Virginia would reduce the amount of money it contributes to the retirement plans of state employees under a new two-year budget proposal that Gov. Timothy M. Kaine will unveil today.
The proposal is one of a series of cost-saving measures, including layoffs and proposals to increase state revenue, that Kaine is suggesting to close an estimated $3.5 billion shortfall for 2010-2012.
Kaine presents his plan to a joint meeting of the legislature's money committees this morning.
Because of the recession, which has depressed tax revenues, Kaine has been dealing with unprecedented budget shortfalls and already has reduced budgets by $7 billion in the past 2½ years.
Currently the state, as an employer, contributes 6.26 percent of each state worker's annual salary into the Virginia Retirement System, which has 600,000 members. But the state also pays the employee portion of the plan, contributing an additional 5 percent of a worker's annual salary.
Kaine's proposal would reduce the 5 percent employee contribution to 4 percent, beginning July 1, the start of the 2011 fiscal year. The following year, the contribution would be reduced an additional 1 percent.
Exact figures on the cost savings were unavailable. Also unclear was whether employees would be asked to make up the difference from the loss of the state funding.
Currently, state workers in Maryland pay 5 percent of their salary to their pension plans; North Carolina workers pay 6 percent. A 2008 study by the Joint Legislative Audit and Review Commission, the state legislature's watchdog agency, found that only four other states did not require state workers to contribute to their government pension plans.
Details on the budget proposal came as the administration announced that it had collected $103 million -- more than twice as much as estimated -- from its back-tax amnesty program.
Early yesterday, Kaine was asked whether his proposal would include spending cuts, layoffs or revenue increases.
"All of the above," he said.
Kaine has indicated that his new budget will mean state job losses and the rollback of certain tax breaks, including the "dealer discount," whereby businesses are allowed to keep a portion of the sales tax they collect.
Yesterday Kaine briefed incoming Gov. Bob McDonnell on his budget proposal. A McDonnell spokesman declined to discuss the substance of the conversation.
McDonnell and the General Assembly can change whatever Kaine proposes today. The legislature convenes in Richmond on Jan. 13 for a 60-day session. McDonnell, who takes office Jan. 16, and fellow Republicans have told Kaine they will not go along with tax increases.
Contact Jim Nolan at (804) 649-6061 or jnolan@timesdispatch.com.
Contact Tyler Whitley at (804) 649-6780 or twhitley@timesdispatch.com.
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