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The Stafford School Board discusses the impact of changes to the Virginia Retirement System on county school employees.
Date published: 5/2/2012
Introducing changes to the state retirement system, Gov. Bob McDonnell said it would be a matter of "basic math." But now that those changes have been unveiled, people with advanced math degrees across Virginia are grappling with the details.
McDonnell wants to get the state and local governments out of obligations to the Virginia Retirement System. Tuesday night, Stafford County's School Board voted to deal with part of the new law, but will tackle the other half of the equation next week.
In theory, the changes should be simple and relatively painless. Stafford County Public Schools now pays 5 percent of each employee's paycheck into the VRS.
Under legislation enacted in the 2012 General Assembly, the employee will pay that 5 percent, and the school division will pad the employee's paycheck to compensate. In practice, the math gets fuzzy.
For starters, the legislation allows the school division to gradually enact the new policy. This year, Stafford County Public Schools could ask each current employee to pay just 1 percent to VRS. And offer a 1 percent raise.
But new employees would have to pay the full 5 percent starting this year. And the school division has to offer the only 1 percent raise given to current employees. The simplest answer would be to go ahead with the 5 percent option for all employees.
It's also the most costly answer, tallying $2.5 million in increased benefits costs
Giving employees a 1 percent raise would cost the division $500,000. "As much as we'd like to do 5 percent now and get it out of the way, I don't know how we can come up with $2.5 million now," Superintendent Randy Bridges said. "It's going to be a struggle to come up with $500,000."
Board members worried that recruiting quality teachers would be tough if new hires had to ante up 5 percent of retirement costs with only a 1 percent pay boost.
WHY IT MATTERS: School divisions can implement the changes at once or in phases of 1 percent each year until 2016. Either way, schools will have to pay more money in benefits. The changes will also tax school divisions' payroll and technology departments. Also, the changes will cost school employees. They wouldn't pay state or federal taxes on the increase in pay, said Patty Sullivan, director of budget and grants for Stafford County Public Schools, but they will have to pay FICA taxes. Stafford schools' finance department estimate that an employee making $50,000 a year would have to pay $2.70 more each month under the 1 percent scenario. That may not seem like too much, but Sullivan said, "The bottom line is: For a lot of our employees, every dollar counts."