By David Flemming
If I give you $100, and you spend it in Wyoming, how does that help the Vermont economy? Answer: it doesn’t.
Yet that’s just about what Hank Kim from the National Conference on Public Employee Retirement System claimed in testimony to the Pension Benefits, Design, and Funding Task Force last October.
David Flemming, policy analyst at the Ethan Allen Institute
Over the last six-plus months, the Task Force took testimony from numerous sources on the generosity of Vermont’s state employees’ and teachers’ pension systems. Our $5.7 billion unfunded liability isn’t going to go away on its own, but Kim and other activists argue that the massive spending on Vermont’s pensions system is actually a good thing. Even our more progressive committee members expressed skepticism of such a grandiose claim.
The argument goes like this: any reforms that reduce the excessive generosity of pension benefits would have catastrophic effects on the Vermont economy. Vermont’s pensioners pay taxes, so they help our state revenue coffers and our local economy. Reducing the generosity of benefits to new teachers and state employees would thereby lower our revenue and economic activity.
This argument is self-evidently absurd. To be economically beneficial, pensioners would have to spend 100% of their pension income inside Vermont, or use that money to beef up state revenues. Unsurprisingly, this hasn’t happened.
That’s due to the significant “leakage” of funds from Vermont’s pension systems and into other states’ economies. We already know Vermont has a migration problem, with folks fleeing to better economic climates. Just how many pensioners are living out of state?
After a public records request to the State Treasurer’s Office, we received our answer. About 25% of the Vermont’s 17,400 retired teachers and state employees that are actively collecting a pension have a primary residence outside Vermont. In other words, for every $1 in pension benefits paid out, back-of-the-envelope arithmetic suggests that only $0.75 remains in-state.
Put another way, Vermont spent more than $350 million in pension benefits in 2020 alone. While activists would like you to believe that whole sum benefited the Vermont economy, nearly $90 million went out-of-state. Yet the entire cost was borne by Vermonters, whether it’s current taxpayers or those down the road who will be facing the consequences of our dangerous decisions today.
Unsurprisingly, the Census Bureau’s state-to-state migration data shows that many former Vermonters wind up in tax friendly states. In 2019, nearly 7,000 Vermonters moved to one of the nine states with no state income taxes, compared to the less than 5,000 Vermonters who moved from one of these states to Vermont.
Put simply, Vermont’s pension checks are getting shipped out-of-state as retirees look for rosier places to retire. Reducing benefits to new teachers and state employees would go a long way toward reducing Vermont’s severely underfunded pensions, increasing Vermont’s credit rating, allowing Vermont to borrow money more cheaply when necessary, and keeping more money in-state.
All this is to say, we can and should have a lively debate about how to address our state’s unfunded liabilities. But the reality is that a substantial portion of pensioners have left our state for better climates, and it simply cannot be claimed that the pension checks they’re cashing somehow benefit the Vermont economy. As long as we continue to deny that our challenges exist, we’ll be stuck with our heads in the sand. It’s time for some intellectual honesty.
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.
I recently retired from my first career in SEP 21. Just today, my home in VT went under contract to sell. We are heading to South Carolina. Why? To dam expensive, liberal, and cold in VT. We lived here our whole lives….for generations. It’s a shame. I’ll say this, I won’t look back. VT can choke on their progressive politics and high taxes while I spend my money in another state.
Years ago, an economist reviewed States with retirement pensions and found all were unsustainable and most were on the brink on bankruptcy or all ready were if it wasn’t for deficit spending or continual raising taxes/fees – same as our Federal government. Private employers moved to 401K plans that are relient on stocks/bonds positive performance and most people don’t understand the markets at all. The past three years is all about artificial numbers and artificial narratives – which means our currency and economy is all an illusion. Collapse incoming.
And yet……. Somebody is buying the real estate that the retired members sell when they leave for a more tax friendly climate. And, if the real estate is bought then the buyers must be able to afford to live here and pay taxes. You (OpEd’s) have beat this horse to death. You want people to stay in the state when they retire, then make it desirable to do so. Oh, I forgot, the party in power (approx 70% of voters) is fine with the levels of spending and taxation. And the party not in power continues to whine about state workers receiving a pension. My maternal side of the family came here BEFORE Vermont was even a state, my paternal side in the 1830’s. There are two of us left. We’re both leaving because we’re sick of scraping to get by. Not to mention voting in every election, local state and national and not seeing anything change in Vermont for the past 30 years. Why would anyone want to leave I wonder.
JS….open ypur eyes and think. You say:…”Somebody is buying the real estate …”
what you do not know is — who bought? We know it is largely out of staters….but I know a few that bought here in Vt SOLELY for COVID “escape houses”…and they expect to return to their previous houses and schools…..and SCHOOL is very important. My guess is many of the buyers are ” temporary-covid- work- from-homes”….and will afterwards keep them as weekend/vacation houses, later. There is NO guarantee…NONE… they will declare VT for full taxable residency and thus pay VT income taxes. Every idiot article I see of the cadre’s of “moving-vans-coming-to-VT” is too stupoid- or biased- to ask…ARE THEY DECLARING FULL TIME VT TAXPAYER RESIDENCY? My guess is….no.
My eyes are open, thanks. I have seen many homes in my town sell to people from out of state that have brought their families here and are going to school. I have offered my home to potential local buyers before putting it on the market with a realtor to give them (locals) the opportunity to purchase a home here that they can afford. This gives them the opportunity to stay in the local area where otherwise they would not have the opportunity. Housing stock, bot rental and for sale, is hard to come by for locals.
As an ex-Vermonter of thirty years we finally had enough under the Obama administration. We knew if D. Trump was elected president the economy would turn around and it would be time to sell the house and get the hell outta’ Dodge. We moved to NE Tennessee in 2018 and it was the hardest, and best, move we ever made. The cost of living is so low; it makes the cost of living in Vermont a crime. Our county is so Conservative that the democrats run as “independents”, what few of them there are. We still read the local Mad River Valley newspaper every week and thank God we were able to move away. Compared to southern red states, Vermont is a liberal insane asylum.
One of the greatest lies that I was fed “up North” was how many racists there are in the South. For Southerners the civil war is long dead along with racism. People are sooooo much more friendly and down to earth here. There is still much poverty here but frankly it’s a welcome change from the pretentiousness of Vermont liberals.
If you are thinking of moving down here, stray away from Nashville and the surrounding counties. While the livability rating is higher, that area is full of liberals and their usual stupidity. Same thing with Asheville, NC. We’ve been there a couple of times and it fells just like being in Burlington. Tennessee is a very conservative state, but North Carolina is struggling with maintaining its conservatism. The southern Appalachian Mountains are magnificent and put the Green Mountains to shame. We moved here for the outdoor recreation and we love it. Retiring in Vermont was unaffordable; retiring here in Tennessee is very affordable. I refer to what is happening as the great realignment of America. I would get the hell out of Vermont while it’s still possible. You won’t regret it.
I know several State employee “lifers”….as soon as they were able, they left for FLA and Delaware. Main reason? They said TAXES too high…yet they were dumb faced when I said they are uber liberals and THEY were the problem. Me? I left several years ago from VT….to AZ. we retired early and the only way to do so was GET OUT of VT asap….property taxes are 65% to 70% LOWER than VT, in AZ….no tax on social security…low income taxes…no heating oil….electricity averags 13 cents a KWH…..Enviro Green VT is double or triple that… It was a lot of money “in the bank” to get out.. Plus a bonus, no snow, no more 20 below zero….no more Socialsm…and for all the “upper end” $$$ taxes I provided..all I got back was hate, class warfare , class envy…spit back in my face…because I was successful. In meantime, the VT home we owned after 26 years appreciated 5%….but that was sold before covid rush. BUT….In FOUR years my AZ house has appreciated 70%. COVID federal cash saved VT for about 4 years….billions of free money rained down. I recommend getting out before they blow that money on climate change, Gender and BLM.
Relying on pensioners (an uniquely ENGLISH as in the UK term that gaslights those who’ve worked all their lives, trusted the gov’t to take care of the amounts they took out of each paycheck, to invest properly) for State income is an indicator of how badly the State is managing its fiduciary responsibilities. Those backs have already been broken with life-long slave labor at minimum wage or less in most case (very few see CEO pay), with the ONLY reward being the pension taken out of each weekly paycheck being there when it comes time to go off the clock.
That the State, after shutting down every mom and pop business in the state, thousands of entrepreneurs, farmers, and anyone else who managed to find a way to live here NOT accepting medical, telecomm or energy mafia lucre at a much higher rate of pay (think bribery), is even considering this expresses a deeply inhumane perspective.
The evil that is our government and its made men and women propping up its intrusion into our lives, its interference with our choices, and its blinding of informed consent, has had its time.
Time for a reset.
I once analyzed my retirement income in Vt, vs. Georgia. the difference after taxes and fees I pay here, vs. what I would pay in GA was $1000 a month. Same for Tennessee. I’m getting out as soon as the house is ready to sell. — That 1200 a month projected over my remaining lifetime is $240,000 that I get nothing for in Vermont.
The article does not give the full picture of where the pension monies go. Does the pension fund draw interest or is it fully funded by tax dollars? For those who continue to reside in Vermont some of their pension is returned to the state and town in the form of taxes paid. The unknown factor is how much money goes to business in tax free New Hampshire and other spending to out of state companies.
For starters, you can count Amazon, E bay, Wal Mart, and numerous other retail outlets set up to gladly take our money. NONE of the above do business in VT in terms of corporate settings etc; they know better! So the end user pays the sales tax, the shipping(if that applies) and other fees that can be added on. Make no mistake, the end user (VT Resident) always pays the freight.
Can you blame them ?
no
Pension recipients may be leaving for, “better climates” but everyone I know who has moved has done so due to the ridiculous cost to live in our once-great state. We love VT but are also planning our exit due to cost and political climate. The California of the east is not where we can afford to retire. The monetary climate is the one driving people away, not the cold. The ridiculousness that is our state government is the sole reason; constantly growing and never ever cutting. Even the pension liability you speak of is the result of gross mismanagement of the fund. The big fat IOU that was left in place of all the pension money the state spent has never been repaid. The state could have made the pension whole with Covid relief funds but nope…..more spending, waste, and government expansion. Flatlanders are moving here specifically for the progressive movement and traditional Vermonters are left footing the bill until they move.
Agreed 100% I too am leaving as soon as possible……and I dont have a big pension, its the cost of living thats killing me here…..
Same here. My income is modest but this state seems intent on driving out hard working people and bringing in those with their hand out. Besides, as a white person I’m public enemy number one. I’ll never be able to afford all the surcharges they seem intent on adding to our heating and transportation costs. Why not live somewhere with low property taxes and mild winters?
Your comments are spot on. I use the term “Excessive TFR.” Taxes, fees and regulations that are the cause on me forfeiting 250+ years of Vermont lineage. Taking my military retirement, Boeing pension and social security benefits to a place where you get something in return for your taxes.
Don’t drive too fast, my eyes are weaker now and I’ll be following your tail lights.