Forced by state lawmakers to delay payments into the Virginia Retirement System during the financial crisis two years ago, local school officials now worry they will have to cut and strain to pay off the bill that is coming due in 2013. Local school systems, whose teachers and employees rely on the state pension system to fund their retirements, now owe millions of dollars to the pension fund. And even though Gov. Bob McDonnell has said he’d use part of a state budget surplus to shore up the fund, and is expected to announce additional surplus funds this week, local officials say they still expect the payments to dent their budgets.
“Because of this decision [to delay pension payments], and because you have to make up for it later, it’s going to be an incredible whammy,” said Neal Menkes of the Virginia Municipal League, which represents local governments.
Fairfax County Public Schools, which has 19,640 employees in the pension system — more than any other school system — set aside $60.6 million to repay the missed payments, but that money won’t be nearly enough, budget director Kristen Michael said.
“We are concerned that it could be substantial,” she said.
In October the school board calculated that it could end up paying $25 million every year for 10 years to make up for the missed payments.
“One of the things that was difficult when the General Assembly artificially lowered the rate, it did provide financial relief during tough budget times, but it really has long-term negative consequences. And while paying a lower rate in this economic crisis is helpful, the long-term impact of that is going to be a challenge,” Michael said.
Arlington, Alexandria and Prince William also set aside funds to repay the pension fund, but don’t know if it will be enough to cover the expenses because the state hasn’t revealed how much each locality owes.
Arlington County schools wanted to pay the bill early to avoid paying interest but were told by the state that they could not, County Board Member Mary Hynes said.
Residents watching local government expenses are worried for the future.
“I’ll bet you 10 grand the county raises taxes,” said Bill Peabody, member of Fairfax County Taxpayers Alliance, who said he was also worried about the impact of federal cuts to defense spending on the region.
