PENSONS: A massive shortage in funds to maintain the state’s public worker pension program is growing year over year and putting increased pressure on leadership to take action.
The state’s largest union for public workers, the Vermont-NEA, is asking that the state use as much federal money as possible from its massive $5 billion influx over the past year to pay down an ever-increasing liability in its pension program.
“As you receive word of the state’s 2021 fiscal year surplus and begin your work on how to address the truly rare “opportunity” of such a sizable amount of resources, we believe it would be wise and fiscally prudent to commit all these one-time funds to buying down the pension liabilities,” Vermont-NEA President Don Tinney wrote in a message addressed to The Emergency Board created to help deal with the financial shortage.
During this year’s legislative session, lawmakers passed H.449, which created the Vermont Pension Investment Commission and the Pension Benefits, Design, and Funding Task Force to help deal with the pension crisis.
As of May, the state had received at least $5.4 billion in federal funds intended to boost the economy while economic activity was largely stifled due to the coronavirus pandemic. Vermont benefited more than almost every other state in federal dollars per capita.
Tinney recalls how deficits in the pension system grew year by year.
“The teachers’ retirement system was underfunded for 24 of 28 years beginning in 1979, and just recently the chair of the Vermont Pension Investment Commission, Tom Galonka, said the underfunding, plus the lost investments on the underfunding, cost the system $1 billion,” he wrote.
“While the state, since 2007, has put into the system everything the actuaries recommended, that hasn’t made up for the lost $1 billion. Using all of the current surplus funds to pay down that debt will partially address the lost funds, and it will buy down the costs associated with lost funds and the current unfunded liabilities.”
According to Tinney, paying down the pension debt will ultimately benefit the rest of the economy.
“Reducing the unfunded liabilities in the pension systems will not only help to sustain those systems, but it will also help to relieve growing pressures on the general fund, making this a win-win proposal,” he wrote. “A more sustainable general fund will help to ensure that the critical programs important to the health of Vermonters, our environment, and our local and state economies can be funded well into the future.”
The message was also sent to state treasurer Beth Pearce, who for years the pension deficit has caught her attention. She is recommending that the NEA reform their pension program so that the economic burden can be reduced. She said in January that “action is needed” if the promises to public employees are to be kept. She warned that the deficit grew by over another half-billion dollars from the previous estimates.
In a recent commentary, Bill Huff offered sobering estimates on the magnitude of the deficits.
“The pension plan unfunded liability has been growing for years and is now nearly $6 billion dollars and the Actuarial Determined Expected Contribution, or ADEC, is out of control,” he wrote. “This is the amount of money that the legislature should commit to the pension funds each year. Just the annual increase in the contribution is nearly $100 million, bringing the total expected contribution next year to $316 million.”
Last year, the Ethan Allen Institute and Business Roundtable’s Pension Reform Task Force collaborated on a report which noted the accelerating pace that the deficits are growing.
“While the state has made some payments to these plans over time, billions are owed — and the amounts owed keep increasing at an accelerated rate,” the report states. “The unfunded liabilities for the pension plans have increased almost 110 percent in about a decade, from $1.1 billion in 2009 to $2.3 billion in 2018.”
Michael Bielawski is a reporter for True North. Send him news tips at bielawski82@yahoo.com and follow him on Twitter @TrueNorthMikeB.
Personally consider Don Turner plan the gold standard – From TNR:
Don Turner: The Legislature’s irresponsibility on pensions
TNR / April 14, 2021
…There are other options out there–options that don’t break our promises and avoid painful cuts. The Legislature could give state employees an option to switch to less-expensive defined contribution plans (and transition new employees into these plans); move other-post employment benefits (OPEB) into the Vermont health exchange; impose a small tax on retirement allowances until we reach an 80% funded ratio (a far better alternative than deep cuts); slightly tweak up the retirement age to match Social Security; and perhaps most importantly, phase-in reasonable increases to employee contribution rates over time….
…I would also encourage modifications to prevent future bureaucrats from gaming the pension system. It is far too common for agencies to promote or move staff around at the end of their career to inflate their retirement pension. Modifying the system to determine beneficiaries pension based on the average of their annual salary over their career versus the highest two years would be more equitable to all and would not allow someone to manipulate the pension system.
http://www.truenorthreports.com/don-turner-the-legislatures-irresponsibility-on-pensions
“Tweaking” the retirement age to Social Security age is NOT slight, and it IS a promise broken. Do you want bitter and burned out teachers teaching your kids?
There is no end to the teachers’ retirement problem.
There will be no end as long as we operate under the current mindset.
All of the issues are resulting from mismanagement and out of sight out of mind utopia.
There is plenty of blame to land on anyone who has been in public service since the 90’s, but particularly the legislatures. One of history’s biggest failures in VT.
There is no easy answer. But there has to be correction somehow, or bankruptcy will be facing us.
If I was a member of the Retirement program, I would be pushing for protection somehow…. Liens on State Owned property maybe? This would get attention if nothing more.
There is no other solution that insures the liberty of Vermonters: terminate public education completely and do everything to support & defend home schooling. With public schools now a hotbed for Marxist and pedophilia indoctrination, we must resist with every means at our disposal.
I taught for 35 years. I never engaged in Marxist or pedophelia indoctrination. Do you think I shouldn’t get my pension?
OK, you taught for 35 years. While you may never have engaged in pedophilia, did you teach in the public-school monopoly? If so, you had the advantage, at the very least, of a Marxist-oriented organization that holds taxpayers responsible for the success of your pension investment choices – not to mention guarantying your employment and benefits despite the poor academic performance of the students and the ever-increasing cost of your services. That is Marxism.
Oh, I’ve benefited! That’s the EXACT same argument that CRT proponents make. That I’ve benefitted from white privilege! I suppose you feel the same way about the military that works for that monopolistic Pentagon and gets a pension after 20 years. You know, the military that McCarthy said was riddled with Marxists. The military that now teaches CRT at West Point.
Okay, here we go again. More diversion and obfuscation, the typical maneuver used to change the subject, deflect criticism, and avoid responsibility.
No, Mr. Hier, that you’ve benefited has nothing to do with your conflated false dichotomy referencing CRT or the military. It has everything to do with the restrictions placed on parents not being allowed to choose competitive alternatives to your privilege as a public-school teacher, a privilege provided despite your skin color, and the issue you so conveniently deflect.
That you would compare your services to that of our military demonstrates just how egocentric you are, as though your services protect us from all enemies, foreign and domestic. If we relied on the public education monopoly to protect us, we would have lost our republic long ago.
Jay, first of all, I have nothing to do with the lack of school choice in Vermont. I wasn’t an NEA member. You’re the one who diverts. Pension reform and school choice are two different subjects. We don’t have school choice. Get over it. Now, what are we going to do about the pension situation?
Secondly, my job compares favorably with the military. For your ability to even write a response to this, thank a teacher. The military, however, got in over its head in Iraq and is handing back Afghanistan to the Taliban after spending $2.26 trillion and killing thousands of civilians, including children. They’re scared to death of Iran and North Korea and would get overwhelmed by Chinese and Russian hypersonic weapons quickly. Our military is worse than our education system.
Yet you had the advantage of going home every night and staying in one location vice fifteen in 24 years.
That you would even dare to compare your job to that of a military member sickens me.
It must have escaped you, as a teacher, that your poor choices at the ballot box are the reason for your complaints about our military – politicians control everything they do.
Frank, you know nothing about me. So don’t judge. I never in my life voted for a Democrat above the office of Probate judge, if that’s what you’re accusing me of. I served my country honorably in the military for seven years. And I’ve also had a challenging and vitally important job as a teacher for 35 years. What have YOU done to better our society?
Government is a non-competitive employer. The citizens who pay the wages have no alternatives, and the majority of the public schools in this state teach socialism without giving parents any say in the matter.
I’ll continue to resist your attempt to change the subject of this discussion – to the military, to Iraq and Afghanistan, etc., etc., or to your claim that you weren’t an NEA member. I never said you were.
But you do make a point that I’ll address for the benefit of TNR readers.
Re: “Pension reform and school choice are two different subjects.”
No, you’re mistaken. Pension reform and school choice are inextricably connected.
Teacher pensions are negotiated benefits in teacher contracts, for NEA members and non-members. The State control of those benefits is also negotiated. And, currently, the rate of return on pension investments is guaranteed by the State.
The only reason the State can guaranty pension benefits is because the State controls the education budget, and the education property taxes that fund that budget, including teacher pensions. School Choice, on the other hand, has existed in more than 90 Vermont school districts for decades, but not in every district (an issue now being litigated in our courts). So, when parents receive, for example, the Average Announced Tuition voucher specified in Vermont statute, they can use that money to send their children to virtually any approved public or independent school they choose (including religious schools). Independent schools negotiate their own teacher contracts (wages, benefits and pensions), which are not defined or guaranteed by the State.
Here’s the deal – when all parents are afforded School Choice tuition vouchers, as many Vermont parents already receive, all schools, public and independent, will have to compete for their customers. Public schools will finally be forced to demonstrate, as independent schools now do, that their students have better outcomes at competitive prices. And being price competitive will finally resolve the pension reform issue.
This is why the public-school monopoly, as it currently exists, resists School Choice with false Marxist rhetoric like “We don’t have school choice. Get over it”. Despite the fact that 90% of Vermont high school students graduate, only 50% of them attain grade level proficiencies, while Vermont taxpayers pay some of the highest annual per student costs in the world.
Consider this:
“A group of Vermont parents are suing the state and local school districts over unequal access to education under the state’s 150-year-old Town Tuitioning system. The parents say the program violates the state constitution by allowing children residing in certain school districts to attend the school of their choice and denying the same right to others.”
Vitale v. Vermont – Liberty Justice Center
It’s only a matter of time before an educational free market resolves all of Vermont’s education woes, including pension reform.
Jay, you are a one trick pony. We’ve had our education system for many, many, many decades. Centuries even. I guess we’ve always been Marxist.
Speaking of a one trick pony, there you go again…misrepresenting what you said – which was:
“We don’t have school choice.”
… when in fact we DO have School Choice.
Whatever, Jay. I taught for 35 years. Now pay me. Actually 30 years was the deal when I started.
You are, of course, kidding. Right?
You weren’t paid for 35 years? And now I should be the one to pay you? That doesn’t make any sense either. No wonder our kids aren’t learning anything about how a free market economy works.
Sure, Jay. Pay me. A member of the military got paid to protect you for only 20 years. Now you also pay the pension. You’ve written hundreds of words in this thread, all spelled correctly. You owe several teachers for that. It’s called the social contract. You benefit. You pay.
Mr Heir, I am grateful to have been schooled at a time when teachers actually taught if you are one – a hearty fistbump. However I am shocked at how much has been pared down – space does not permit listing – to compesate the ever-increasing benefits paid to teachers. From a class size of 30 to a class size of as fews as 10, as well as paid classroom assistants and volunteers, speaking for myself, your arguments ring hollow.
The glib politician-like ease that teachers atrtempt to shoehorn their case is astonishingly vacuous. As far back as I can remember teachers have been bitching about how much they work and how little they are paid so call me unsurprised.
And have known some of the most hardworking, caring humans who inspired their students as well as some of the most incompetent excuses for humans I have ever met are umbrellaed into the school system. Over the decades it has only grown worse and it is simply breathtaking that our school system harbors these overly-educated fools.
VT taxpayers do not possess the funds necessary to pay the negotiated pension rates and as such it is bankrupt. If you worked for a bankrupt business and it went under you would be forced to accept a negotiated pension rather than the windfall most teachers receive. As such it is the teachers who should be connected to a 401-k rather than benefits managers.
So you are essentially demanding that other Vermonters who would benefit from those funds be denied them, and/or we taxpayers who VT has taxed to the extent that like 10,000 or more have fled the state in the last 10-15 years.
As you remind us to “thank a teacher”, pls be thankful for the taxpayers who so generously compesated the likes of yourself and a career path which allows retirement at 50 and when our tax rates begin to skyrocket receive generous bonuses to retire rather than forced to do so by a totem system. And you are not amongst other vets who commit suicide at the rate of approx 1 per day, and the many who are homeless.
We do NOT get to retire at 50. Military personnel do, however. The pension issue is not the same as the quality of education issue. To improve school quality, I’d be for school choice and merit pay. The one way the pension issue is tied to the school quality issue is that if you make burned out teachers stay in the profession, the quality of education will definitely go down.
Agree on school choice and merit pay. Teaching groups could break off from public ed and start own schools – like the schools all over the state in the 70s. I’d like to see Latin return lol, math clubs, writing clubs, science clubs etc etc Civics!
They can retire @ 50 or 55 when the tax rates get unbearable also think state of VT employees do the same – it’s called ‘early retirement’ but not exactly an expert here 😀
I always wanted to start a charter school. But not allowed in Vermont. Early retirement is such a big cut in pay that full retirement was the only option for me. Some teachers take it if their spouses have good jobs. Many of my colleagues in Fair Haven went to NY for a good pension deal or Rutland to get a city pension on top of their state pension. Colleagues a few years older than I could get a full pension after 30 years. I had to do 35.
Hier – my bad
The Social Security age is currently 67 – a mere two years over the 65 it was. If they retire early a modest clawback
Burned out teachers?! Please Curtis, don’t compare the military to the education system. These men and women put their lives on the line for every American. I don’t ever remember a teacher walking around without limbs from putting in a hard day in the classroom. You feel you should be put on a throne and worshipped for having a career in teaching. Why?
I will say that the education system was much better 35 years ago but from what I am hearing and seeing now…..the VT education system is a disgrace. Yes, you are entitled to your pension, as I am mine, but no teacher should be getting a raise every year, especially when they are not doing a good job educating these children. When a teacher has 8 children in their class and not one of them passed the state test, there is a major problem. When my education taxes go up over $500. in one year, when the ACT 46 was supposed to lessen the burden….enough is enough. VT needs more quality, not quantity of teachers, and less administration. We can’t keep going on like this.