Localities, schools worry over possible budget shortfalls [Daily Press, Newport News, Va.]

Dec. 28--Officials from cities, counties and school divisions across the Peninsula and South of the James say cuts in Gov. Bob McDonnell's proposed $84.9 billion two-year budget will be felt locally.

McDonnell, in a proposed spending plan presented to the General Assembly on Dec. 19, calls for $882.6 million in cuts for fiscal years 2013-14. Most of the reduction-related savings -- $537.6 million -- would come from withholding inflation increases for Medicaid payments to hospitals and nursing homes, and from not funding inflation increases for support services and "not-competitive" salary adjustments for K-12 public education.

Despite $363.6 million in cuts to educational support programs and personnel, the governor is increasing spending in the state's public school system by $438 million. The governor's goal is to increase the percentage of money being spent directly on instruction, and would require divisions to report that percentage to the state.

The governor's budget does not call for plans to offset the loss of $108 million in federal stimulus funds that ends this year.

The budget also calls for increasing the state and local contribution to the Virginia Retirement System by $2.2 billion. Approximately $1.2 billion of it would come from the state, with localities expected to shoulder the rest.

The budget also includes $83.6 million in reductions that include $14.4 million in the Department of Health; $12 million in the Department of Social Services; $10.8 million from Comprehensive Services for At-Risk Youth and Families; and $4.3 million from the Department of Conservation and Recreation.

Hampton

Hampton is bracing for a tougher budget than in 2011-12, with falling property values; the state budget may make matters worse, officials said.

"We believe that Hampton, as well as other localities, will be impacted," said Assistant City Manager James "Pete" Peterson. "However, we won't be able to gauge the level until state agencies determine how they will implement the suggested changes."

"Of particular concern would be that cuts not simply shift the responsibility from state taxpayers to local taxpayers," added Budget Director Gloria Washington

The city's school system anticipates a $4.95 million budget shortfall in 2012-2013, said finance Director Suzanna Scott.

That's based on decreasing local revenue and increased costs that counteract any bump in state funding next year.

The hike in the state's retirement system rate will cost Hampton City Schools$6.8 million more next school year, Scott said. The district anticipates losing $3.2 million in local funding.

Given next year's estimated budget shortfall, it's tough to point to any benefits for Hampton in the governor's proposed budget, said Deputy Superintendent Victor Hellman.

The district, which has an operating budget of $184.9 million this year, has cut $31 million from its budgets since 2009 by eliminating jobs, cutting pay and closing schools.

District officials plan to close another school in 2012, saving another $900,000.

Newport News

Newport News Public Schools officials reported in October the district faces an estimated budget gap of $4.6 million for 2012-13. Officials have not provided an updated estimate.

The district's current budget is $279 million, more than $37 million less than 2009.

This fall, officials said they expect health insurance premiums for both the district and employees will increase in 2012-2013. Details of the district's preliminary budget will be presented early next year.

In Newport News, City Manager Neil Morgan has asked department heads for budgets with 6 percent cutbacks as a "worst-case scenario." The city is also undergoing a partial hiring freeze.

Cynthia Rohlf, assistant city manager, said departments are just starting to schedule budget hearings for the 2012-13 budget. She said the city is waiting to hear more specifics before figuring out how to proceed, but officials haven't heard that local governments would have to suffer through a major reduction in state aid.

Isle of Wight

Both school district and county officials in Isle of Wight say they haven't crunched the numbers enough to know the fiscal impact the governor's budget will have in the county, which is still grappling with a $5.7 million loss in tax revenue related to the 2010 closure of International Paper.

The biggest challenge will be the proposed increased local funding into the state's retirement program, said Phillip Bradshaw, chief financial officer for Isle of Wight Public Schools. According to state education department estimates, the school district spent $316,249 in local money for VRS this year. That number is poised to jump to $480,257 next year, under McDonnell's budget.

"The VRS is going to have the biggest impact on the schools and the county," said Bradshaw. Between the rising insurance expenses, increased state mandates and end of the federal stimulus money, any supplemental money coming to the district will negate itself, he said.

McDonnell's budget is not all bad news, said Don Robertson, county spokesman. It doesn't appear to reduce funding for the county's constitutional officers and includes some money to help localities begin implementing federally-required components of the U.S. Clean Water Act.

York County and Poquoson

Schools officials are still reviewing the governor's proposed budget and related information from the Virginia Department of Education, while county and city officials did not respond to a request for their reactions.

"Based on our preliminary analysis at this point, state revenue to the York County School Division will go down significantly under the governor's proposed budget," York County School Division Chief Financial Officer Dennis Jarrett wrote in an email. "Additionally, the governor's recommended VRS rate increase will increase VRS cost to the school division by over $4 million.

"Both of these changes, the state revenue loss and increased VRS expenditure, represent a tremendous burden to the school division as we proceed in the FY13 budget process."

Poquoson City Public Schools officials said they will be able to give specific information in January on what the governor's proposed budget means to the district.

"We're going to be making deep cuts; we do know that," said Superintendent Jennifer Parish.

She said it's important to remember that approximately 78 percent of McDonnell's additional money for education will go toward covering the state's share of the VRS increase and won't really be additional funding.

Williamsburg/James City County

It's not entirely clear yet how the new budget will affect James City County.

"Except for schools, the impacts appear to be modest," Finance Director John McDonald said. "K-12 education is really taking a hit statewide, as is pre-school."

He plans to work with the General Assembly, Williamsburg-James City County Schools and the City of Williamsburg to craft a balanced school budget for fiscal 2013, but did not say what, if anything, could be easily trimmed.

The state budget includes some additional funding for sheriff's offices, and McDonald said state revenues are increasing.

"This is just the beginning," he said. "The General Assembly takes over in January, and the budget proposals will change."

WJC Schools is anticipating a budget gap of at least $5.5 million in Fiscal Year 2013.

The largest ever increase in employer contributions to VRS is responsible for the majority of the gap. Scott Burckbuchler, assistant superintendent for finance and operations, said he expects a cost increase of $4.4 million on the school division's VRS contribution, boosting the total to just shy of $12 million.

Burckbuchler said federal Jobs Fund money will be exhausted this year and won't be available in 2013, so the district will be down $1.8 million before taking the governor's budget into consideration. The division gain a bit as a result of McDonnell's proposal, but it doesn't come close to mitigating his VRS contribution proposal.

"Under the governor's proposed budget, it appears that state revenue is going up about $500,000," Burckbuchler said.

He said it's too early to speculate on how the district will handle the shortfall, but he suspects local revenue increases and school budget reductions will be part of the solution.

Williamsburg City Manager Jack Tuttle said the major impact for the city will come from increased contributions to VRS on behalf of district school teachers.

At the current 9 percent city share of school funding, that comes to an increase of $378,000 next year.

"That will change some in the new school contract, but it will be close to that," he said.

He said that's probably the best localities can hope for from the state this year, that it does no more harm.

"If we break even with the state this year, I think we'd all be pleased with that," he said.

Mathews County

County Administrator Steve Whiteway said he couldn't gauge the fiscal impact of McDonnell's proposed budget on the county until after the school division has crunched its numbers.

"Local education drives our budget," he said.

Surry County

Although he hasn't run any preliminary figures, Surry County Administrator Tyrone Franklin said he expects McDonnell's budget will bite into the county and school district budgets. He said he expects to have more detailed data early next year and stressed he is hopeful Surry's tax rate -- 73 cents per $100 of assessed property value -- will not have to be raised.

Surry won't feel the sting quite as much if Dendron's site for the proposed Old Dominion Electric Cooperative's proposed coal-fueled power plant is used, Franklin added.

Though controversial, the project would increase the county's tax base and create about 4,000 jobs during five years of construction, as well as adding 200 permanent positions once the facility is operational, he said.

Daily Press reporters Samieh Shalash, Jennifer L. Williams, Joe Lawlor, David Macauley and Virginia Gazette reporters Steve Vaughan, Cortney Langley and Susan Robertson contributed to this story.

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