Thursday, March 22, 2012


We are very pleased to report that the Senate Finance Committee met today and unanimously reported out its versions of the both the amendments to the 2010-2012 biennial budget, SB 1300, and the 2012-2014 budget, SB 1301. With a few exceptions, these budgets are identical to Senate Bills 29 and 30 previously reported by the Committee, but which died on the Senate floor. Of particular interest to school boards is that the Committee adopted amendments to its previously adopted SB 30 that would increase funds going to K-12 by approximately $55 million. Because the budget bills received a unanimous vote of the Committee, versus the 9-6 party line vote the first time around, it is reasonable to assume that the full Senate will vote in favor of the bills and that they will be sent to House, which will reject the bills so that they can go into conference. The General Assembly is scheduled to meet in special session again next Monday, March 26, and these votes by the Senate and the House could take place then. If that is the case, it is entirely reasonable to assume that we will have a state budget by the time of the veto session, which will take place on April 18.

Friday, March 16, 2012


VSBA and VASS have been receiving a number of questions regarding the VRS legislation adopted by the General Assembly last Saturday.  While the information below may not answer all of your questions, we hope that it will be helpful to you.

Q:  What is the employer contribution rate and how was it calculated?
A:  The employer contribution rate for the fiscal years beginning July 1, 2012 and 2013 will be 11.66%.  The VRS board set an employer contribution rate of 16.77%.  The conference substitute for SB 498 provides that school boards only have to pay 69.53% of the VRS board-established rate, or 11.66%, for the fiscal years beginning on July 1 of 2012 and 2013.  Here is a link to the entire bill:

Q:  Is there an employee contribution rate in addition to the employer rate of 11.66%?
A:  Yes, there is an employee contribution rate of 5%.  However, there are discussions about increasing this rate to 6%.

Q:  Must school boards require their employees to pay the 5% employee contribution rate?
A:  Yes, school boards are required by SB 497 to make their employees pay the 5% employee contribution, although the bill gives school boards the option of phasing-in this requirement over a five year period with at least 1% being paid by the employees each year.  The requirement for employees to pay the employee contribution becomes effective on July 1, 2012, for all new and existing employees.

Q:  Must the school board provide an increase in compensation to employees to offset the employee contribution to VRS?
A:  Yes, for certain employees.  The school board must increase the creditable compensation for persons employed by the school board as of June 30, 2012, for whom the school board had been paying the employee contribution. The increase in creditable compensation must equal the amount of the contribution the employees are required to pay VRS.  For example, if the school board had been picking up the employee contribution for all persons employed as of June 30, 2012, and the school board elects to require those employees to pick up the entire 5% employee contribution effective July 1, 2012, the school board must increase the creditable compensation of those employees by 5%.  If the school board elects to phase-in the requirement on those employees, the school board must give those employees an increase in creditable compensation equal to the phase-in amount.

Q:  What is "creditable compensation?" 
A:  In the last few years VRS has interpreted creditable compensation to be salary and payments to employees treated by the school board as part of the contracted salary.  For example, if the employee is given a car allowance and the employment agreement with the employee specifies that the allowance will be considered salary for IRS and VRS purposes (e.g. reported as income on the employee's W-2), VRS has been willing to treat the allowance as creditable compensation.  It would be wise to check the VRS Employer's Manual regarding what can and cannot be counted towards creditable compensation and to get approval from VRS if you are contemplating matching the employee contribution with anything other than an increase in salary.  (Please recall that the law was recently changed to make employer potentially liable to VRS for incorrect retirement payments based on the erroneous reporting of creditable compensation by employers.)  Also, please remember that the actual costs to the school board of increasing creditable compensation/salary will be greater than 5% because of the additional fixed costs, e.g. FICA and increased employer contributions.

Q:  Is the school board required to give a salary increase to employees who were paying the member contribution before June 30, 2012, or who are hired (or rehired) on and after July 1, 2012. 
A:  No, it is not required, although a school board may elect to do so.  Obviously, if salaries are not adjusted for new employees, you may end up with a two-tiered salary schedule which may cause practical, but not legal, problems.

Q:  Did the VRS bills approved by the General Assembly make other changes that are not discussed above or in the previous Alert?
A:  Yes, the bills changed certain benefits, e.g. COLA increases, for certain employees and they mandate that employees hired on and after January 1, 2014, who are not members of the current defined benefit plan must belong to a "hybrid" plan.  Because these changes do not directly effect the budgeting process, we have elected not to address them in this Alert. If you would like more information on the changes in benefits, we encourage you to read the full text of SB 498 as passed by the General Assembly, which can be accessed through the link set forth above.

Q:  Are Senate Bills 497 and 498 as adopted by the General Assembly on March 10 the final word on the changes to VRS?
A:  Probably not.  It is anticipated that the Governor will present amendments to the bills to be considered by the General Assembly at the reconvened session scheduled for April 18.  VSBA and VASS will be encouraging the Governor to send down amendments to make both the member contribution and the increased creditable compensation requirements optional with school boards.  In addition, the budget for the 2012-2014 biennium has not been adopted.  That budget may very well address some issues relating to VRS.  In this regard, it is important to remember that the budget has the force and effect of law, is effective immediately upon being signed by the Governor, and takes precedence over any inconsistent provisions in the Code of Virginia.  The General Assembly will hold a special session to deal with the budget.  The General Assembly is scheduled to convene for that special session on March 21.  It goes without saying that each and every school board member and superintendent should encourage their Delegates and Senators to pass a budget as quickly as possible to remove the current uncertainty hanging over the local budgetary process.

Saturday, March 10, 2012

Sine Die

As we sit here on the last day of the GA, otherwise known as Sine Die, we are awaiting word on several bills in conference.  We take comfort in the fact that the GA  adjourns today, at least this regular session.  A special session will be called to deal with the budget, in addition to the normal veto session.  We will not be so bold as to predict which month, much less which which week or day, the GA will adopt a budget.  The "pretend" budget conferees are meeting this morning in hopes that their work will be expenditure when the Senate finally adopts its version of the budget.  Stay tuned.
One of the bills in conference is SD 598, which deals with the funding of virtual school program funding.  The VSBA was successful in having the bill amended to give school boards control over virtual school programs.  The private vendors want what they term as "choice."  Under their proposal, students could elect to attend any virtual school program in the state regardless whether the local school board had its own program and the state and local funds would follow the student.  There is no middle ground on which VSBA and the vendors can agree so we anticipate the bill to die this morning.  This issue will not go away and legislators have told us to expect to work on it during the off season. 
We will have more to report over the next couple of days.

Thursday, March 1, 2012

Budget Alert!

Another House budget was introduced this afternoon. This will give the Senate another opportunity to vote out a budget which can be put in conference. Please call your Senator TODAY requesting that he or she vote to pass a budget when the House version of the budget comes before the Senate. If the Senate votes down the budget (a third time), there will be no budget before the General Assembly on which it can act before adjournment. The last time this happened, Governor Kane was not able to sign a budget until June 30. This uncertainty will wreak havoc on the budget process for localities and school boards, among others. It is imperative, therefore, that the Senate pass some type of budget so that the budget conferees can meet and the Commonwealth can have a budget by adjournment.

Budget Reintroduced!

This afternoon the House approved the introduction of its budget again. This will give the Senate another opportunity to approve a budget so that the General Assembly can meeting its deadline of adjourning on March 10 with a budget. Below is a release by Speaker Howell:

March 1, 2012

Statement of Speaker William J. Howell Following Reintroduction of the FY 2012-14 House Budget by Unanimous Consent

RICHMOND, VA - Speaker of the House of Delegates William J. Howell (R-Stafford) issued the following statement this afternoon following the motion by Appropriations Chairman Lacey E. Putney (I-Bedford) to reintroduce the FY 2012-14 House Budget by unanimous consent:

"With the defeat of the House budget yesterday by Senate Democrats, the Commonwealth of Virginia entered uncharted financial waters. Never before has the General Assembly failed to put a version of the Budget into conference. As many of us have said over the last several days, the obstructive actions of Senate Democrats put Virginia on uncertain financial footing."

My colleagues and I in the House Republican Caucus were unwilling to allow such a state of affairs to continue. So today, Appropriations Committee Chairman Lacey Putney asked for the unanimous consent of the House of Delegates to reintroduce the FY 2012-14 House budget."

Due to procedural deadlines in the General Assembly, introduction of new legislation this late in the legislation session requires the unanimous consent of the body.

"We are pleased that our Democrat colleagues in the House of Delegates were willing to cross party lines to work with us on the most important piece of legislation to come before us this session. With their help, we now have a vehicle for continued consideration of the biennial budget."

"Today the entire House of Delegates - Republican and Democrats alike - sent a message to Senate Democrats: we have let this political theater play out for long enough. Now, Senate Democrats must come to the table and earnestly work with us on the financial blueprint that will govern Virginia's services and spending for the next two years."

One Big Loss and One Big Win

The Senate Education and Health Committee voted down the Labor Day opening bill introduced by Delegate Tata by a vote of 9-6. This is the same vote that killed the Senate version of the bill a few weeks ago. The usual culprits again opposed the bill - the hospitality industry. Before the committee voted against Delegate Tata's bill, the committee defeated a much more limited bill that would have given the City of Martinsville the right to open before Labor Day. Despite the fact that the city has approximately 70% students on free and reduced lunch, the hospitality industry bitterly opposed the bill because of alleged damage to tourist destinations, such as Virginia Beach. To hear the hospitality representatives and those from Virginia Beach the world as we know it today would come to a grinding halt if even one school system is exempted from the post-Labor Day opening law. It is unlikely that any bill to repeal the Labor Day opening law will be successful with the current makeup of the Senate committee and it is not anticipated that the members of the committee will change before the next Senate election four years from now.

On a positive note, the committee voted down a bill sponsored by Delegate Rob Bell that would have permitted home schooled students to participate on pubic school athletic teams. The bill failed on a 8-7 vote. Many home school families support this bill, although it is not supported by the home school league. Therefore, we can expect to reappear next year.