Did changes to school system's benefits plan violate state law?
A s the Board of Supervisors considers options for preserving the solvency of a retirement benefit program for Chesterfield County Public Schools employees, questions continue to swirl about the legal implications of changes the School Board has made to the plan.
It now appears that the School Board has made multiple amendments to the school system’s supplemental retirement plan, or SRP, over the past 20 years without subsequently seeking approval from the Board of Supervisors as required under state law.
At this point, though, nobody in the county government or school system seems willing to talk about what that means for the program and its $99 million unfunded liability.
County officials didn’t respond by the Observer’s Monday press deadline to questions submitted last week through the Communications and Media office.
Superintendent James Lane and School Board Chairman Javaid Siddiqi released a joint statement Monday afternoon, but didn’t directly address the issue, either.
“County and school leadership have worked closely to build a solvent SRP program,” the statement read. “Our actuary has run several scenarios on behalf of school and county leadership teams to focus on funding and liability. Additionally, we have held meetings between the school and county legal teams to discuss the SRP. We are thankful that the school and county administrative teams are working closely to develop a solution to ensure this important employee benefit is sound.”
According to the Code of Virginia, the “governing body” of any locality has the authority to establish and modify retirement plans, including those that supplement the Virginia Retirement System.
In Chesterfield, the governing body is the five-member Board of Supervisors.
As County Administrator Joe Casey noted in his April 5 letter to Lane, the School Board last asked the Board of Supervisors to amend the school system’s SRP in 1997.
Does that invalidate the changes the School Board has made to the plan since then? Is the plan’s liability larger than the $99 million school officials acknowledged last October?
The school system hired an actuary last year and retained outside counsel to advise it on possible changes to the supplemental retirement plan, but declined to share the attorney’s findings with either the county government or citizens on the basis of attorney-client privilege.
The school system also denied a Freedom of Information Act request from the Observer to review the report, citing attorney-client privilege.
Perhaps the most notable of the School Board’s changes was made in May 2013, when the School Board decided it would not offer SRP benefits to any school employees hired on or after July 1 of that year.
The plan amendment was never presented for approval by the Board of Supervisors, which raises the question as to whether the change was valid.
Two current School Board members – Carrie Coyner and Dianne Smith – served on the board that approved the 2013 SRP changes.
Regardless of the legality of that action, it’s unlikely to have any effect on those employees’ retirement benefits. County Attorney Jeff Mincks is drafting a new version of the plan’s governing document that, once approved by the Board of Supervisors, will legally establish June 30, 2013, as the cutoff date for newly hired or rehired school employees to participate in the plan.
Still, additional questions about the school system’s management of the SRP comes at an inopportune time for Lane and Siddiqi, who are trying to convince the Board of Supervisors to approve the school system’s recommendations to address the plan’s unfunded liability.
Some citizens are questioning the wisdom of entrusting the school system and county government to fix the SRP, considering neither addressed its unfunded liability when a county resident brought it to their attention seven years ago.
The Board of Supervisors is expected to adopt changes to the schools’ SRP at its April 26 meeting.
Siddiqi said earlier this month that he and his fellow board members are “actively engaged in conversations” with the supervisors about protecting benefits for long-tenured principals and other employees.
Based on analysis by county staff, Casey has proposed a series of structural amendments to the SRP, including the establishment of a salary cap under which only the first $85,000 of each eligible employee’s salary will be considered for computation of benefits.
The rationale for using that figure is that it covers Chesterfield’s entire teacher pool at the maximum salary scale, even when allowing for future salary step escalations.
As Lane noted in his own letter to school employees, he and the School Board are concerned about the impact of the $85,000 salary cap on their ability to “grow leaders” from within the school system.
“We believe this lower salary cap effectively eliminates principals, many 12-month employees and other school leaders” from participation in the SRP, Lane wrote.
Lane has endorsed setting the salary cap at $135,000 – the recommendation of an employee committee he formed last December – to protect principals and all other school-based employees from being hurt by SRP changes.
“I’m glad Dr. Lane is standing up for the committee’s recommendation,” said Don Wilms, president of the Chesterfield Education Association, one of 26 people who served on the SRP committee.
An $85,000 salary cap would mean “employees take the hit for the alleged mismanagement of the SRP,” Wilms added. “I don’t know how you can look at it any other way than that.”
The Chesterfield Education Association has coordinated an effort to convince the Board of Supervisors not to eliminate or significantly reduce SRP benefits.
At the direction of the local teachers union, dozens of county teachers have sent emails to the five supervisors, asking them to approve a series of changes school officials say will preserve the plan’s long-term health.
A large contingent of teachers also attended the board’s March 29 public hearing on the county’s proposed fiscal year 2018 budget.
“They can send us one email or 1,000 emails. We’re not going to be pressured or influenced by special interest groups,” Matoaca District Supervisor Steve Elswick said. “We’re going to do what we think is right.”
Dorothy Jaeckle, chairwoman of the Board of Supervisors, said the board is trying to prevent problems with the schools SRP from negatively affecting the county’s Triple-A bond rating.
According to Casey’s letter, the county’s proposed changes are projected to bring the SRP to 80 percent funded status – a generally accepted standard for healthy retirement plans – only one year sooner than the plan recommended by the School Board would.
The county’s plan reduces the SRP’s unfunded liability by $10 million more in the first year than the schools’ proposal, however.
“This is an important attribute when dealing with the rating agencies,” Jaeckle said.
She noted that the Board of Supervisors directed Casey and staff to evaluate changes to the SRP with a focus on various metrics relevant to those agencies.
“There is no guarantee that meeting those metrics will keep our bond rating,” Jaeckle said. “However, the more of those metrics we accommodate, the more likely we will retain our excellent credit rating.” ¦