Virginia Gov. Robert F. McDonnell will seek $2.2 billion in employer contributions to the Virginia Retirement System, Richmond, when he presents his next biennial budget to state lawmakers on Dec. 19.
“The plain truth is our state retirement system is underfunded, and this situation threatens the system's long-term solvency,” Mr. McDonnell said in a statement. “This historic new investment will begin to reverse the downward spiral VRS has been on and get us back on a path to revival.”
Liabilities for the $51 billion retirement system increased to $19.9 billion in 2011 from $11.8 billion two years earlier, according to a report from the state's Joint Legislative Audit and Review Commission released Monday, which said the funded status had dropped to 70.6% for the state employees plan and 66.6% for teachers.
Mr. McDonnell's $2.2 billion proposal would fully fund contribution rates of 8.76% for state employees and 11.66% for teachers. Of the $2.2 billion, $596.9 million would be for state employees and $1.61 billion for teachers over two years. The amounts include the first two installments to pay back deferred contributions made in the last budget cycle.
The proposal assumes an 8% rate of return while VRS uses a 7% rate. On a conference call with reporters Thursday, Richard D. “Ric” Brown, Virginia finance secretary, said Mr. McDonnell used the higher rate “because it is most likely that the General Assembly would fund it at that rate.”
When the General Assembly convenes in mid-January, “we stand ready to fight for” the $2.2 billion proposal, he said.