Virginia will reduce its contribution to the $49 billion Virginia Retirement System, Richmond, by about $620 million over the next two years, if, as expected, Gov. Bob McDonnell signs budget legislation passed last week by the Virginia General Assembly.
But another provision included in the state's budget legislation would require the state to repay the money over 10 years beginning in 2013, plus interest based on VRS' assumed rate of investment return at the time, according to a Virginia state legislative aide who asked not to be identified.
VRS' assumed rate of return is currently 7.5%, the legislative aide said.
According to the aide, the state budget included the pension contribution reductions because the state's constitution requires a balanced budget.
“It's one of a number of actions taken to help address the revenue shortfall,” the legislative aide said. “You've got no choice here but to balance the budget.”
Jeanne Chenault, a VRS spokeswoman, declined to comment on the budget provision that would cut state contributions. Ms. Chenault also said a figure on how much money the state currently contributes to the pension system annually was not immediately available.
The legislative aide said the state's annual contribution to VRS was about $500 million, and added that Mr. McDonnell is expected to sign the budget bill by mid-April.