The state’s Rainy Day Fund is now over $1 billion for the first time. “We’re coming up on almost 30 years of having a Rainy Day Fund. This is the first time it’s ever reached a billion dollars,” said Revenue Secretary Dave Hardy. “That’s good news.” By those measurements, West Virginia is in good standing.
The state’s retirement programs for teachers, public employees, State Police, judges and Natural Resource Police officers are remarkably healthy now, but it was not always that way.
The fund’s health is directly related to the state law requiring half of any budget surplus each year be deposited into it. Without that, the money would have inevitably been spent rather than saved for a rainy day.
For example, the Teachers’ Retirement System (TRS), by far the largest retirement program, is 75.75 percent funded. Back in 1994, it was less than ten percent funded, woefully short of the assets needed to pay future teacher retirees.
At that time, Governor Gaston Caperton and legislative leaders made the difficult but ultimately wise decision to put additional money into the retirement system every year to catch up. Subsequent governors and lawmakers of both parties have remained committed to the fiscal discipline.
This budget year, the state paid $480 million into the retirement system. That is a huge number, equal to about ten percent of the entire General Revenue budget, but it keeps the retirement programs healthy.
The second largest retirement program, the Public Employee Retirement System, is in even better shape. It is 97 percent funded. The retirement programs for State Police, judges and Natural Resource Officers are also flush.
This financial security is not only a positive for the retirees, but it also boosts the state’s bond ratings with financial service companies. The current rating is AA Stable. Hardy said West Virginia is in much better shape than states like Illinois and New Jersey. “They have completely ignored this obligation,” he said.
“The foundation of West Virginia’s financial house is very strong,” Hardy said, “and it has taken a long time to build that foundation. Think of all the governors and legislators, including this governor, that have committed to this fund.”
The good bond rating means West Virginia saves money by paying a lower interest rate when it sells bonds to finance road projects.
Hardy said the savings discipline by the state over the last three decades provides stability for teachers and state workers for their later years. “It means they have benefits they can count on when they finish their public service.”
West Virginia is not a wealthy state, and slow economic growth, especially during down times in energy production, means it is often a challenge to pay teachers and state workers competitive salaries.
However, in fairness, state leaders have remained true to their commitment to save where they can and ensure that retirement programs are healthy and fully funded. Those are significant benefits for the state and its employees.
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