The state has overpromised and underfunded the pension funds for teachers and state workers for so long that taxpayers now carry a $5.8 billion unfunded liability. Those are promises the state doesn’t have the money to pay for. Now it’s impossible to ignore by even the most obtuse lawmaker.
If we had acted five years ago when the Vermont Business Roundtable and Campaign for Vermont again brought these issues forward we still probably could have avoided it. But now the deficit is twice as large as it was in 2015 and adjusting benefits for new hires isn’t enough, we need to make structural changes.
On Friday the House Speaker pulled her support for the plan in favor of a summer study. The Speaker is pushing to get a bill addressing governance out soon and then asking the study committee to come back with recommendations before the end of the fiscal year.
In the final part of our interview with David Coates, retired managing partner at KPMG and a member of the Vermont Business Roundtable, we look at why the state faces a declining workforce and ranks at the bottom for wages and benefits, and consider solutions to revive Vermont’s economy.
In the second part of our interview, David Coates (retired managing partner at KPMG who has years of experience with Vermont’s debt and fiscal woes) proposes corrective measures to address the state’s growing debt of unfunded liabilities.
I believe there is a solution that will keep the promises made to plan participants, reduce plan costs over time, and eliminate the unfunded liability we face today. Annual employer contributions would become sustainable and predictable.
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. Leaders of the House Government Operations Committee released their proposal on Wednesday.
For years, David Coates has been sounding the alarm about Vermont’s unfunded liabilities regarding public pensions and health care benefits for retirees and their spouses. He joins Meg Hansen to explain this crisis and why no one in power wants to deal with the elephant in the room.
There are no conditions tied to the funding, meaning the union pension plans aren’t required to make changes or pay any of the money back.
The Legislature is now expecting to have $200 million on hand from stimulus funds to put towards broadband buildout. This is nearly a 670% increase over what the state had planned to spend in fiscal year 2022. Also on the upside, stronger voices have started testifying on the state of our pension funds.
An $86 billion bailout for nearly 200 union pensions was included in the Democrats’ massive stimulus package, which President Joe Biden is expected to sign. The union bailout, among the $1.9 trillion coronavirus relief package’s provisions unrelated to the pandemic, rescues 185 pension plans across several states.
I here propose a bold plan, which I will call the “Vermont Pension Funding Action Plan.” The plan would create a state task force to combat fraud and waste, replete with a confidential phone line for reporting.