their way.  According to the Richmond Times Dispatch:

Virginia legislators are preparing to take a fresh look at whether to require state and local government employees to pay their full share of pension costs.

Faced with rising rates to pay for long-term liabilities, members of the General Assembly are considering requiring all public employees — not just those hired after last June 30 — to pay 5 percent of their salary toward their pensions.

The legislature also is likely to discuss whether to offer state employees the option of contributing to a 401(k) plan they can manage themselves instead of a defined-benefit plan run by the state.

“There is no doubt this issue is going to be revisited this session,” said Del. S. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee’s subcommittee on compensation and retirement.

Jones also said he is disappointed that most local governments and school systems chose to pay for new employees’ share of pension contributions.

A new law took effect last July 1 that allowed localities to hold new employees responsible for their own contributions.  Very few localities took advantage of this offer.  About 80% continued paying this benefit for new employees.

…[T]he governor and the legislature also deferred paying $620 million into the state and teacher pension plans to balance the $70 billion biennial budget. That diminished the retirement system’s ability to pay future liabilities at the same time it lowered its expectations for returns on market investments. The result is intensified pressure on contribution rates, which will be reset in 2012.

McDonnell has promised to begin making up those deferred payments in the coming year, but he wouldn’t say last week whether he will propose to reverse a 27-year-old deal that allowed the state to cover employee shares of their pensions instead of raising their pay.

In an interview last week, McDonnell said he will recommend changes to the retirement system when he reveals his proposed budget amendments Friday, but he would not elaborate.

“What I’m interested in is the long-term solvency of the retirement system,” he said, adding that he has 22 years of state service vested in the system.

McDonnell said he created a work group several months ago to consider pension options. He cited concerns about unfunded, long-term liabilities; the increasing number of employees retiring; and the potential for big increases in employer contribution rates next year.

The amount borrowed from VRS keeps changing.  At one point it was in the neighborhood of 6 billion dollars.  At one point, VRS received accolades  for being one of the best handled retirement systems in the United States.  How could things have gone south so quickly.  Perhaps Eric Cantor’s wife can explain it.  She is chairman of the board of directors of VRS.   We cannot ignore the fact that large sums of money were borrowed from the pension fund and that is part of the reason it isn’t in as good of shape as it once was.  

Of course the VRS lost money during the \crash of 2008.  However, it lost around 20% which is a whole lot less than what most individuals lost.  The investments were very solid.  As for employees electing to go the 401k route rather than the pension route…what fool is going to fall for that one?  No one would do that unless the pot were sweetened a great deal.

Many people rely on the VRS for their retirement.  All state employees, judges, magistrates, commonwealth’s attorneys, sheriffs, police, county employees, and teachers are part of the system unless the locality elects to have its own form of retirement.  It is unfortunately that this retirement system appears to have appendages on the chopping block because of state deficits.  Strange that it was the first place the state looked to borrow from when the budget needed balancing. 

Back in the day when employees had to pay their own 5%, they weren’t given an option to join or not join.  It was required.  How is that different than being required to have health care?  Can   a government require an individual to buy retirement?  Perhaps Cuccinelli will sue the state over that one, should it come to pass.  Wait…he is the state.  Ooops.

[note:  highlighting by administration.]

[UPDATE:  noon  12/12/10-  Blue Virginia’s take on this issue   http://www.bluevirginia.us/diary/2572/pension-plan-pay-cut]

 

Virginia participants

 

 

 

Pensions Revisited

MoonHowler

There has been an on-going discussion here on Moonhowlings.net about pensions and other retirement plans.  Some people here are very much oppose to any plans that are from money in  the public coffers.  I asked the serious question if those who oppose plans like VRS, Federal Retirement Programs, etc also oppose military retirement.  To date, no one has answered me. 

Last Sunday, the New York Times  featured a section on pensions entitled, In Budget Crisis, States Take Aim at Pension Costs.

Many states are acknowledging this year that they have promised pensions they cannot afford and are cutting once-sacrosanct benefits, to appease taxpayers and attack budget deficits.

Illinois raised its retirement age to 67, the highest of any state, and capped the salary on which public pensions are figured at $106,800 a year, indexed for inflation. Arizona, New York, Missouri and Mississippi will make people work more years to earn pensions. Virginia is requiring employees to pay into the state pension fund for the first time. New Jersey will not give anyone pension credit unless they work at least 32 hours a week.

“We can’t afford to deny reality or delay action any longer,” said Gov. Pat Quinn of Illinois, adding that his state’s pension cuts, enacted in March, will save some $300 million in the first year alone.

But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired. Though heralded as breakthrough reforms by state officials, the cuts phase in so slowly they are unlikely to save the weakest funds and keep them from running out of money. Some new rules may even hasten the demise of the funds they were meant to protect.

Lawmakers wanted to avoid legal battles or fights with unions, whose members can be influential voters. So they are allowing most public workers across the country to keep building up their pensions at the same rate as ever. The tens of thousands of workers now on Illinois’s payrolls, for instance, will still get to retire at 60 — and some will as young as 55.

One striking exception is Colorado, which has imposed cuts on its current workers, not just future hires, and even on people who have already retired. The retirees have sued to block the reduction

Some of the states mentioned have really cushy pensions. Virginia’s pension, the VRS, is rather modest but livable. The rub with the VRS is that back in the early 80’s most individuals had their pension paid by the state or the locality. That happened in leiu of giving pay raises. (see the history of VRS)

The VRS is actually mandated by the Constitution of Virginia.  The history also explains the following:

House Joint Resolution 392 of the 1993 General Assembly Session requested the Joint Legislative Audit and Review Commission (JLARC) to complete a comprehensive study of VRS. The study concluded:

  • VRS should be established as an agency independent of the executive branch of Virginia government.
  • The appointment of trustees should be a shared responsibility of the Governor and the General Assembly.
  • The VRS trust funds should be established as independent trusts in the Constitution of Virginia.
  • The structure of VRS advisory committees should be established in law.
  • The General Assembly should designate a permanent legislative commission or committee to carry out continuing oversight of the retirement system.

This series of changes to the Virginia Constitution and the VRS enabling statutes occurred in 1995 and 1996. The Constitution of Virginia (Article X, Section 11) now requires the General Assembly to maintain “…a retirement system for State employees and employees of participating political subdivisions. The funds of the retirement system shall be deemed separate and independent trust funds, shall be segregated from all other funds of the Commonwealth, and shall be invested and administered solely in the interests of the members and beneficiaries thereof.” Today, this includes 237 state agencies, 249 counties, cities and towns, 183 special authorities and 145 school boards. As of June 30, 2009, VRS had nearly 347,000 active members and more than 141,000 retirees and beneficiaries.

Back to the military question:  Do those who want to get rid of pensions and retirement for public servants also want to get rid of military retirement?   Freedom is not only preserved by fighting our enemy.  It is also peserved by knowing how to read and write, and by being able to walk your streets without being killed by domestic enemies we often call thugs.  Freedom is knowing that we have first responders to keep us safe. 

All are important members of society who deserve to have their pensions kept intact without meddling and without the proverbial hands in the cookie jar.  After reading the above, I am not even sure what Virginia did was legal.

Albemarle County Opts Out

MoonHowler

Albemarle County has decided to opt out of paying VRS contributions for new employees hired after July 1, 2010. The General Assembly allows them to chose whether to pay the employee contribution or not.

According to the Richmond Times Dispatch:

CHARLOTTESVILLE — Albemarle County officials have decided to stop picking up the tab for what local government employees have to pay into the state retirement system.

Albemarle, along with the bulk of localities in Virginia, has long been required to pay what is considered the employees’ retirement contribution share. But this year’s General Assembly gave localities the option to make new employees pay the contribution themselves — which equals 5 percent of their salaries — so Albemarle decided to make new employees start paying.

The change applies only to new employees who have never been in the Virginia Retirement System and are hired after July 1.

The benefit payouts will be deducted from employees’ paychecks.

Depending on how many employees the county hires after July 1, the move at a joint meeting last week between the Board of Supervisors and School Board could save the county a couple of hundred thousand dollars per year, officials estimated

.

It is unclear whether the school board will go the same route and the county. One thing being discussed is raising the pay to attract more teachers and then soaking the new employees for their VRS contribution. I hope they tell them this before they sign on. It almost seems deceptive. The VRS employee contribution is 5% of the employee’s annual salary. I am not sure I see where Albemarle County Schools would be saving money if they paid more to the new employees and didn’t pay VRS. Wouldn’t they have to pay highter FICA contributions? It also eventually raises the amount their pension is calulated on. Pay me now or pay me later. It seems to me that they are just being sneaky. I hope it ends up biting them in the butt.

Full Story

State will dip into pension fund, repay with 7.5% interest

MoonHowler

The Virginia General Assembly just couldn’t help itself.  It had to put the sticky fingers into the pension fund before closing for the session. 

The State of Virginia is helping itself to more than $620 MILIION  that belongs in the state pension fund, VRS, to pay pensions to state employees, some  county employees and teachers.  Virginia must begin to pay back the money by 2013 at an interest rate of 7.5% over 10 years. 

Predictable.  So the state who must have a balanced budget doesn’t really have one and the Emperor has no clothes.  According to the Richmond Times Dispatch:

 

The provision, sought by the state Senate and included in the joint budget adopted by the General Assembly yesterday, is aimed at easing jitters over the decision to defer state and local payments to pension plans for the portion of future retirement liabilities that aren’t funded by the system.

Sen. Walter A. Stosch, R-Henrico, called the provision the most important step taken by the assembly to protect the retirement system, even as it relies on deferred pension contributions for almost one-fourth of the money used to balance the two-year budget.

“I don’t want anybody to feel that their pension is in jeopardy, because it isn’t,“ Stosch said yesterday. “But we’re recognizing the unfunded liability and requiring it to be repaid.“

But that wasn’t the only important step taken by the legislature to guard the $48 billion retirement system. It also adopted a package of changes that will lower the cost of pensions for future employees by more than $50 million in the next two years and $3 billion over a decade.

The above sounds like politico-speak for “I’m from the government and I am here to help you.”  The warm, fuzzy feeling just isn’t there if you have anything to do with the $48 Billion  VRS.   This sounds like the government doing what the government does best:  Robbing Peter to pay Paul.  However, there is no free lunch.  Retirement ages will increase and a greater part of employee contributions will come of the the employee’s pocket.  

This house of cards doesn’t sound like the foundation is real firm:

House budget officials had argued that the deferral would not harm the retirement system because of benefit changes that would reduce long-term costs and a likely recovery of stock market investments.

The VRS lost 21% of its assets during the free fall of 2008.  Actually, it ended up better than most individuals.  However, I don’t think our lawmakers should be gambling pension money away on the shaky premise that the stock market earnings are going to take up the slack. 

Part 2 will continue when more unfolds about the great robbery of 2010.  (subtitle:  Public Employees:  This will only Hurt for the Rest of Your Lives)  They just couldn’t keep their grubby mitts out of the pension fund.  News is sketchy at this point on the great robbery.  If the Washington Post even mentioned it, I didn’t see it.  The budget news is overwhelmingly horrible.

NOT ANY MORE. DADDY HAS HIS HAND IN THE POT.