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.
Recommendations proposed by State Treasurer Beth Pearce would reduce the pension fund shortfall and maintain defined benefits. However, the retirement payout for current employees would likely be smaller, while the shortfall would be reduced by “only” $2.2 billion. The entire pension fund shortfall is $2.9 billion.
The total of the two pension funds and expected OPEB obligations went from $4.637 billion a year ago to the present $5.657 Billion. That’s an increase in required expenditures of over a billion dollars in a single year. How did we get to this dismal situation?
Faced with a $2.2 billion shortfall of unfunded financial obligations, New Hampshire entered the current pandemic playing catch-up and could face more challenging headwinds in the future, a new report states.