Pension bill would fall on localities

Local governments would pay the bill, one way or another, for a 2 percentage-point increase in teacher pensions proposed by Gov. Bob McDonnell.

McDonnell's proposal — aimed at boosting contributions to the state retirement system to compensate for payments the state and local school systems didn't make a year ago — would take almost $54 million budgeted to help localities that would lose from changes in the state funding formula for public education.

The Richmond region would lose more than $9.1 million under the proposal, including $5.5 million that had been budgeted for the city in the next fiscal year, $1.7 million for Chesterfield County, $682,415 for Henrico County and $365,475 for Hanover County.

At the same time, local governments that saved money when the state slashed payments to teacher retirement plans last year would have to come up with their share of the extra 2 percent in pension contributions proposed by McDonnell.

"The locals are going to have to put in a lot more than the $54 million," said James J. Regimbal Jr., a budget consultant to local governments.

Local leaders in the Richmond region asked their state legislators Tuesday to oppose the use of the so-called "hold harmless" money for education to help pay the state's share of teacher pension contributions.

Richmond City Council President Kathy C. Graziano made the request on behalf of the Richmond Regional Planning District Commission as part of the legislative agenda it presented at the Greater Richmond Convention Center.

The city is one of 97 localities that would lose state funding under changes in the composite index that benefited other localities, especially in Northern Virginia, that traditionally have gotten smaller pieces of the state pie for schools.

McDonnell and the General Assembly cushioned the blow for affected localities by budgeting money to hold them harmless from the change for two years. The measure means $11 million for Richmond this year, and additional $5.5 million in the fiscal year that will begin July 1.

State officials say the money is discretionary, especially in the second year. "It's very uncommon for the General Assembly to provide a hold harmless for a second year," said Daniel S. Timberlake, director of the Department of Planning and Budget. "It's usually only one year."

But local officials say they're upset that McDonnell wants to take the money to pay the state share of increased teacher pension contributions.

"We do have a problem with using money which is designed to be used in classrooms and using that money to pay the state's share of teacher retirement," said Mary Jo Fields, research director at the Virginia Municipal League.

Last year, the governor and the legislature deferred payment of more than $620 million into plans for state employee and teachers to balance the $70 billion biennial budget. McDonnell now calls that decision a mistake because the state and teacher pension plans are not funded as well as he thought.

As a result, the governor has proposed to invest $311 million in the state and teacher plans, including more than $100 million from local governments.

The local contribution includes money for teachers and other school staff beyond the minimum positions required under the state Standards of Quality.

Local governments would have the option of making their employees, including teachers, pay up to 5 percent of salary toward their pensions. But they would have to raise salaries 3 percent and pay additional payroll taxes to do so.

Legislators were rankled that few school systems took the opportunity to make newly hired teachers pay their share of the pension cost under a law that took effect last year.

But Robley S. Jones, lobbyist for the Virginia Education Association, said the blame lies with the legislature for not funding the rates recommended by VRS in 16 of the last 20 years.

"Instead, we're going to ask state employees, local employees, and schoolchildren to pay for it," Jones said.

mmartz@timesdispatch.com

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