By Rep. Jim Harrison
If it was easy, the pension dilemma would have been solved. There is no hitting the Staple’s “Easy” button to solve this one.
The unfunded pension liability for teachers and state employees has grown from $1.0 billion to approximately $5.7 billion in the past 13 years. This is despite an extended market rally and ever-increasing contributions by the Legislature. In the budget for the coming year, the state’s payment is up over $100 million to $316 million. In addition, the House budget set aside another $150 million of the current one-time surplus.
It’s clear that something must change, or the funds will go bankrupt. The situation has already caused a downgrading of the state’s bond rating. It’s easy to find fault with the Legislature or governor in the 1990s, when the annual contributions were often reduced from recommendations; or the actuaries that didn’t forecast accurately the changing demographics (more retirees and living longer); or the treasurer or investment committee for utilizing an optimistic rate of return forecast in the past that masked the problem; or the pension boards themselves, which have a majority of plan participants that should have forced a discussion earlier.
The reality is, that is all behind us and some changes need to be made.
We should give House Speaker Jill Krowinski credit for a willingness to tackle this difficult issue, especially in her first term as the House leader. Her chair and vice chair of the House Government Operations Committee unveiled a plan that reduces benefits of future retirees and increases employee contributions. Even though they indicated it was a starting point for discussions, the proposal has not gone over well.
Emails coming in from union members have been strong in their opposition. I understand the frustration.
While I don’t have a pension, if the folks in Washington were to decide to lower my Social Security benefits, I would be upset as well. However, while I am not on the committee trying to craft a path forward to sustainability, some type of shared sacrifice may be needed.
During discussion of a normally benign misc. tax bill, a sign of the debate to come rose when a Progressive-led amendment was offered to add an income surcharge to high-income Vermonters to apply to the pension liability. The Ways & Means Committee opposed the proposal and it was defeated on a 125-21 vote by the full House.
Union leaders have been calling for a surcharge on the wealthy and more study on the pension issue. With the liability growing $600 million in the past year, another delay could make the solutions even more expensive and harder to enact and risk the future viability of the program.
Ticket to freedom
With an unexpected spike in recent Covid cases, especially among younger age groups, that could delay reopening plans, state officials are doubling up efforts to encourage Vermonters to get your vaccine shots as soon as you are eligible. The governor has suggested that life in Vermont hopefully could return to normal by the Fourth of July if high vaccine rates continue.
Highlights of the past week:
Utilizing new federal funds earmarked for broadband, the Vermont House appropriated $150 million into a new Vermont Community Broadband Authority. The new entity will help provide grants and loans to the communication union districts (CUD) throughout the state. CUDs are towns working together to bring broadband to underserved areas.
A boost to childcare support in H.171 was approved by the House by a wide margin. In addition to expanding subsidies to families earning less than 350% of poverty (100% of poverty is approximately $22,000 for a family of three, so this would apply to that same family of three with a combined annual salary of approximately $77,000 or less), the legislation includes a study on the costs and feasibility of capping childcare costs to a maximum of 10% of family income in the future.
The Senate approved S.79, which creates a statewide rental (including short-term rental) registry and inspection program, on a 22-7 vote.
A second House committee advanced legislation, H.157, to require a new registration for home contractors on a 7-4 vote. The committee had been deadlocked on the bill until one member offered an amendment to increase the threshold of work before registration was required.
Still no deal on a key unemployment bill, S.10, in the Senate as of Friday afternoon when consideration was halted because of a power outage in Montpelier. The controversy surrounds a proposal to increase state benefits for unemployed in addition to the extra $300/week Congress authorized, including a new $50 addition if the recipient has any dependents.
The Appropriations Committee added a boost to next year’s tourism marketing efforts of $2.5 million to give a needed boost to the state’s hospitality business later this year as things reopen.
The House approved legislation, H.437, on a 91-51 vote, that increases the property transfer tax on commercial and residential properties above $1 million to provide tax breaks on more affordable manufactured homes.
Jim Harrison is the state House representative for Bridgewater, Chittenden, Killington and Mendon. He can be reached at JHarrison@leg.state.vt.us.