Lawmakers Mull Pension Funding
After Failed Bond Measure
The Associated Press,
Last weekend's defeat of Gov.
Joe Manchin's $5.5 billion pension bond proposal will force lawmakers on to
''Plan B,'' House Finance Chairman Harold Michael said Monday. The only
problem, the Hardy County Democrat said, is that ''we don't yet know what Plan B
is.''
Saturday's special election saw
voters reject, by 54 percent to 46 percent, Manchin's plan to fund the ailing
pension programs for teachers, judges and troopers through the sale of bonds.
''The real difficulty is
going to become, as we move forward, that we are going to have to pay the
increased costs,'' said House Speaker Bob Kiss, D-Raleigh. In
1994 Kiss was one of the primary architects of a 40-year plan to pay off the
pension liabilities. Under that schedule annual payments increasingly draw from
The funding shortfall for
the teachers' program, which has 45,363 enrollees, is one of the worst among
public plans nationwide. Responsible for about $5 billion of
Manchin acknowledged the will
of the voters in deciding against his proposal, but emphasized that the
liability will continue to exist despite the bond measure's failure. ''This
doesn't go away, this still has to be paid,'' Manchin said. ''You're still
paying for this over next 30 years.'' Manchin
said he will focus on making state government ''as efficient and lean as it can
be'' in order to be more competitive.
Senate Minority Leader Vic
Sprouse said voters showed their skepticism about Manchin's plan to invest bond
proceeds. ''If it was such a good
idea, why weren't we going out to get $12 billion or $15 billion?'' said
Sprouse, R-Kanawha. Sprouse, who
voted during the legislative session to put the bond measure on the ballot, said
he voted against it Saturday and supports the original payment plan. Sprouse
said he is confident the state can handle the escalating payments.
''The $724 million will be the
final year's payment in 2034,'' he said. ''That will actually be a smaller
percentage of the $350 million we pay right now since our budget should
naturally increase over that time.''
Department of Revenue Director
of Fiscal Policy Mark Muchow agreed that the general revenue budget is likely to
increase. But controlling for temporary revenue enhancements like the cigarette
tax, the tobacco settlement funds and video lottery expansion, the state's
annual growth between 1998 and 2004 was 2.3 percent. The
yearly increase needed to fund the pension oblivion, meanwhile is between 3
percent and 3.2 percent, Muchow said. ''Over
a longer period of time that 1 percentage point difference makes up a lot of
money,'' Muchow said.
Sen. Steve Harrison, one
of the few vocal opponents to the bond measure during the session, said he is
pleased with the result of the election. ''I
equated this as someone coming into a bank to borrow a large amount of money to
invest in the stock market because they would think they could get a greater
rate of return than the rate of the loan,'' said Harrison, R-Kanawha and a
banker. ''There's a lot that can go wrong there.''
''Reducing the sales tax
would benefit
But Michael, the House finance
chairman, said cutting taxes would leave a large short-term gap, even in the
event that the economy improves in the long run. ''I
can't believe the growth is going to be substantial enough to handle that. My
sense is we will have to either make some substantial program cuts, or talk
about is raising taxes,'' he said. ''I've always been a proponent of that's a
last-resort type of thing.'' And not
everyone is ruling out a new pension bond proposal in the future.
''Do we have to find
alternative methods? Absolutely, yes,'' said House Minority Leader Charles
Trump, R-Morgan. ''But to pronounce it dead in any incarnation in the future, I
think that's premature.''