How to Look Fiscally Responsible While Being Fiscally Irresponsible

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?

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8 responses to “How to Look Fiscally Responsible While Being Fiscally Irresponsible”

  1. LarrytheG Avatar

    re: ” House Appropriations Chairman Chris Jones, R-Suffolk, called the benefit increases “fiscally irresponsible.””

    Yeah, but isn’t it Chris Jones and company that allowed that fund to not be funded properly to start with before Northam appeared on the scene?

    Why not point that out also?

  2. LarrytheG Avatar

    This is actually an interesting subject. More than law enforcement get this credit. (the amount of the credit might be different between say teachers, state employees and local and state law enforcement).

    But generally – this is a benefit to quite a few Va state and local retirees to help them pay for their health insurance – either from the state/local or Medicare or other insurance.

    I’m not sure when it came online or much else – perhaps Steve does but quite obviously when the legislature enacted the credit, they did not full-fund it.’

  3. Doesn’t matter who started it or not. This sounds like a vote buying scheme. Fund the thing to the point of 95% before you start giving more out.

  4. LarrytheG Avatar

    re: “.. sounds like a vote buying scheme”

    yup – and that was also true when it was first created, no?

    surely we wouldn’t say Northram is doing it to buy votes but the guys who originally created it in the General Assembly didn’t do it for that purpose also. They were more virtuous? ;-)’

  5. djrippert Avatar

    Ralph Northam is rapidly establishing his case as the worst Virginia governor in living memory. Hopefully, the Republican majority General Assembly can reel this “Bernie Sanders lookalike” governor in before he does any more fiscal damage to the Commonwealth.

    How have the Medicaid expansion cost estimates been holding up?

  6. Almost 1/2 billion over budget already. Morons.

  7. LarrytheG Avatar

    Don’t confuse Medicaid Expansion with original Medicaid.

    The Expansion is doing fine budget-wise. Its the forecasts for the original MedicAid that has been wrong about predicting increased participation and costs.

    Some folks who opposed the MedicAid expansion are disingenuously claiming these increased costs are due to the expansion. That’s not true – these increased costs are with regard to the original MedicAid not the expansion.–%20Medicaid%20Expenditure%20Growth%20and%20Implications%20for%20Expansion.pdf

  8. LarrytheG Avatar

    Medicaid aside – the questions:

    1. – how many folks know that there is a separate VRS “fund” to provide subsidies to Virginia and local retirees health insurance including Medicare?

    Most folks pay for Medicare PartB by deducting the premiums from their Social Security. Virginia actually helps it’s retirees pay for that cost rather than those retirees having to pay for it like other retirees.

    2. – whose idea was it to provide that benefit to Virginia retirees?

    3. – who approved such legislation without providing funding for it?

    the “real” irresponsibility here extends also (beyond Northam) to those who voted to provide the additional benefit originally AND without adequately funding it.

    So yes.. Northam is running “wild” in a sense in that he is proposing additional spending – but based on additional revenues.

    What would be a principled position for the opponents would be to not only oppose Northams proposal but to say they WILL fully fund the existing credits OR vote to remove them if they feel we cannot afford to fund them.

    but alas, partisan politics is also running “wild” as usual.

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