By Rob Roper
Vermont now has a $4.5 billion unfunded public pension liability for teachers and municipal workers. The politicians who created this problem are slow (stationary, actually) to take up the task of fixing this because the numbers are huge and telling someone they’re going to have to suck it up and pay does not promise to be a politically popular activity.
But who should take the hit: taxpayers or union members? Actually, morally speaking, neither.
The reason we’re in this mess is because the politicians charged with building and maintaining the pension system chronically underfunded it on the one hand, and on the other engaged in some book-cooking by making blatantly unrealistic estimates on investment returns, which led to further underfunding.
Rob Roper is the president of the Ethan Allen Institute.
Why did they do this? Because they wanted to spend the money on other programs. Money stocked away in the pension funds, which benefits some in the future, couldn’t be spent this or that thing constituents were clamoring for today.
Here’s an analogy: You contract with a builder to construct a house (the pension program) for your aging parents (union members), who are also contributing to the costs. The contract (state statute) stipulates that the builder must spend the money you and your parents give him on materials and labor to construct and maintain the house. But, when it’s time for your parents to move in, it turns out that the contractor didn’t use the a good chunk of funds provided to build and maintain your house. He used them to subsidize other projects he was working on around the neighborhood. Maybe they were worthwhile projects: a firehouse, low income housing, a new rec center. But what the contractor did would still land him in court. It was neither honest nor just.
So, who should shoulder the responsibility and financial costs of making this right?
Not the taxpayers. Taxpayers have already provided the politicians with the money to build and maintain the system. To make them pay again would be like in the example above, the contractor telling you that, despite his malfeasance, if you still want your house built, you’ll have to pay him again — in this case through even higher taxes. Um, no.
Not the union members. Whether you agree with the benefits promised or not, they were promised, and that promise should be kept. That your aging parents, again referring to my analogy above, recommended the contractor and keep insisting that he’s a great guy (i.e. support the politicians who did this to them) is a question for another time.
The money to fix the pensions should therefore come from within existing government revenues. The politicians who put us in this position should have to bite the bullet and make the hard decisions necessary to make the taxpayers and the union retirees whole. What the contractor did in my analogy was a crime. We don’t hold our politicians to the same standards (unfortunately), but perhaps a just sentence for what they did is having to shoulder the political ramifications of their actions.
Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.
Once the libs and socialist gain complete control, Vermont might look like jolly old England in the tale of Robin Hood. The working class will be the serfs. The autocrats will have TCI, GWSA, and the people’s common property. They will have, “Complete control”, and we will have plenty of work, but not enough to pay our taxes.
Here is a good article on how we got into the pension mess: https://vermontbiz.com/news/2020/january/15/vermont-business-roundtable-takes-troubled-pension-system
As the article shows, serious, chronic under-funding of the pension system really accelerated in 1991, when Howard Dean became Governor. Pensions continued to be drastically underfunded for the first nine years of Dean’s tenure. So much for his claim to be a “fiscal conservative.”
100% funding started in 2007 under Governor Jim Douglas.
When you are in a hole the first thing you need to do is stop digging. Defined programs are a thing of the past and are unsustainable. Not debatable.
What direction we go in is on the table, let’s have a conversation.
well, I was told, by someone who should really know, that Vt legislators have been “helping themselves” to many many millions of the money put in and set aside for state retirement,,,like a LOT of money,,,doesn’t matter where ya go, any state, politicians are thieves, and some do quite well,,,ask Sanders
Rob is right on. The do gooder got the fund into the mess that it is in, let them shelve some of their feel good projects and dedicate the fund to solving the problem they have created. Enough, already!!!
Has the sound of the federal government. They use SSI for the countries piggy bank, and then tell us we are going bankrupt. Bad enough the kids are leaving this would surely make them not come back. Now the issue of when retirement comes around. I am looking into moving to Tenn. for they let you keep more money than VT does.
These legislators that created this problem were elected in free elections … so voters are not off the hook. And over and over they have had options. They could have voted for people who would pay these obligations by cutting government in other areas, but over and over they did not. Voting irresponsibly has to have consequences or there will be no correction. And in the end, it surely will be those who stay in Vermont that will have to pay, either by government cuts or higher taxes … unless the state goes insolvent, in which case the retirement plans do not get fully funded.
If VT goes insolvent, there is no guarantee that any percentage of the retirement fund gets paid. At that point it is up to the Federal government. It will decided if any and at what rate the pension plan will be funded by Federal taxpayers. When United Airlines filed bankruptcy, it cut loose it’s retirement program. The Fed arranged three or four tiers of payments. Some got different percentages and one tier got zero. I knew a retired pilot who got nothing. He worked thirty years for United, retired and drew his pension which was eventually taken away. All those state workers who keep voting in liberal Dems, including the retired ones should be worried about who they vote for.
Well stated, excellent article.
Conservatives would be wise to put up bills that say the state must fund or at lease attempt to keep their promises,
Then the progressives and socialists will have vote yes or no, exposing them, they can’t do it as you’ve said they spent the money on all sorts of programs, that they’ll have to cut. They will have to cut.
The majority if called out and exposed for simply what they are doing will crumble and self destruct. Math is math…..they spent all the money and they CONTINUALLY refuse to fund the program.
Nice idea. But that would only work with honorable politicians. Libs, progs, and socialist are not very honorable.
That’s the point, then perhaps all those who voted in the majority will see they really don’t want to fund the retirement.
Also….use their own words against them, don’t fight. They want more money, we can say it’s for the retirement fund…..
Then perhaps all the state employees at the very least for self preservation and selfishness would stop voting for the same people.
The Legislature has continuously spent the money allocated for the pension fund on other things. They have even tired to get their hands on the retirement money that municipalities and their employees have paid into the Vermont Municipal Employees Retirement system. Fortunately the states only control here is that its overseen and governed by the State Treasurer. The people responsible for this crisis are the ones who mismanaged it and misused its money, the lawmakers. Unfortunately we elected them. This shouldn’t come as any surprise to any reasonably intelligent person. If we keep electing people who want to give everything away and create programs that are a waste of our money you can expect it to get worse. Lawmakers have no fear of their decisions. They vote the way “they” want knowing its unlikely that anyone is going to run against them so they are free to do as they wish. As much as I’d like to blame somebody else for the problem we have to look at the root cause which ultimately lies at the feet of the voters. Until there is a sweeping change in our state government expect more of the same.
Vermont’s Unfunded liabilities, who pays , well you do !!
The problem is that year after year benefits and other incentives are piled on with
with not even a thought, on how to address this issue from Montpelier and it’s cast
of masterminds from the top down……….. pretty sad.
We need to hold all legislators feet to the fire, especially spendthrift Liberals and all
the agenda driven bills proposed for 2020……….
Wake up Vermont, hold these legislators accountable they don’t care about you or
the state, agenda politics.
Vermont has a cancer and it’s in Montpelier under the golden dome, there is a cure
and it’s called ” vote ” these unaccountable fools out before the state DIES !!
So Rob, what you are advocating is, I assume, a measured approach to a balanced funding mechanism to get the fund to fiscal stability. What I do not believe is that The legislative rulers in VT will take anything away from current programs to fund it. All one needs to do is look at the myriad of bills proposed by the progs this year which would add measurably to the cost to Vermont citizens with no room left or any notion of the Retirement fund’s unfounded liability.
So, thanks for waving, once again, the red flag. Unfortunately, the progs that rule the state house have shown us they are substantively colorblind!
I spoke to my 2 “Representatives” at town meeting
I pointed out that NH has twice as many citizens as Vermont
And Vermont has twice as many bureaucrats as NH
That means that Vt has 4 times as many bureaucrats per citizen as NH has.
They looked puzzled. Wonder why there is never enough tax money?!?!?!
“They looked puzzled. ”
You hit ’em up with to much Math all at once and ended up
putting them in a daze… Maff be hard for the critters in Montpeculiar…
Richmond and DBean – Montpelier does have its own form of mathematics. It morphed from the “New Math” system to “Socialism Math” where addition is done by subtraction and mathematical outcomes that do not fit its intended purpose discarded and ignored. Also everything is rounded down.
Math isn’t only hard – it’s apparently racist as well. Provides a convenient excuse for those too lazy to learn.
It’s scary isn’t it? They have no concept of the big picture. Did you get lambasted by the crowd too?
I’ve stood up at town meeting and discussed how we are putting money into the accounts of UVM medical, building a local savings account for them with property tax money. Clearly they are profitable as their savings account keeps getting larger, matching our funds.
They didn’t change course, despite others before me with accounting degrees and professions saying the same.
Great job!
With due repect it’s not our fault either. And we likely have seen businesses go bankrupt with all losing jobs leaving little to no money left for employees retirement. Don’t build a house upon the sand lest a sinkhole devour it? The aggrieved need to gently be brought back to earth and kindly assuaged of reality. Fine to build a house but if there are so many that the bank runs out of money, and its minders put the money into a bonfire the good ppl of VT should graciously just add more money to the bank to add to the fire…chaching! Sorry – there’s no fixing stupid.
Unions do not represent workers any more – primarily public sector employees. Benefits which are far in excess of what those paying the bills receive need to end.
Go ahead union bosses, corrupt politicians and beneficiaries negotiate the sun, moon earth and stars with only the sky as the limit…when the bill comes due and theres no money left…what then? Pull it out of our a***s on your behalf? What happens when we run out of them? Which is what’s happening.
State needs to file for bankruptcy bc we simply cannot pay what these masters of the universe have put on plastic and our leaders have burned. And w/our reduced bond rating – the compounded interest.
And should anyone other than a *real* bank be given control of someones nest egg and financial future? The funds should be placed in trusts to be used upon retirement and interest part of the banking, treasury and bond system.
But this is just one of the myriad examples of our leaders and officials failing us all for their own selfish interests. Filling our state with employees – specifically state of VT – and teachers far in excess of other states is being presently done to create a patron class of voters captive to the Dems and our governor who has allowed this to happen. And why should public sector employees have unions *at all* as they are essentially negotiating with the taxpayer. And this is not our fault either.
The unholy alliance between Democrat party which includes Comrade Phil, the employees who benefit and union bosses are part of the screwing of us all and ruining the quality of life to the extent VT is experiencing a massive exodus. Let them do the splaining to each other bc when it’s all said and done we’re now being asked to prop up them, there rigged system and the failure they’ve created.
National problem, same reasons. You are spot on, rob. Make them do it. But how?