Campaign for Vermont: Pension reform suddenly looks real

Editor’s note: The following is from the Campaign for Vermont March 29 newsletter.

A number of bills came together to meet the crossover threshold this week. A few more are on the way and will likely be given exceptions because of their importance. We will provide a full list in the next couple days, but here are some of the highlights we have been following.

Economic Development

Two significant bills were passed by the House this week. The first is H.159 which does a number of consequential things, including Better Places program to encourage public investment in parks and greenspaces that can attract traffic. The goal is to create economic development by positioning businesses near these attractions. It also establishes a neighborhood development program and creates a trade representative in Canada to attract business investment in Vermont from Quebec. There was originally a downtown tax credit proposal, but it got pulled out by the Ways & Means Committee, we are hopeful the Senate might restore this section.

Perhaps most important is a $1.5M increase in the state’s tourism an marketing budget (a 50% bump) in order to attract tourists in the Summer and Fall months as the Pandemic winds down. Research indicates there is pent up demand for travel, particularly within drive markets for Vermont and being able to capture this could provide a quick shot in the arm for our economy and also provide a helping hand to businesses hardest hit by the pandemic.

The second important bill is H.360 which would funnel $200M in federal dollars into broadband expansion in the state. While historic in it’s scale, the bill fails to make internet access more affordable for consumers which is incredibly important given our reliance on video conferencing for work and particularly school. Many families might have “access” but lack the ability to pay for the speed of service they might need. Also, to be clear, even with the level of funding available in this bill, it will take years for many Vermonters to receive fiber service. There are better technologies available that could reach Vermont’s 70k households that are underserved and some of them are contemplated in Senate’s broadband bill, S.118. We are already reaching out to Senators to address some of the issues in this bill.

Education

The education weighting bill, that has the potential to swing property taxes in both directions across the state, cleared the Senate this week. The bill doesn’t make any definitive changes, but does create an advisory group to study the issue (a classic legislative stalling technique). The House seems more interested in acting on property tax weighting this year so they may push back on this Senate version of the bill.

H.106 also made crossover. This bill would create $330k grants (over three year) to hire community school coordinators in a handful of schools that sign up for the pilot project. The Senate began taking testimony on the proposal this week and have already scheduled time on it next week as well.

In a bit of good news, legislators found out this week that more than $5M in federal funds will be available to the Agency of Education to assist pandemic-related issues. The Agency is working to identify the areas with the most need now.

Fiscal Responsibility

There were major developments this week on pension reform. Word began circulating last week that the Speaker had a “secret group” of legislators working on a pension plan. That “secret group” turned out to be the leaders of the House Government Operations Committee, who released their proposal on Wednesday. The bill would do several different things, but here are some highlights:

  1. Adjusts cost of living increases built into retirement compensation to reduce liability. This is largely done with pushing retirement age indexes up and applying 100% adjustments to the first $24k of retirement income only.
  2. Adjust the average final compensation (AFC) which is used to calculate retirement benefits. The proposal would average this over seven years instead of three.
  3. Increase the vesting period (length of employment before qualifying for full benefits) from five years to ten.
  4. Raise retirement eligibility age to the social security retirement age (the current threshold is either 55 or 62 depending on employer and some groups have eligibility after 20 or 30 years of employment).
  5. Raise the base employee contributions across the board to 7.75% of gross salary (roughly a 1% increase for most groups).
  6. There would be a risk sharing provision that would kick in if actual returns came back below projections. It would add an additional tiered rate assessed base on the employee’s salary. This would scale from 0.25% to 1.25%.

The proposal would also create a 15 member oversight board to manage the entirety of the state’s post-employment obligations. Coupling these efforts with a $150M pre-funding commitment from the state would reduce the pension fund liabilities by $500M (about half of the liability added over the past year). The Joint Fiscal Office indicates this would get us to an 80% funded ratio which (according to them) is close enough to manage via an amortization schedule. This plan has the appearance of making the pension plans more uniform, sharing risk between employees and the state, and asking both parties (taxpayers and employees) for buy-in.

The state employees and teachers unions have already come out in strong opposition to this proposal because it eats into benefits (which are some of the most generous in the country) and because of lawmakers being under a looming crossover deadline. A public hearing was already held on Friday and another one is scheduled for Monday. Those testifying repeatedly noted that under this proposal they would pay more, work longer, and get less benefits.

Spread the love