- The Washington Times - Monday, December 10, 2001

Virginia legislators scouring state resources for cuts, savings and extra cash to fill a $1.3 billion hole in the state budget need to think twice about drawing on the cash reserves of the state's retirement system, senators were warned.
The Virginia Retirement System, with nearly $30 billion in assets as of June, has more than enough money to cover about 411,000 state employees and teachers and employees of 531 localities and school boards, but tapping VRS reserves now can have consequences later, a Senate budget analyst said Friday.
The number of state workers and teachers eligible for retirement will nearly triple in the next five years, Bill Echelberger, a Senate Finance Committee fiscal analyst, told 37 state senators during a retreat in Reston focusing on the state's budget crisis.
"Already, we've begun to pay out more in benefits than they're taking in in contributions," Mr. Echelberger said.
Virginia government faces a series of what state Sen. John H. Chichester, Stafford Republican and committee chairman, called "draconian cuts" as legislators struggle to reconcile an expected revenue shortfall of $1 billion and $300 million more in mandatory expenses for the fiscal year that ends June 30. In addition, the committee forecasts a $2.1 billion shortfall for the 2003-04 biennial budget.
Among the options mentioned during two days of budget briefings and brainstorming were cutting agency spending, postponing raises for state workers and teachers, curtailing services, charging user fees and even laying off employees.
Legislators also will scrutinize the state's cash reserves to help balance this year's budget.
VRS has built a nest egg to handle a wave of state personnel who become eligible for retirement by 2006 through investments and contributions into the plan from employees and employers, said VRS Director William Leighty.
Among state employees, 5.7 percent are eligible now for full retirement, meaning they are at least 50 with 30 years of service. In five years, the proportion will jump to 14.6 percent who are eligible. Among teachers, the figure will increase from 3.7 percent to 12.2 percent.
Drawing from VRS assets now could alter actuarial formulas intended to keep the fund robust, perhaps forcing employers to increase contributions, especially if returns on investments weaken.
"It comes down to pay me now or pay me later," Mr. Echelberger said.
Gov. James S. Gilmore III suggested during last winter's failed efforts to make midterm adjustments to the state's two-year budget that employers reduce contributions into the overfunded retirement system and use the savings to provide pay raises. The Senate resisted the plan then, and Mr. Chichester said the idea is equally distasteful now.
"I would hope that even though we are overfunded in a couple of categories, that we resist the push to take any savings. That's what the actuaries suggested and the [VRS] board suggested we not do it," he said.
Mr. Echelberger also said legislators have sent mixed signals to public employees in recent years with a hodgepodge of sometimes conflicting legislation.
"There's no overarching concept of where the state is going on retirement policy," he said.

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