Following up on Jim’s recent post about the WMATA pension problems, I decided to check on the recent performance of the Virginia Retirement System. Now that I get a monthly check from these folks, my interest is more active than in the past.
Analysis of pension plans is out of my league, but there is a recent report that does create some concern and even I understand it. VRS is required by statute to conduct periodic stress tests. The latest one was released in December. For those who are interested in digging into the weeds, here it is . Toward the end of the report, the authors point out that VRS lost about 25% of its value in the first couple of years of the Great Recession. They warn that, if there is another great shock or even a period of a few years of returns lower than needed, the plan would be in a worse position to absorb the shock than it was in 2009. The Free Lance-Star had a good summary of the issue in this editorial.
In summary, to keep VRS able to meet its pension obligations, the General Assembly needs to continue its recent practice of paying down the plan’s unfunded obligations.
One of the most pleasant surprises that I discovered upon becoming a frequent follower of this blog was the whole world of energy regulation. RGGI, and, now, TCI, were new terms for me. I became aware of the cap- and-trade concept in its first widespread use in dealing with sulfur dioxide emissions, but was not aware of its current use for carbon dioxide.
Steve Haner’s recent post on TCI referred to RGGI and TCI as interstate compacts. That caught my attention. Long ago, in my political science courses, I learned about interstate compacts (my professor wrote what was then the definitive study on interstate compacts). The U.S. Constitution provides, “No state shall, without the consent of Congress…enter into any agreement or compact with another state….” (Article I, Section 10) Virginia has entered into a number of agreements with other states that fall under the ambit of this provision. The Atlantic States Marine Fisheries Commission, which sets limits on the catches of certain fish species, is one example. Another, more familiar, example is the Washington Metropolitan Area Transit Authority. But RGGI and TCI have not been approved by Congress, which puzzled me.
It turns out that not all agreements among states constitute an “interstate compact” in the Constitutional sense. The Supreme Court in its first case dealing with interstate compacts (Tennessee v. Virginia, 1895), and confirmed in 1985 in its most recent case on this subject, declared that an agreement among states does not require the consent of Congress if it does not infringe on, or encroach upon, federal supremacy. Continue reading