Chesterfield Finds $83 Million Unfunded Liabilities

Somehow Chesterfield County schools missed $83 million in unfunded liabilities until late last year.

Somehow Chesterfield County schools missed $83 million in unfunded liabilities until late last year.

Our society is riddled with unfunded liabilities. Nowhere is the magnitude of short-term thinking more egregious than the federal government. As case in point, the U.S. military has put off maintenance and repairs to the point where we don’t have the money for the military we have, much less the military we would like to have.

“The Department of Defense “has breathtaking liabilities — as much as $88 billion a year — that ought to be addressed before procuring a single additional plane, ship, or tank,” says Tom Spehr, as quoted by Robin Beres in her Richmond Times-Dispatch op-ed today.

But Virginians can’t get sanctimonious. Not only do we have the example of Petersburg to to keep us humble, we now hear of scandalous inattention to hidden liabilities afflicts one of Virginia’s most populous jurisdictions — and one with the reputation, no less, of being exceptionally well run.

In Chesterfield County, school officials are grappling with massive unfunded liabilities for a supplementary teacher retirement benefit. Under the program, teachers can retire then get re-hired under the program working part-time, temporary jobs similar to their pre-retirement work. As incentive, they get a lucrative supplement to their normal Virginia Retirement System benefits.

In 2014, reports the Times-Dispatch, unfunded liabilities were found to be $58.7 million. Now they are $83 million.

Here’s the amazing part. The T-D quotes Donald Wilms, president of the Chesterfield Education Association, as being shocked when he learned of the program’s underfunding for the past five years. “Teachers were continually told that the program isn’t going away. So I think it was natural to assume that the program was healthy,” he said. “Nobody told you it was in danger.”

Nobody, that is, except for MGT America, which provided an efficiency review of Chesterfield schools in 2010 (!!!) and noted that the  supplemental retirement plan faced a large unfunded liability in the next few years as Baby Boomer teachers began retiring. “The increased number of participants will dramatically increase the cost of this program,” warned the report.

Somebody wasn’t paying attention.

Forget the federal government. Let Donald Trump and Congress worry about that. Here in the provinces, we need to worry about how we handle our own business. Do other school systems have supplemental retirement programs like Chesterfield’s? How many other unfunded liabilities, the existence of which lurk deep within Comprehensive Annual Financial Statements, are ticking time bombs? Is anyone paying attention?

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8 responses to “Chesterfield Finds $83 Million Unfunded Liabilities

  1. The issue has always been there – but not required to be reportable on the CAFR until updated GAPP rules required it.

    The concept is to let your veteran teachers come back after retirement which ought to be a big plus compared to full salary folks but they’re not going to work for free so some bright person in the school board office thought they could save the schools money on full benefits by paying them as a retirement stipend supplement.

    schools also have programs to advance retirement money to those who are not yet eligible for Social Security but did put 30 years in – later at 65 – when SS kicks in , the retirement flow is reduced so that the same amount is total is still received.

    But the real problem is that school systems across Virginia – and their BOS – willingly choose to pay far more for education that just the required state match as voluntary value-added programs and while there is some justification for some of it – the question is how much can be afforded because every teacher hired on the local dime is NOT partially funded by the state. The entire salary, all benefits are paid wholly at the local level and that includes full pensions, OPEB and the supplementary programs.

    Public school teachers are still among those who receive defined benefit pensions – but the State wants that to change..and shift to defined contributions.

    The problem is …portable pensions give more freedom
    to leave without giving up the pension. If and when health insurance becomes portable – who knows what would happen – turnover would probably increase.

    so here’s the hard numbers n how much localities voluntarily choose to
    pay for schools over and above the State required local effort.

    County required local effort additional local funding

    CHESTERFIELD 122,925,348 217,814,071

    HENRICO 121,192,776 227,376,742

    FAIRFAX 827,359,677 1,788,223,108

    CHARLOTTESVILLE 17,500,957 44,059,875

    ALEXANDRIA 73,646,657 193,174,909

    ARLINGTON 130,615,640 355,353,119

    Once again – when complaining about Government – recognize that it IS
    government that requires the disclosure of this data… and that if there
    was no rule requiring it -you can bet it would not be disclosed for non-public schools either.

  2. the formatting here just _ucks.. sometimes.. let’s see if I can make the data more readable

    county
    required local effort
    total local spending

    CHESTERFIELD county
    122,925,348 required local effort
    217,814,071 actual total spending

    HENRICO
    121,192,776
    227,376,742

    FAIRFAX
    827,359,677
    1,788,223,108 – you read that right – it’s 1.8 BILLION!

    CHARLOTTESVILLE
    17,500,957
    44,059,875

    ALEXANDRIA
    73,646,657
    193,174,909

    ARLINGTON
    130,615,640
    355,353,119

    Makes me wonder what non-public choice schools would be doing.. they probably will not be able to offer much in the way of value added… probably won’t be paying defined benefit pensions.

  3. Just perhaps our armed forces could be more current on maintenance and repair if Congress didn’t insist on purchasing weapons that the generals and admirals haven’t any use for.

    • exactly..

      and bases they want to close that Congress will not do…

      and… reduction of uber compensation packages for personnel that they cannot afford.

      the military wants to modernize… but Congress want them to be “jobs”..
      for their districts…

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  5. More info in the RTD this morning.

    What Chesterfield is doing is similar to what other School systems do – i.e. some kind of program to pay pensions to retired who are not yet 65 and also getting social security.

    HOW Chesterfield is doing it sounds like a serious problem – not only with their budgeting but their disclosure of the costs in their budget funding request to the county …

    The program is normal.. the process for handling it in the budget sounds like it has some serious problems.

    just FYI – pension liabilities can be viewed from different perspectives.

    i.e – how many years out are they looking – and for how many retirees?

    in other words – you know what you paid out this year for pensions and you probably have some idea knowing what you’d pay next year based on the number of retired you know that are going to happen this year.

    but how do you know what the number is 10 years from now – and do you book that as an unfunded liability – because you don’t have enough in the current account to fund it now?

    what exactly is an unfunded liability – how is it being defined?

    Bacon’s Rebellion ought to have an informed discussion about that – since more than a few posts are about “unfunded liabilities” but do we really understand what they are and whether or not they are as serious as they sound or more of an FYI – ” you’ve got liabilities 20 years from now and you don’t have enough money in that account – right now – to pay for them”.

  6. Why quote the Richmond Times Dispatch all the time. The Chesterfield Observer has had tons of coverage.

  7. Well good question… I was looking at VANEWs and that’s what they had .. and once I read it – it was alarming to read.

    got a link to the CO? put it here…and let others see it…

    you know, my impression of most school boards is they are cheerleaders
    for education for the kids and benefits for the teachers… money is no object!

    And if the School administrative staff were to play around with budget numbers.. many SBs would be largely clueless.

    Don’t get me wrong – I believe strongly in K-12 education .. but like everything else – there are fiscal limits and the real issue is what is the best you can do with the money you can get. More money is not more/better education and good teacher benefits don’t necessarily yield that either.

    Having said that – there are some GOOD school systems that get good results but also stay within their budgets.

    Good administration does just that.. they prioritize and focus their spending on bang for the buck… others just gobble up as much money as they can convince the BOS to give them – and there may not be any particularly better outcome- it all depends on the folks running the school district – and like towns and cities – there are good ones with good cultures and there are others.

    Few school boards consider it their responsibility to hold the administration responsible for results as well as spending..

    but on this – something smells Rotten in Chesterfield… you do not underfund your pensions and no one knows that.. SOMEONE – KNOWS IT!

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