The Virginian-Pilot
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Local cities and school divisions are facing a choice they’ve never had before: Should new employees contribute to their own pension plans?
With a June 30 deadline looming, some South Hampton Roads cities will answer that question today.
Since the early 1980s, most cities and schools have paid their employees’ 5 percent salary contribution to the Virginia Retirement System. The state picks up the rest so city and school workers pay nothing toward their pension benefits.
A state law change this year gave municipalities the option to make new hires pay. Existing employees would not be affected.
Chesapeake and Portsmouth city councils are scheduled to vote today. The Norfolk City Council will talk about what to do at a work session. Suffolk has decided to keep paying the contribution, and Virginia Beach has decided to make new city employees pay, which is expected to save the city $270,000 next fiscal year.
A warning from City Manager Jim Spore last week that doing so could hinder the city’s recruiting competitiveness hasn’t swayed Virginia Beach council members.
“Honestly, I’m more worried that we’re fiscally responsible and paying our bills,” Councilman Glenn Davis said.
In Virginia Beach, paying the 5 percent contribution for the 5,914 city employees in the state pension system costs the city about $15 million a year.
The Beach School Board is hoping to continue paying new employees’ retirement contributions, a move that would cost an estimated $565,000 based on the hiring of 250 to 275 new employees next fiscal year, Chief Financial Officer Farrell Hanzaker said. The board is scheduled to vote tonight.
“It’s taking care of your employees and maintaining a competitive advantage,” said Bill Brunke, School Board vice chairman.
Norfolk schools also are planning to pick up the cost, City Manager Regina V.K. Williams said. Suffolk schools plan to do the same. Some Portsmouth School Board members have said they support doing that, as well. They’ll vote Thursday.
Several Portsmouth council members said they would consider supporting or already support passing on the cost to new employees. Councilwoman Elizabeth Psimas viewed it as inevitable.
“We all realize this is the next step in municipal employment, but nobody wants to do this first,” she said.
City Manager Kenneth Chandler, who is recommending the move, said he believed a majority of South Hampton Roads cities will make the change. It would have saved Portsmouth about $240,000 this past year, he said.
Chesapeake Mayor Alan Krasnoff said he was waiting to get more information and talk to fellow council members before taking a position.
Pilot writers Dave Forster, Hattie Brown Garrow and Harry Minium contributed to this report.
Aaron Applegate, (757) 222-5122, aaron.applegate@pilotonline.com
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Here's how it will work
1) The state government and some local governments will make new employees pay 5% of their salary toward VRS, saving lots of money (on paper). Yay! However...
2) Job applicants selected for hire (aware that 5% of their salaries will be automatically deducted from their paychecks), will negotiate 5% higher starting salaries to make up the difference.
3) The government will pay Social Security taxes and the VRS employer contribution on the additional compensation, which will end up costing the government (and taxpayers) more than it would have if they had just continued paying the 5% VRS contribution.
If Only It Were True
If only it were true that passing the retirement contribution on to new hires would help the cities become more finacially secure. The truth is that the more they get the more they spend. Does anyone really believe that this move will have a positive impact on any of the cities financial situation?
Times Have Changed
With the possible exception of fire, police, and teachers; the time for pensions based on 25 or 30 years of service for City employees has come and gone. First, Cities are saying that they no longer promise job security. This is unacceptable to the concept of pensions. Second, most young workers do not believe in such long term jobs. It's time for Cities to give employees a matching 401 K starting after their probationary period.
You pay for what you get
Poorly paid teachers: Poorly prepared students
Poorly paid health inspectors: Dirty Restaurants, Dirty Grocery stores
Poorly paid cops: More crime, unsolved investigations
Poorly paid civil engineers: Bad roads
Poorly paid firefighters: increase in accident fatalities
Poorly paid building inspectors: more RG Moore shanties
I guess the City of Norfolk
I guess the City of Norfolk has to find a way to replace all the money it lost planting 100s of new trees and bailing out Afram Fest.
Sometime change is necessary
Back in the 70's Va. Beach employees paid into their retiremnet plan. Then due to hard times no raises were granted for a couple of years. Then city manager Hanbury, instead of a raise, had city pay the employee share of retirement. Over time the city employees began to get raises and then now everyone is faced with hard times money wise. The city employee will benefit in the end when they retire by receiving their retiremnet. No one is losing a job, at this point, but in the future some may lose their job if something is not done. I would like for evertone to recieves a raise but right now it is just not possible.
Two things strike me from a recent statment in the Pilot,
1. Chief Jacocks stated he will receive almost the same amount of retirement as he now makes as Chief. Good for him but current city employees don't seem to see that as a retiremnet benefit.
2. I do not know Mr. Bailey but from his many posts I assume (yes I know what can be said about assume). But I ASSUME he is connected with a union. This is not to say it's good or bad, but a union cannot exist without a controversy so union peolpe must keep a controversy going to keep the rank and file paying those dues.
How is the Chief doing it?
I'd like to know how Chief Jacocks will be getting almost the same retirement that he currently gets in salary. To my knowledge, that doesn't fit with the formula that the Virginia Retirement System uses to determine the amount of the monthly retirement check. Maybe he's "netting" his salary check after contributions to IRA's, deferred comp, etc.
"Submitted by 23322va on
"Submitted by 23322va on Tue, 06/22/2010 at 8:53 am. Wait til he retires from his security guard job, and gets Social Security as if he was contributing for 30 years."
Under VRS he HAS been contributing for 30 years...
Get off it already!
Think: Get What You Pay For
The local employees have not had a pay raise in three years. Now you want to cut their pay by 5%. As I see it, you are already ahead of the employees. I'm not opposed to the employees paying for a retitrement but they deserve a pay raise if your going to make them pay. Otherwise, I see your service getting cut by employees who do not feel valued, are not making ends meet at home and frankly who don't care. Just remember, you get what you pay for. Cuts are not just going to happen and the employees are just going to stand by and do nothing.
I wish you all well but think before you act.
Fortunately...
Most of our public servants are professionals who will not react in the manner you describe as being a possibility. They continue to work hard and do good for the public even when they are demonized, belittled, or told they are of little value-in either direct or indirect manners. When you take a 20 year VB employee for example: that person has not had a raise for 5 going on 6 of his/her years (1 in 4) due to the last several years and several years in the early 90's; during the "good years" raises ranged from 2.5% to 4%-combined merit and cost of living (many times not even keeping up with inflation); has seen career progression paths evaporate due to the elimination of grades; and has had benefits cut in many areas. Yet citizens rate services highly in the city. Going forward however, this is no way to attract the best applicants and retain the highest performers. And with all the boomer retirements coming up private and public entities will start fighting for experienced people and that is when the piper will be paid.