Vermont Business Magazine Governor Phil Scott and Treasurer Beth Pearce both expressed their disappointment that Speaker of the House Jill Krowinski on Friday morning tabled a pension reform plan that she brought forward in March.
Her plan was met with a negative response from both the state employees and teachers unions, which would be directly effected, as well as from the Progressive Caucus in the Legislature and others.
While acknowledging the seriousness of the issue, the speaker has paused the process and will create a task force and proposes to reorganize the Vermont Pension Investment Committee.
The task force is tended to find broad consensus (including from the governor and the unions) on a solution, while changes to the VPIC could possibly find a way to increase the return on investment of the pension-related funds.
Treasurer Pearce issued a statement today on Krowinski's decision (see below).
Pearce brought her restructuring plan to the Legislature in January (See full report HERE. See story HERE.). It included increased annual funding from the state (which has been put in the budget) and the use of one-time funds (the speaker is setting aside for now $150 million) on the one hand, and increased contributions to the plans and reduced benefits from state workers and teachers on the other.
It was that cost to the unionized workers that caused the most consternation. There are over 8,000 current state workers and the Vermont-NEA teachers union says it has more than 12,000 members. The Vermont State Employees Association had organized a rally for Saturday, which has now been canceled.
The current unfunded liability in the pension and retirement health plans is $5.7 billion and without action would increase by $600 million, Pearce said in January. Her proposal would have saved about $2.2 billion.
In July 2019, the rating agencies downgraded the state credit rating. This will cost the state more to borrow money, which it does on a regular operational basis. In doing so, Moody's mentioned the state's aging population and relatively high pension liabilities as two contributing factors in the downgrade.
The governor, who was not alerted to the speaker's decision before today, commented on it during his regular Friday press briefing.
For the fiscal year 2022 budget related to the retirement plans, according to Administration Secretary Susanne Young, "The cost this year, status quo, is $388 million all funds, $250 million general fund. That’s up $100 million all funds and $50 million general fund from FY21."
The governor, who was not alerted to the speaker's decision before today, commented on it during his regular Friday press briefing.
He said in part, "From my perspective, I’m disappointed obviously. This is a huge problem for our state. It’s going to affect everyone for years to come. It’s a $5.7 billion unfunded liability that has to be dealt with because if we don’t, we’ll be facing insolvency and that is something we can’t let happen. In terms of being at the table, I’ve been at the table the last four years. I’ve talked about this publicly. I’ve talked about it with the leadership of the House and Senate. I’m a willing partner. I’ll be at the table. I don’t want to be the main course, but I’ll be at the table. This is their moment to shine. This is their responsibility as the majority party to get something done. Something I advocate for is probably not going to be accepted out of hand. So, it’s going to take them to lead. But I’m willing, and I’ve given them great credit, for bringing this up. Treasurer Pearce, legislature leadership, they have to lead on this. They’re the majority party. They’re in control of the Legislature… While I’m disappointed, I’m encouraged they’re still willing to have the discussion, because it still has to be dealt with."
“From my perspective, I’m disappointed obviously. This is a huge problem for our state. It’s going to affect everyone for years to come. It’s a $5.7 billion unfunded liability that has to be dealt with because if we don’t, we’ll be facing insolvency and that is something we can’t let happen. In terms of being at the table, I’ve been at the table the last four years. I’ve talked about this publicly. I’ve talked about it with the leadership of the House and Senate. I’m a willing partner. I’ll be at the table. I don’t want to be the main course, but I’ll be at the table. This is their moment to shine. This is their responsibility as the majority party to get something done. Something I advocate for is probably not going to be accepted out of hand. So, it’s going to take them to lead. But I’m willing, and I’ve given them great credit, for bringing this up. Treasurer Pearce, legislature leadership, they have to lead on this. They’re the majority party. They’re in control of the Legislature… While I’m disappointed, I’m encouraged they’re still willing to have the discussion, because it still has to be dealt with.”
Speaker Krowinski said in her statement that: "Some stakeholders like the Vermont State Employees Union have brought a few ideas to the table, and others like the Governor have not."
The governor was asked whether he would support a one-time pay-down this year.
“Not without structural changes. No.” he said.
Statement from Treasurer Beth Pearce on Friday’s Announcement on Pension and Health Care Liabilities
I am disappointed that State leadership was unable to reach consensus on a plan to address the unfunded pension and retiree health care benefit liabilities. That being said, I want to acknowledge the difficult conversations that have been held to date by all parties. While I recognize that any required benefit changes will be painful, we cannot afford to delay action.
Some steps were taken and I appreciate the additional revenue that was brought to bear this legislative session to address our liabilities and am willing to work with all parties to ensure we use those funds where they will be most impactful and generate the greatest return. I also support the most recent proposal for changes to the VPIC (Vermont Pension Investment Committee) Governance structure as I believe they will strengthen and build upon the foundation that is currently in place and further our recent successes. While VPIC’s performance for the recent 7-year period is in the top third of the nation’s public pension plans of similar size, and in the top 19% for the 1-year, 3-year, and 5-year periods ending December 31st, we see this as an opportunity to take VPIC to the next level.
The state is also continuing to underfund retiree health care benefits, which substantially increases State costs and puts our ability to continue to pay these benefits at risk. I urge the General Assembly to take action this year, in this session, to address the Treasurer’s Office’s longstanding recommendations to support prefunding, which will reduce our long-term liabilities by over $1.6 billion. The State cannot afford to kick this can down the road any longer.
As caretakers of taxpayer dollars, we elected officials have a responsibility to act in a prudent, effective, and cost-efficient manner. Our history of consensus building and fiscal discipline has been key to attracting investments to this state. We need to refocus our efforts to bring that collaboration to this critical issue and get this done now.
Vermont has a long history of tackling difficult issues, sound budgetary and financial management policies, and practices, and of collaboration between the Administration, the Legislature, other elected officials, and all impacted stakeholders. It is time to redouble our efforts and demonstrate the will to address these challenges. Only then can we ensure retirement security for all of Vermont’s public employees, now and for generations to come, and to promote economic prosperity for all Vermonters.