Virginia Gov. Terry McAuliffe wants to put an extra $150 million in the state’s teacher retirement fund this year in a bid to reduce the state’s pension contributions in future years.
The extra money would also reduce future pension payments from school districts.
From the Richmond Times-Dispatch:
The proposed payment to the teacher fund would reduce government contribution rates for teacher pensions by 0.35 percentage point beginning in fiscal 2016, according to the Virginia Retirement System in a presentation to the Senate Finance Committee on Tuesday.
The reduced rate would save the state about $10 million and local school systems $15.8 million.
The governor’s pending budget proposal also would accelerate the 10-year payback of more than $741 million in contributions the General Assembly and Gov. Bob McDonnell deferred in 2010 to balance the two-year state budget at the end of the recession.
The teacher retirement plan carries the largest unfunded liability, estimated at $14.3 billion last year using the same methodology as used to calculate the rates. (The unfunded liability of the plan is $11.9 billion, if based on the current market value of system assets, but that method is subject to big swings in market value that would make rates unstable, VRS officials said.)
Local governments pay about two-thirds of the employer retirement costs for teachers, and the state pays the rest. The climb in pension contribution rates — projected to peak in 2018-19 — has put heavy pressure on school system budgets. Next year, for the first time, local school systems will have to show that liability on their books under new federal accounting rules — about $500 million each for Chesterfield and Henrico counties.
The state’s teacher retirement system was 65.4 percent as of June 30.