Another Year Later and Deeper in Debt
Opinion Editorial by David Coates, KPMG Partner (retired) and Lisa Ventriss, President, Vermont Business Roundtable
Beginning in 2009 we have periodically written to Vermonters regarding state and teacher pensions and related retiree health care benefits, and the impact they have on our fiscal future. In reviewing the most current Report of the Actuarial Valuation, it is evident that Vermont has made no overall progress on containing these costs. Instead, we have continued to pile on more debt to be borne by future generations of Vermonters, and have placed additional pressure on future budgets that will crowd out funding of other important and necessary programs.
For the fiscal year ended June 30, 2012 the State’s liability for these obligations increased another $160 million over the previous year; bringing our total liability to $3.2 billion, or a price tag of $5,100 for each Vermont resident. Since 2009 the State’s unfunded liability has increased an astounding $500 million. It has been headed in only one direction: up!
This year, Vermont’s 2014 General Fund budget will require an additional $10 million just to fund the minimum required for the pensions (and by 2020 it will require $37 million more). To properly fund the retiree health care benefits would require millions more; funds that Vermont will not have without raising broad-based taxes, redesigning benefit plans, or cutting other important programs.
The roots of this dilemma are due to a combination of factors, including: inadequate funding of the required contributions, especially for the teachers, and not considering the long-term financial impacts as these contracts were negotiated. Whether Vermont ever had enough dollars to adequately fund the required contributions is another question.
We believe the major cause for concern is with the Retiree Health Care Benefits. Vermont is not currently funding this program properly, nor can it be properly funded, because the State simply does not have the more than $80 million it would require each and every year.
Possible solutions have been identified in the past, though none of them has gained any momentum because the political will was not there. However, one thing remains perfectly clear: Vermont cannot dream of properly funding these benefits without the courage to change from past practice.
Other states have taken the unpleasant, but necessary, steps to restructure their plans and have saved their taxpayers millions in future costs, without disrupting the pensioners’ benefits. Now it is time for Vermont’s policymakers to stop postponing the inevitable and take the necessary actions to save our state’s fiscal future.
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