Governor Ralph Northam wants to boost the retiree health credit for state police, law officers, sheriffs and their deputies. He has included $8.1 million in his proposed FY 2020 budget to pay for a $2-per-year of service increase for state police and a $1.50- to $5-per year increase for sheriffs and deputies.
While the increase in benefits will be paid for, it legislative hearings have revealed how poorly these retirement plans are funded to begin with. Northam’s proposal would add $76 million in liabilities to two plans that are funded at less than 10% of their long-term obligations. House Appropriations Chairman Chris Jones, R-Suffolk, called the benefit increases “fiscally irresponsible.”
Reports the Richmond Times-Dispatch:
“Virginia’s law enforcement officers have physically demanding jobs and they put their lives at risk every day to keep the public safe,” spokeswoman Ofirah Yheskel said. “Governor Northam believes they should be able to afford their health care costs after retirement and has proposed a reasonable credit that would ensure they are able to do so.”
The VRS (Virginia Retirement System) estimates that the proposal would increase the long-term, unfunded liabilities by $33.7 million for the state fund and $42.3 million for the sheriffs’ and deputies’ plan.
Currently, both plans are funded at less than 10 percent of their obligations — 9.67 percent for the state plan, which already has almost $900 million in unfunded liabilities. The deputies’ plan was funded at 8.45 percent in mid-2017, with an unfunded liability of about $26.3 million.
“These are not well-funded plans,” VRS Director Trish Bishop told a House Appropriations subcommittee on Thursday.
VRS estimates that the proposals would lower the funded status of the state plan to 5.40 percent and the deputies’ plan to 2.66 percent.
Bacon’s bottom line: Putting extra money into the pension funds is financially prudent. Increasing benefits for plans that are so grievously underfunded is not. How about using the $8.1 in increased funding to pare the massive liabilities? If Virginians want to show their gratitude to the “boys in blue” (and the girls in blue, of course), isn’t the best way to guarantee that we can pay for benefits already promised?