The combined unfunded liability of the Virginia Retirement System and other state-supported pension plans amounts to $17.6 billion, a report by the legislature's watchdog agency concluded Monday.
That means that contributions by the state and local governments likely will have to increase in the next biennium, said Tracey Smith, an analyst with the Joint Legislative Audit and Review Commission.
The rate of return would have to be 44 percent for contribution rates to remain where they are, she said. The rate of return this year has been 11 percent, which is good, she added.
"This is a big challenge for us," said state Sen. Walter A. Stosch, R-Henrico, an accountant and member of JLARC.
Smith said the VRS is performing better and at a lower cost than most of its peers.
As of Sept. 30, assets totaled $50.8 billion, an increase of $3.9 billion over Sept. 30, 2009, she added.
Smith said pension-reform legislation passed by the General Assembly will help the fund over the long term. State employees hired after July 1 of this year will have to contribute 5 percent to the system. The state and local governments pick up the contributions tab for people hired before then.
The committee also heard a recommendation from Aris Bearse, a project leader for JLARC, that it encourage local school systems to get together with other school systems so they can buy in bulk and get lower costs. But Bearse stopped short of recommending that the assembly mandate cooperative procurement. In some cases, individual school systems can get a cheaper product, he said.
The group procurement could be helpful in purchasing health insurance, IT equipment and fuel, he said.
If local school systems are included in a statewide employee health plan, they could save an estimated $47 million to $66 million annually, Bearse said.
JLARC also produced a report in which it blasted the Virginia Department of Transportation for basing highway funding decisions on political considerations rather than priorities.
"The process is too political and often the 'squeaky wheel' gets more attention," a member of the Commonwealth Transportation Board is quoted as saying. The board member was not named in the report.
"How money is allocated and shifts around beats the heck out of me," JLARC analyst Justin Brown quotes an unnamed VDOT district administrator as saying.
In the report, Brown recommends that the federally funded Metropolitan Planning Organizations be given a larger role in planning for highways and mass transit.
"Minimal MPO role in the state allocation process is a missed opportunity for more informed decisions," Brown said.
But Gregory A. Whirley, the VDOT commissioner, disagreed. He said metropolitan planning commissions are included in planning. And he said VDOT does a good job of setting priorities within limited budget restraints.
twhitley@timesdispatch.com
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