By Sen. Alison Clarkson
When the Pension Benefits, Design, and Funding Task Force was created last year, I was relieved. Our public pension system was in crisis. If we did nothing to fix the problems, Vermont taxpayers were looking at an unfunded pension liability of $4.5 billion dollars, with that liability growing for the teachers and state employees by over $600 million dollars per year. These financial pressures (historic underfunding, fund underperformance and rising health care costs) coupled with demographic changes (fewer people paying into the system and people living longer) were stressing the pension system. To guarantee a secure and reliable retirement for people who have served Vermont admirably for decades, and to recruit new teachers and employees, we needed to address this thorny problem.
Unlike the many other states facing a similar crisis, Vermont chose to address it head on. It created a well balanced task force with every stakeholder group represented at the table to tackle this daunting job. Everyone had skin in the game and everyone benefited if a solution could be agreed upon. This group of 13 participants managed to accomplish this feat. They worked hard building trust, learning together, listening to each other and compromising. It was a good example of Vermonters coming together to solve hard problems.
After six months of work on this complex issue, the Pension Task Force voted unanimously to adopt their Final Report on Jan. 10. This agreement protects the public pension system, saves the taxpayers $2 billion in the upcoming years, and maintains the defined benefit plan. Vermont will be adding hundreds of millions more to lower the unfunded liability and will continue to contribute millions annually to the pension system both through the ADEC (actuarial defined employer contribution) and by pre-funding the OPEB (other post employment benefits/health care).
While there are differences between the teachers and state employee agreements, some changes will include: phasing in a progressive contribution structure, higher employee contributions, delaying their COLA for an additional 12 months and other benefit changes. At the public hearing last week, many teachers and state employees testified that the agreed package to keep the pension system healthy was “fair and reasonable.” Those who are currently retired are not affected by these changes.
In addition, the Pew Charitable Trust recently cited Vermont for restructuring its pension governance board, which is an important step in strengthening our pension investment and oversight practices. I encourage you to read this report and the Joint Fiscal Office’s overview. Both are on the pension task force’s webpage.
Here is a link to that report: bit.ly/vtpensionfinalreport
I appreciate hearing from you. I can be reached by email: [email protected] or by phone at 457-4627. To watch Legislative committees in action, and to get more information on the Vermont Legislature, the bills which are being debated now, and those which have been proposed and passed, visit the legislative website: legislature.vermont.gov.