Vt. lawmakers pitch plan to shore up pension funds
MONTPELIER, Vt. (WCAX) - Vermont lawmakers are considering a plan to shore up a multi-billion-dollar hole in the state’s public employee retirement systems by asking teachers and state employees to pay more and get less.
Tackling the longstanding underfunded pension has been one of the biggest issues of the 2021 legislative session. Vermont’s public sector retirement funds are facing a $3 billion unfunded liability. A highly-awaited draft plan released Wednesday outlines a potential path to financial sustainability.
The report from House lawmakers would make teachers and state employees pay more into the fund, stay in the workforce longer, and get less in monthly benefits when they do retire. Cost of living adjustments would only apply to the first $24,000 of the retirement benefit, and employees would also have to work a minimum of 10 years, instead of five, to be vested in the program.
The effort was also jump-started by a one-time $150 million state investment from the American Rescue Plan. “I think it’s important to be honest with the taxpayers of Vermont that we think there should be other changes that should be made in addition to putting a slug of $150 million in to fix this problem,” said Rep. Sarah Copeland-Hanzas, D-Bradford.
The massive shortfall stems from a combination of factors including a lower than anticipated return on investments, underfunding in the 1990s, and more retirees living longer.
“It’s been a rough year, and to receive this news today is just a gut punch,” said Don Tinney, the president of the Vermont National Education Association, the union representing teachers. He was among those union officials questioning why lawmakers aren’t putting more money into the pension funds by raising taxes on Vermont’s top earners. “Those folks can well afford to pay additional money in taxes to support services in the state as well as help fund this pension system.”
Copeland-Hanzas however says the $150 million investment is a significant investment to the retirement funds, and that the Legislature needs to look holistically at the contributing factors that lead to the shortfall.
Some state employees are also concerned about the process and transparency of how lawmakers are building the plan, saying the Legislature is moving too fast. “It does feel like it’s being pushed through on a very aggressive timeline to satisfy a political calendar,” said Steve Howard, the executive director of the Vermont State Employees Association. “Politics is not something state employees need to worry about.”
However, lawmakers say some discussions have been happening behind the scenes to bring legislators up to speed on the complex issue of pension reform, and that any official votes will be conducted over livestream for the public to see. In addition, a separate proposal looks to reform how pensions are governed by creating a 15-member Vermont Retirement Commission. Lawmakers say these two proposals are just the beginning of the conversation, and that there will be a public forum this Friday.
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