School system adds $5 million to budget deficit, must pay more for employees’ retirement

Hamilton County Schools was just handed an extra $5 million to add to its budget deficit, thanks to a new requirement that it contribute more to employees' retirement funds.

The Tennessee Consolidated Retirement System soon will require all school systems in Tennessee to increase the percentage they contribute to retirement funds by nearly 3 percent for both classified and certified employees.

For Hamilton County, it means that overnight, the system's projected deficit for fiscal year 2011 went from $12.5 million to about $17.2 million.

'This is something we're all having to eat at a very unfortunate time, and nobody had a heads up,' Chief Financial Officer Tommy Kranz said Wednesday during a special called meeting of the Hamilton County Board of Education.

Changes to the district's contribution for certified employees such as teachers will go into effect July 1, 2010. The final amount of increased contribution for classified employees ' positions that don't require professional certification ' will be announced in January.

School district officials, who now are in the midst of negotiations with the Hamilton County Education Association over employee health benefits, said the news will change how they negotiate.

'You have to cut some expenses somewhere. Those expenses can be anything, I'm not just saying it's health insurance. You've got to look at the whole ball of wax,' Mr. Kranz said.

'The financial picture has changed; it's gone negative,' he said. 'Every budget in the district just got a lot tighter.'

Board member Jeffrey Wilson said the new requirements definitely should be a factor in negotiations with the teachers' association.

'This amounts to a raise for someone on the back end,' he said.

Hamilton County Education Association President Sharon Vandagriff was unaware Wednesday of the new Tennessee Consolidated Retirement System requirement. She said any discussion about how it related to health insurance would have to take place at the next negotiation session, which likely will be scheduled after the first of the year.

Several board members asked whether the district also would ask employees to increase their retirement contribution, but Mr. Kranz said he would look into whether that was a possibility.

Mr. Kranz said the new Tennessee Consolidated Retirement System requirement is due partly to a large pool of teachers retiring.

Board member Rhonda Thurman said that if the employees were in the private sector, they would just have to deal with getting less retirement money.

In addition to the $4.7 million in general purpose funds, the new requirements also will cost the district's federal programs budget $421,756 and the self-funded programs such as food service an extra $86,754.

'It's a shame. Things will have to be eliminated in order to balance the budget,' Mr. Kranz said.

INCREASE IN RETIREMENT CONTRIBUTION

* General purpose: $4.7 million

* Federal programs: $421,756

* Self-funded: 86,754