Category: Government workers and pensions
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Thinking Sensibly about Virginia State Police Salaries
Virginia State Police troopers would receive a $7,000 pay raise — a 22.3% boost for starting salaries — under a budget proposal that also would provide a 3% pay raise for all state employees, reports the Richmond Times-Dispatch. The dramatic pay hike comes in response to deteriorating morale and a surge in state trooper departures. Is…
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Budget Shortfalls Will Dog States for Decades
Over the next 44 years, state and local governments face chronic budget shortfalls driven by Medicaid spending, government employee health care costs, and underfunded pensions, warns the U.S. Government Accountability Office (GAO) in a report issued earlier this month. “Absent any intervention or policy changes, state and local governments are facing, and will continue to face,…
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Tackling Virginia’s Hidden Budget Deficit
Restoring a pay raise for state employees outranks pension reform in the recommendations of the Commission on Employee Retirement Security and Pension reform. The legislative commission voted yesterday to prioritize a 3% pay raise for state employees that Governor Terry McAuliffe has proposed putting on hold in the face of $1.5 billion revenue shortfall. House Speaker…
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Paying University Executives for Performance
The Richmond Times-Dispatch published its annual ranking of highest-paid state employees Sunday and, no surprise, university presidents and Virginia Retirement System (VRS) executives dominate the list. I’m of two minds. On the one hand, if you want the best people running your universities and your pension funds, you have to pay them competitive salaries. Basically, you…
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Quantitative Squeezing
It’s nice to see mainstream media highlighting an issue that I’ve been hammering here at Bacon’s Rebellion for a couple of years now. A front-page Wall Street Journal article discusses how the zero-interest rate policies of central banks around the world are crippling returns on pension portfolios, making it difficult for nations and municipalities to meet…
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$6 Million Bonus for VRS Staff — Justified or Not?
by James A. Bacon The Virginia Retirement System (VRS) has awarded $6 million in incentive pay to its internal investment team, raising the issue of whether the Commonwealth of Virginia is creating a caste system of “haves” and “have nots” in its workforce. The VRS Board of Trustees approved the incentives yesterday, reports the Richmond Times-Dispatch,…
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Long-Term VRS Performance Not Looking So Good
by James A. Bacon Governor Terry McAuliffe announced Thursday that Virginia faces a budget shortfall of roughly $1.5 billion in the current biennial budget. That’s a big short-term problem, one of the worst in recent Virginia history — and possibly the worst ever during a period of economic expansion. However, the long-term picture doesn’t look any better. The…
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Stick It to the Hedge Fund Managers!
by James A. Bacon One of the voices urging reform of the Virginia Retirement System (VRS) is a semi-retired University of Virginia economics professor, Edwin T. Burton III, who served 18 years on the board. He argues that the VRS pays too much in management fees to outside investment firms that pursue labor-intensive strategies and should rely on low-overhead…
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Digging into Rate-of-Return Assumptions
by James A. Bacon House Speaker William J. Howell is rightfully concerned about the long-term health of the Virginia Retirement System. The pension system’s own actuary estimated a year ago that the $68 billion retirement system has unfunded liabilities of $22.6 billion. On Sunday, the Richmond Times-Dispatch’s Michael Martz described the debate over restructuring the VRS from a…
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Virginia Retirement System — Trouble Ahead
Last week as I was watching the business channel, I was very interested in the comments of AIG’s head of investments about the effects of low interest rates on his firm. For those involved in life insurance and other long-term products, today’s historically low interest rates pose a significant problem. With negative rates on investment-grade…
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Petersburg’s Other Fiasco
by James A. Bacon Poor Petersburg. The economically depressed Southside city of 32,000 serves as a vivid warning of just about everything that can go wrong for a local government in Virginia. Not only is the city running a massive General Fund budget deficit, it is falling millions of dollars behind in the collection of revenues…
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When Balanced Budgets Aren’t Really Balanced
by James A. Bacon The politics of fiscal implosion are ugly. Just look at what’s going on in Petersburg and Richmond. Confronted with a massive budget deficit last year in contravention of the state constitution and the prospect of a deficit in the year ahead, Petersburg City Council bravely agreed to cut the compensation of…
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The Seven Percent Assumption
by James A. Bacon The Virginia Retirement System earned an estimated 1.5% return on its $68 billion portfolio of investments last year, spurring discussion over whether state and local governments are contributing enough to maintain the long-term financial integrity of the retirement plan for Virginia school teachers and government employees. For purposes of calculating the system’s…
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Detroit on the Appomattox
by James A. Bacon For its 2016 fiscal year, which closed June 30, the Petersburg City Council enacted a $75 million General Fund budget. Somehow, the city managed to close the year with a $17 million deficit. Last week, council members knew the situation was dire. Staring at what they thought was a measly, $7.5 million deficit, they…
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Chicago on the James?
by James A. Bacon As if the City of Richmond didn’t have enough problems, now tensions are erupting between the executive director, board of trustees, and members of the city pension fund’s investment advisory committee. Based on the account by Michael Martz at the Richmond Times-Dispatch, the rancorous relations between pension director Leo F. Griffin…