The unfunded pension liabilities facing the Vermont State Employee and Teacher Retirement systems are crippling Vermont. As Vermont stares down the triple tsunami of affordability, demographics, and a falling credit rating, it just doesn’t have enough revenue to generate the billions that would be required to fully fund its pension funds, much less its other post employee benefits (primarily healthcare). The poor decisions made by policy makers from previous decades and underperforming investment returns have damaged these funds beyond repair. The only thing left for today’s elected officials to do is take responsibility for the past and walk Vermont’s political gauntlet.
This catastrophe should be obvious to everyone by now, including the Administration, Treasurer, and Legislature. Many have tried to bring attention and understanding to this issue, including private citizens. There is no clearer indication of how red hot and dangerous this topic is than to scour the Vermont political landscape for proposals to repair our unfunded pension liabilities – not one is to be found. Not surprisingly, no elected official is willing to offer a solution to a problem that is not their own making, and certainly not the fault of the employees in either system – they have made every required payment. Make no mistake, proposed policy changes will draw out sharp sticks and harsh rhetoric meant to inflict maximum political damage.
Vermont has the revenue capacity and moral obligation to ensure every employee in its current retirement systems receives the retirement benefits that have been promised; the existing fund balances, continued employee and employer contributions, and General Fund are sufficient. In fact, this already occurs on an annual basis. But Vermont does not have the capacity to increase these pension funds by billions through annual General Fund appropriations; we need to finally admit the folly of this idea. Incredibly, after pouring in over a billion dollars into these pension funds since 2008, Vermont’s situation has worsened. In 2009, VSTRS and VSERS were funded at 65.4% and 78.9% respectively; by 2018 they had decayed to 55.2% and 70.7%, with the unfunded liabilities more than doubling.
There is a solution. Vermont’s existing retirement systems should be closed to new employees with current member benefits secured by the existing pension fund balances, current employee and employer contributions, and the General Fund. A Commission with employee and employer representation should be formed to recommend new retirement systems to the Legislature for new employees that can be assured to not fall into the same trap that the existing have fallen into – unrealistic investment returns with no guarantee that annual employer contributions will be made.
If there is a better solution to this problem, I’m all for it. But let’s not continue to fool ourselves into thinking Vermont is on the correct path, that ship has sailed.
Rep. Scott Beck, of St. Johnsbury, serves in the Vermont Legislature.