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2000 -- -- -- may but the yeah the broken state budgets are running huge deficits and spending continues to spiral out of control.
One reason behind states going broke -- public look up pension obligations.
The governor Bob McDonnell hopes to change back in his state he joins us now from Richmond got a what a pleasure thanks for joining us -- Like his third.
You are demanding that public sector what is contribute 5%.
Of that pay towards the pension fund.
I know that's that's -- a way of trying to fix this problem.
Does that applied to existing.
Yes it does we change the law last year effective July 1 of this year.
So that all new workers would contribute 5%.
This change I'm recommending now goes back it applies to all workers are not offset that with a 3% increase.
In -- so the net increase to the workers 2%.
And the reason we're doing this as we've got an eighteen billion dollar unfunded liability.
It would take a 44% stock market returned.
But just to keep the same contribution right keep the status quo and it's unsustainable so I'm not gonna pass this problem to another governor try to fix it this year.
So you are proposing to do what other states other governors have not been able to do namely.
Make a pension contribution that you've got to do it.
And what's the reaction of the unions that -- so.
Well I met with all the employee groups on Thursday before I made the announcement explained it to -- And told him look out -- it to your method member myself it affects me and my family but I don't see another way to assure solvency of this system.
When people reach retirement age and I'm not gonna allow the system to stay.
Stay broken -- one of only four states in the country that requires zero contribution none.
From the employee.
And private sector -- course private sector pension plans almost all record sum pension their contribution so.
We're just getting up to speed with what most people are doing I think it's fiscally responsible and so far the response has not been not you know supportive but it's been rather muted because they understand we're in trouble.
If you get this through this mandatory 5% contribution to the pension fund.
Will it fix you'll pension problem over the long hole.
No but it'll make substantial process progress.
Towards doing that -- contribute about 311 million dollars of new money a year.
And then it heading out stored on what our road return on investment rate is will make a lot of progress but it it might get -- the 75 or 80%.
Funded over the next decade or so but but not not a 100% so we still have work to do.
Even with that but a -- of reversals the decline -- gets us on the roads toward solvency.
Now we're looking at the year 2011.
-- with calling of the year of the broken states.
Because as I look at the Illinois in the California's of this world that they have massive deficits and they do not have a plan like -- to deal with it.
How we within the bounds of possibility via that we will see a real crunch.
In some other major states in the year 2000 and up.
Well I think it's possible which is why were taken a leader in Virginia to.
Make fiscally responsible decision store we did at this past year we cut four point two billion dollars out of our.
Out of our budget in January as opposed to raising taxes.
And now we have a four 400 million dollar surplus at the end of the last fiscal years so we know that this this these tough decisions will -- -- down the road two.
But -- surplus of those and two solvency so.
We're already doing that now where I've taken that to the to the pension system I think other states and talk and it.
Other governors almost all of them have the same kind of problem we do California New York Illinois other set.
Much more dramatic problems and now we do Chris Christie's take it on the problem in the New York in -- New Jersey in this.
Having some success so we've we've all got to be able to look our workers -- the -- -- say you're doing good work where like what you're doing but you're sure that your families are gonna have.
-- of the up -- at the end of the rainbow we've got to make the sacrifices down I think people understand that it's common sense and it's the truth.
If you do have one advantage -- -- eagerness of long term as governor in Virginia so you're not looking for reelection I think that's advised.
A half a congratulations on that advantage and for tackling the problem.
Governor Bob McDonald Republican Virginia thanks for joining us so much appreciated Merry Christmas -- all.
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