Henrico expects $10.7 million less in state aid

Henrico County expects to receive $10.7 million less in state aid this year under budget cuts proposed by Gov. Timothy M. Kaine, but the county is even more worried about how the state will affect next year's budget.

Finance Director John A. Vithoulkas estimated last night that sales-tax revenue for education alone will drop by $4.9 million in Henrico because of state cuts Kaine proposed in September to fill a projected $1.4 billion shortfall in the budget that ends June 30.

Vithoulkas and other county officials also warned members of Henrico's General Assembly delegation that the financial condition could get worse if the legislature and new governor raise rates for teacher retirement plans. The county also faces increases in retirement contributions for government employees based on rates that will be recommended this month by the Virginia Retirement System.

"The rate increases we have heard mentioned would have a significant impact on local budgets across the commonwealth," Vithoulkas told legislators at the county's annual legislative dinner last night.

Henrico officials said they face unprecedented financial challenges because of the recession, which has reduced real estate values in Henrico by an estimated 6.5 percent, or more than $20 million in local tax revenue.

They warned against pending state actions that likely will increase pressure on local governments, such as a proposal to shift responsibility for buying medications for mentally ill residents from the state to localities.

Legislators acknowledged that upcoming deliberations on a two-year budget for 2010-2012 will be ugly, especially in state funding for public education. "It will get worse," said Sen. John Watkins, R-Powhatan.

However, some legislators questioned whether Henrico would be affected by proposed rate increases for state employees and teachers covered by the state retirement system. "It's not required for your teacher retirement, it's not required for your local government retirement," said Sen. Walter A. Stosch, R-Henrico, an accountant.

Henrico officials say the state underfunded the retirement plans when times were good and fear that benefits to retirees will suffer.

Stosch disagreed. "No one's retirement is in jeopardy," he said.

Contact Michael Martz at (804) 649-6964 or .