Governor's VRS Proposal Could Cost WJCC $4M

By Amber Lester Kennedy Friday, December 23, 2011

Local government leaders are saying Gov. Bob McDonnell’s proposals will pack a major punch to the budget for Williamsburg-James City County Schools.

McDonnell’s proposed biennium budget, released Monday, recommended a total of $2.21 billion in employer contributions to state employee and teacher funds by state and local governments, which will amount to the largest-ever contribution by employers to the Virginia Retirement System (VRS).

The proposal packs a wallop for the localities that finance school divisions, although they won’t know just how hard they’ll be hit until the state provides more detailed numbers in a few weeks. For now, James City County Finance Director John McDonald confirms the increased contributions to VRS will cost more than $4 million.

In his speech Monday, the governor said the increased cost for VRS affects both state and local employer contributions. “Our historic new contribution to VRS therefore puts no mandate on local government, but just continues their fair share of retirement for their teachers,” he said. “Through our new funding, the state is helping localities with their requirement to the greatest extent in history.”

The state contribution for the school division’s operating budget will increase approximately $550,000, McDonald said, but more than half of that sum will come in the form of state sales taxes allocated for education, with the receipts going to localities, rather than the schools.

The additional cost comes just as the school division enters its first budget cycle with no federal stimulus dollars, meaning overall revenue will be decreased by $1.3 million from the current budget. With all of those factors, WJCC Assistant Superintendent for Finance & Operations Scott Burckbuchler estimates the budget gap is approximately $5.5 million.

The governor’s proposal is used as the basis for the Superintendent’s proposed budget. That budget, once approved and adjusted by the School Board, becomes the School Board’s budget and is then presented to its financial partners, the city of Williamsburg and James City County. During that time, the General Assembly is also coming up with its own budgets in response to the governor’s; both the House of Delegates and the Senate of Virginia prepare budgets before approving the final joint version.

“This is just the beginning – General Assembly takes over in January and the budget proposal will change,” McDonald said.

The new funding for VRS satisfies one of the governor’s priorities: reducing the system’s unfunded liability and increasing its long-term security and stability. To balance the budget in 2010, the General Assembly approved a plan to defer payments to VRS, with the intention of paying the borrowed sum back over 10 years. If approved, McDonnell’s plan would fully fund the first two installments of the payback period.

As of June 30, VRS had nearly 340,000 active members and more than 156,000 retirees and beneficiaries. Although school teachers are local employees of local school divisions, they belong to a statewide retirement plan. The Virginia Retirement System sets the contribution rates for the teacher retirement system and local school divisions pay that cost. The current rate is 11.66 percent for teachers.

Last year, WJCC was spared from state funding cuts, and the loss of one-time Federal stimulus funds was softened by the Federal Jobs Fund, which provided an additional $1.8 million in funding. VRS contributions cost the division $7.6 million in fiscal year 2012.