Tuesday, December 21, 2010

The Governor's Amendments

The Governor’s budget amendments constitute the continuation of Virginia’s disinvestment in public education even as revenues are increasing. This is particularly disheartening, as Candidate McDonnell asserted that, “We need to fund education well, while also looking for innovative and creative ways to ensure that our children are getting the very best education in the nation.” The Governor's amendments include $509.9 million more in available resources. This is the additional money the Governor had to work with. Of this, none goes to public education, even though per-pupil state funding for public education has declined by over 14% since the 2008-09 school year. The percentage of the budget devoted to public education has been in steady decline (see below).

K-12 Direct Aid as a Percentage of General Fund Budget

FY 2009 – 34.63%
FY 2010 – 32.26%
FY 2011 – 30.49%
FY 2012 – 29.88%

The General Assembly has failed to adequately fund the Virginia Retirement System. They have provided sufficient funds to meet the VRS Board of Trustee’s certified contribution rate only four times in the last twenty years for the teacher fund and six times in the last twenty years for state employees. Now the Governor wishes to tax state employees and teachers to address a problem they did not create. To address this problem the Governor also diverts funding from schools to the detriment of Virginia’s children, who are the most tragic victims of Virginia’s disinvestment in public education.

Teachers and all local government employees are not given equal treatment as compared to state employees. State employees who would pay the 5% VRS employee contribution will receive a 3% salary increase and are eligible for a 2% bonus. Hence, the first-year impact of the 5% shift is zero. For teachers and all local government employees the 5% shift requires a 3% salary increase from local funds, so the impact on take-home pay is -2%. In addition, while the health insurance costs for state employees will remain the same, they will be going up for many teachers and local government employees. It should be noted that shifting the 5% employee contribution back to the employees does not change the amount of funding going to VRS, it just changes who is paying it.
Once again we see funds provided for state employees, both a salary increase and a bonus. No such funds are provided for teachers and other school board employees. No funds have been provided by the state specifically for teacher salary increases since December 2007. Historically, the state has provided parallel increases for teachers when state employees were provided increases. Why the break with tradition – is this in keeping with the values of Virginians?
The $57.6 million for the 50% of the Local Composite Index hold harmless, $53.2 million of which was redirected to the VRS teacher fund, had been discretionary funding which could have been used for the benefit of instruction. Though this money will still be considered direct aid to public education, it cannot be used for educational purposes. Ninety-seven school divisions will see a change in the discretionary funding available to them. In some cases the decrease in discretionary funding will be substantial and will harm instructional programs. Virginia Beach loses over $7 million, Richmond City loses $5.5 million, and Bedford County loses $1.7 million. The continuing impact of the recession on local property values and resulting real estate revenues will make it difficult for localities to make up for this lost discretionary revenue.
We share a concern that debt service is a rapidly growing general fund obligation. The cost of servicing the state’s increasing debt is taking General Fund dollars from our schools and other core services.
The Governor’s amendments shift costs to localities at a time when they have endured severe cuts in past budgets, and when they are under severe fiscal stress. Those costs include the 3% salary increase and the 2% increase in the VRS rate.
What is the efficacy of funding pay-for-performance pilots when there is no funding for pay?
The defined contribution option for future hires will be harmful to future employees who will see drastically decreased retirement benefits (PwC’s analysis shows that after 30 years of service, the defined contribution plan would have approximately 52 percent of the value of the current defined benefit plan) and it will have a negative impact on the VRS fund as fewer employees will be contributing.

It is important for Virginians to look to what our leaders do rather than what they say as we try to size them up. Public education was not a priority to those who crafted these amendments. These amendments do not reflect the values held by Virginians who place high priority on the quality of public education.