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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.
"We don't want to make our situation any less appealing to potential employees," Patricia Healy said. "We all know new teachers and when they come in here, they can hardly eat with what we pay them, they're renting an apartment with other people and there's nothing left. I'm concerned that 5 percent is a lot of money to people who are just starting out."
However, if the school division pays new employees 5 percent more, then those employees reap better benefits--including retirement and life insurance--than current employees.
"They're going to have much richer benefits than existing employees," said Wayne Carruthers, assistant superintendent for finance. "They're going to come in and be treated better than the existing employees and that's a heck of a message to send."
School Board members seemed poised Tuesday night to solve the problem by offering a stipend--enough money to compensate for the additional VRS costs without increasing base pay. But first, they wanted to know how much this option would cost. That's another number that's not easy to come by, Sullivan said. But she said that board members could have the information by next week's meeting.
The board voted to start current employees with the 1 percent option. Board members hope to make a decision about new hires Tuesday. Time is running out for that decision; the school division typically sends out new contracts in mid-May.
Amy Flowers Umble: 540/735-1973
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."