Williamsburg-James City County School Board Chairman Jim Kelly said the division will face added fiscal pressures from the state as it begins its budget process this weekend.
Changes in the local composite index, which the state uses to determine funding levels, means James City County could receive $2 million less in funding, Kelly said.
In addition, the school division will have to pay more than $1.3 million in contributions to the Virginia Retirement System.
The estimates are preliminary, Kelly said, on Thursday. He said he got wind of the reduction in state funding earlier in the week. The financial pressures come as the General Assembly looks at ways to provide additional funds for education, but Kelly said it's not clear W-JCC Schools would benefit from them.
"I have long said from the dais and from other places, the problem with education funding is not with the county or city, they have done the work for making up for the lack of funding," Kelly said. "The county and city have worked very well with us."
The composite index is a ratio that indicates the minimum amount a county has to pay based on adjusted income, true value of property, taxable retail sales, population and school enrollment, according to the Virginia Department of Education.
"I think the state has fallen down on its responsibility to fund schools statewide," said Kyra Cook, school board vice chairwoman. "Will any increases benefit us? It depends on how the budget language is written."
The fiscal 2016 budget adopted last year was about $123 million, Kelly said. The state provided 25.6 percent of all operating funds in the fiscal 2016 budget.
A report published this year by the Center on Budget and Policy Priorities shows that most states cut school funding and some continue cutting funds.
From 2008 to 2014, Virginia cut K-12 spending more than 10 percent, rounding out the top 11 states with the largest cuts in education funding for that time period, the report shows.
Federal funding for education, including Title I funding for low-income schools, has also fallen since the recession, according to the report.
As the W-JCC schools hosts a budget retreat this Saturday, school board members will likely face tough choices on balancing the division's budget, including those on capital or school building and facilities improvements.
A lengthy budget season is ahead as the General Assembly debates state funding and the county begins its budget talks next week.
"I'm hoping this budget year we turn things around," said County Administrator Bryan Hill.
Hill said he also hopes the division will get additional funding for schools.
"I'm hoping they change their composite indexes," Hill said. "I'm hoping we can talk to the governor to help James City County up."
Michele Canty contributed to this report.
Bogues can be reached at 757-345-2346.
The school budget retreat will be held at 8:30 a.m. Sat., Jan. 16, at the School Board & Central Office, Room 400. Williamsburg. The event is open to the public and will also be live streamed at wjccschools.org.