Vermont Business Magazine Earlier this morning, House Speaker Jill Krowinski was joined by members of the Democratic Caucus at a press conference and provided the remarks below regarding the effort to stabilize the public pension system. A link to a video of the press event can be found HERE. The Speaker had presented a plan to address the $5.7 billion unfunded retirement liabilities in the pension and retirement plans for unionized state employees and teachers. However, she announced today she would not move forward with that plan and instead set up a task force to address the matter.
Krowinski has also set aside $150 million that could be used for a possible one-time payment to help reduce the obligation.
The unions and the Progressive caucus in the Legislature opposed the plan.
Krowinski previously had outlined the retirement funding issues:
- New projections will grow by another $604 million in the coming year alone
- This state will need to increase annual contributions to the system by $96 million
- This is in addition to the estimated $4.5 billion unfunded liability reported last year
According to the Vermont Chamber of Commerce report, Krowinski had suggested that any reforms shouldn’t impact employees close to retirement or existing retiree benefits but going forward a systems change could include an injection of one-time funds to partially address the unfunded liability, an element of risk sharing between the state and employees, and changes to plan administration to create more active and transparent oversight.
- Either reducing or eliminating cost-of-living adjustments for future retirees
- Increasing employee contributions, and
- Changing the formula used to determine monthly pension benefits
Pearce’s report does conclude that Vermont should not consider abandoning the current defined-benefit system.
House Speaker Jill Krowinski
We are here today because we want to save our public pension systems and give teachers and state employee’s confidence that the money won't run out.
When we began this legislative session, I stressed the need to build a COVID recovery plan that leaves no one behind. Because of the tremendous amount of federal relief dollars the state has received, it has given us a once in a lifetime opportunity to think creatively about how to solve our biggest challenges and build us back stronger than ever before in all 14 counties.
One of our state’s biggest problems is our unfunded public pension liability, which has risen exponentially to $5.6 billion. We cannot ignore this situation any longer; we must act. We must stabilize our pension system, so that our hard-working state employees and teachers can retire with peace of mind. Over the past few weeks, we as legislators, along with the House Government Operations Committee, have been taking a deep dive into the seriousness of the problem, how we got here over decades, and examining ideas and solutions that will move us forward on a productive path for the future.
I want to pause and acknowledge how hard and emotional this conversation has been for all concerned. We are talking about the economic security and the futures of our dedicated state employees and teachers, and that’s deeply personal for those impacted by any proposal. We have been listening closely to our constituents and hearing their concerns. Change is hard, it takes methodical, determined work, and we are only successful if we work together. As I’ve been listening to people give their feedback, while trying to get people to come to the table to add their voices and solutions, it is clear people are struggling with how to find real systemic change to resolve this crisis right now. Some stakeholders like the Vermont State Employees Union have brought a few ideas to the table, and others like the Governor have not.
The added challenges of trying to do this kind of deep policy work in a virtual environment, and not being in the State House together, are creating obstacles towards having a difficult, yet solutions-oriented conversation.
However, in the midst of the frustration, we are seeing a path forward towards fundamental change. A majority of what I’ve been hearing, and the Government Operations Committee has been hearing is focused on the question of, “how did we get here?” Circumstances largely beyond the State’s control have led to this crisis situation, including an aging population with increasing retirements; lower than anticipated investment returns, in part, due to the Great Recession; and changes in actuarial assumptions, including a reduced rate of return.
Moving forward, I believe we should focus on where I’m seeing the most consensus, which is changing the way we make our investment decisions with our governance structure. The legislature doesn’t make investment decisions, but we can change the board structure to make it more transparent, independent, and get more expertise at the table. This is no small lift, but I know we can do this. Second, I’d like the committee to create a Pension Task Force that brings all stakeholders, from the unions to the Governor, to the table to look at possible revenue sources and plan and benefit changes to fix this problem. Lastly, I recommend we keep the one-time $150 million in reserve while the Task Force does its work. We also have the $300 million in this year’s budget to pay for pensions and OPEB.
I want to thank Chairwoman Copeland Hanzas and the Government Operations Committee for all their hard work to save our pension system. I also want to thank all of the members for joining in and helping us find a solution. Thank you.
Senate President Pro Tempore Becca Balint made the following statement in response to the press conference held by House Speaker Krowinski and other members of the House Democratic Caucus this morning:
“The Speaker and I have been in close conversation these past five days. Our shared goal for this session will be to make a significant one-time investment into the pension funds, making changes to the governance structure, and creating a task force to work on the benefits structure and other relevant issues over the summer and fall. We want to do all we can to maintain the defined benefit system, and we recognize that all options must be on the table for the Task Force, including an increase in revenue and benefit changes.
"I think this is the right path forward and strikes a balance between taking steps to prevent a crisis and acknowledging how difficult this discussion is and how thoughtful our work must be. As Pro Tem, I will help make sure that the Senate is doing its part to support this sensible approach. I want public employees to know that we heard them and that we are committed to working together to save the pension system.”
The Vermont-NEA, the state's largest union which represents teachers, sent the following statement:
House Speaker Jill Krowinski’s announcement today abandoning immediate action on a pension plan that would have hurt teachers and state employees is a welcomed decision that now gives all stakeholders a chance to develop a long-term approach to Vermont’s public retirement plans, according to Vermont-NEA. The following statement can be attributed to Don Tinney, a high school English teacher who serves as president of Vermont-NEA.
“We appreciate the Speaker’s decision to take a long, methodical look at our public pensions. Throughout the pandemic – and before – educators have kept their promise to Vermont’s students. We look forward to working with all stakeholders to ensure that the state keeps its promise of a secure retirement to teachers and all public employees.
“I also want to thank the thousands of teachers and state employees who have written, called, testified, and protested against a plan that would have them work longer, pay more, and get less in retirement while protecting Vermont’s wealthiest from higher taxes.
“As we work together to ensure that the promise of a pension is kept, we look forward to working with the Speaker and others to make sure that our public pensions are secure and stable.”
A recording of the Speaker's event can be found here.
Source: Montpelier, Vt. – Earlier this morning, House Speaker Jill Krowinski 4.2.2021