Todd Smith: Crisis of leadership on state pension system

By Todd Smith | The Caledonian Record

For the past 20 or so years, we’ve made a biannual effort to inform readers about Vermont’s unfunded pension crisis.

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 made to public-sector employees that it doesn’t have the money to pay for. The debt rose about $600 million this past year, alone.

Todd Smith

Todd M. Smith is the publisher of the Caledonian Record.

Lawmakers have willfully ignored the problem for decades. It was easier to get away with it 20 years ago when only a few responsible voices — David Coates, Tom Pelham, John McClaughry, Art Woolf, Geoffrey Norman (foremost among them) — could be heard sounding the alarm.

The number of voices grew in proportion to the size of the liability. In the past couple of years, as we’ve long warned, the problem became an existential crisis — consuming double-digit allocations just to service the debt and crowding out other substantial government services.

Now it’s impossible to ignore by even the most obtuse lawmaker.

So we were guardedly hopeful when, earlier this year, House leaders followed the lead of State Treasurer Beth Pearce and promulgated a plan to address the man-made disaster. It’s one thing to have a negative balance sheet. It’s quite another when there’s no money to fund compost-pile police because the money is going to interest on debt.

Basically, the plan is what we’ve long insisted it had to be. That’s not because we’re financial geniuses, but because it’s the only choice if the state wants to avoid bankruptcy. It calls for higher contributions from beneficiaries, smaller and later payouts, and a move from defined benefits (pension) to defined contribution (401K) plans.

Then the public sector unions went stark-raving-mad and House Speaker Jill Krowinski, D-Burlington, crumbled like the Red Sox in 2021. Rather than use any of the 12,000 existing studies on the topic, Krowinski said the legislature would have to study the topic, providing a useful study in political cowardice.

Of course, Krowinski’s conundrum is that of all liberals who owe their single-party monopoly to patronage predicated on extravagant promises to unions and public workers. The financial solution to the pension crisis is obvious. The real problem is finding leadership in Montpelier.

Todd M. Smith is the publisher of the Caledonian Record, where this editorial first appeared. He lives in St. Johnsbury.

Images courtesy of state of Vermont and Todd Smith

9 thoughts on “Todd Smith: Crisis of leadership on state pension system

  1. Don Turner wins the prize lol – best solution imo:
    First, follow the path of other states (link is external)with distressed pensions, and move to a defined contribution system for all new state employees and new teachers. Yes, a new DC plan may cost more at first. But over the long run, this will save the state resources, give employees direct control over their retirement investments, reduce the vesting period, and increase portability of benefits.

    Second, deal with other post employment benefit (OPEB) liabilities by terminating the current program, and sending all state employees to the health exchange. If Vermont’s individual health care market is good enough for the average Vermonter, then why is it not worth pursuing for, say, state bureaucrats?

    Third, follow the bipartisan idea proposed by Rep. Linda Joy Sullivan (D-Dorset) to impose a 1 percent tax on retirement allowances until the retirement system reaches an 80 percent funded level.

    Fourth, slightly raise the state retirement age from 65 for full retirement benefits to match the Social Security retirement age sliding scale of 66 to 67 (depending on one’s year of birth). This could defer retirements and keep individuals paying into the system longer.

    Fifth and finally, change employee contribution rates to retirement plans. For all defined benefit and defined contribution plans, the state should increase employee contributions by 0.5 percentage points across the board to improve solvency.

    To summarize: stop the bleeding by switching from DB to DC; get OPEB under control by moving retirees to the exchange; finance pension expenses with a temporary, 1 percent tax on retirement allowances; raise the retirement age by 1 – 2 years to defer retirements; and increase solvency by slightly adjusting contribution rates.
    https://vermontbiz.com/news/2021/january/28/don-turner-pension-mess

    Unless I missed something the 5 step plan finances the current obligation from within the affected programs of beneficiaries – not taxpayers.

    Don Turner for Governor 😀

  2. Try this solution: Break the current pension-funding bottleneck into two parts.

    Fund existing pensions as promised but do not offer public pensions to new hires. Instead increase the salaries of the new hires and let them privately contribute to their own IRA with matching funds from the state. Any past public employee can voluntarily switch to the new system at any time.

    Future employees will have sole control over their IRA contributions and how they are invested. The state government will not be allowed to invest or borrow any pension money. Eventually, past public employees living off the old pension plan will have transitioned to the new plan, retired or died.

    Deny the right of public unions to strike as the state has demonstrated it cannot faithfully negotiate using other peoples’ money and unions have shown to wield undue power over their members, politicians and the public at large.

  3. All these union members get what they voted for, corrupt left wing politicians who have squandered their monies and investments. I for one do not believe we should dig these jerks out, they are their people! deal with it teachers and state workers………

  4. Vermont’s unfunded pension obligation at this point has EVERY Vermonter owing about $10,000 to the system. Part of the problem is that Vermont has way too many public employees being lavished with way too many benefits. The other part of the problem is that the demKKKrat-run legislture is in total denial of the problem. The solution is beyond simple and does not break any promises to past or current employees and retirees: Immediately go to a defined contribution system with a decent employer match of 3-5%. It used to be that the private sector had to have outstanding benefits to compete for workers since the salaries were typically below those of the private sector. That is no longer the case, and State workers are well compensated AND have a lavish benefits package. The blame rests squarely on the influence of the public-sector unions VTNEA and VSEA. These unions have 2 functions… to protect bad workers and to launder public funds from employee paychecks into union dues and funnel it back into the coffers of the demoKKKrat party through campaign contributions.
    The voters of Vermont have the opportunity to solve this problem every 2 years by not voting for these clowns so it really is in our hands.

    • The source of the pension problem maybe the influence of the public-sector unions, but not necessarily the blame…….The blame resides with the leadership in Vermont State Government to include all Governors and legislators who for decades have failed to deal responsibly with the pension issues.

      The unions’ job is to advocate for the best deal they can get for its members…….It is the Governor’s and legislature’s responsibility to insure that the compensation and benefits paid to union members are fair, affordable and in the best long term interests of all citizens of Vermont…….What we have witnessed over the decades are multiple Governors and legislators failing to carry our their fiscal responsibilities in this regard by repeatedly folding under union pressure.

      It is now time for Gov. Scott to step up along with Speaker Knowinski and President Pro Temp Balint and put an end to the decades long lack of responsibility in managing the State’s pension programs……..No more studies needed……..What’s needed is leadership from our leaders.

  5. Pay-to-Play:

    This sums up how Vermont’s unfunded pension & healthcare liabilities accrued.

    In return for overly generous and unaffordable benefits by Government, VOTES and CAMPAIGN DONATIONS were secured for the progressive-Democrat Party by the teacher’s and state worker’s union.

    Knowingly using unrealistically high discount rates of seven to eight percent by Government, kept the CAMPAIGN DONATIONS and VOTES rolling in for decades with the progressive-Democrat Party.

    Now, the jig is up.

    It’s corruption. Pure and simple.

    The corrupt media won’t reveal the truth because they’ve been apart of this corruption: WCAX, Vermont Digger, WPTZ, VPR (Vermont Public Radio), Burlington Free Press, Seven Days, NPR, CNN, MSNBC, CBS, ABC, NBC, New York Times, Washington Post. No doubt I left many out.

    Propaganda is a powerful tool in the age of science, technology, organization and knowledge.

    With Government mostly in control of education, the United States of America is seriously in doubt. Some form of Totalitarian Government is a reality.

    Separating the world into wolfs, sheep and shepherds. It’s apparent the wolfs are ascendant. The sheep are deserving of their fate. The shepherds will die in virtue.

  6. PENSION CRISIS: The crisis described by Mr. Smith is going to be a train wreck, despite the decades of warnings he’s noted. The legislative overpromised and underfunded pension funds have been driven by voting blocs voting on their own pay&benefits…conflict-of-interest. How can we deal with professional organizations protecting workers without building extortion into our legislative process? Will we engage this issue or repeat this crisis in the future?

  7. Over the last thirty years this has been offered as the solution. It has played out in the private sector this way because it is the only economically viable option. There is SocialSecurity and what you save throughout life with help from your employer or not.

  8. Pretty much sums it up. Good reason to change both composition and leadership in the legislature.
    Thanks Todd.

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