Virginia Shows the Way in Taking on the Pensions Crisis
As the federal government continues to expand at an ever-growing pace, the Old Dominion is doing things differently. As The Richmond Times-Dispatch explains, Governor Bob McDonnell is trying to get the state to live within its means (and those of taxpayers), focusing on a key issue.
The most significant piece of McDonnell’s budget — though not widely noted — was the decision to trim the pension costs of future state employees. By shifting the model for those hired after July 1 to one that more closely resembles private-sector retirement plans, McDonnell took an enormous step in ensuring the state’s solvency — which should soon emerge as a distinct competitive advantage for Virginia’s economic development — while keeping faith with past promises made to current state workers.
This essential reform would have been impossible if Virginia politics were dominated by the public-sector unions that seem determined to drive California and New York, to name the most prominent examples, into bankruptcy, crippling tax increases — or perhaps both. McDonnell has set an important precedent here.
Indeed, as the Cato Institute’s Chris Edwards notes, Virginia, by barring collective bargaining by public employees, should serve as a model for other states. Almost as important is to depoliticize pension fund investment decisions, which have led pension funds to under-perform.