by Mark Crow, Chair, VBR Pension Reform Task Force and President, Tenth Crow Creative
What if you owed someone a substantial amount of money and were making annual payments each year to pay down the debt. However, every year, year after year, the amount you owe and the annual payments you must make increases – significantly.
Now, what if at the same time, you owed someone a separate substantial amount of money but there was no schedule to pay it back. You were making some intermittent, smaller payments when the lender periodically asked for them, but there was no plan in place to pay off the entire debt. And, like the first debt, each year, the amount you owe increases – significantly.
Meanwhile, you’ve got other essential expenses – car and house payments and maintenance, childcare, food, clothing, medical care, etc. But, with those large debts continuing to increase, you are finding that you can’t afford to pay for some or all of these essential expenses. You could try to borrow money to pay for them but, because of those troublesome and ever-increasing debts, your credit score is low (and is at risk of being further lowered) and the only loan you can get, if you can even get a loan, will bear interest at a high rate.
And, oh, by the way, your income is not even close to increasing fast enough to pay for these expenses and debts. In fact, your income pretty much stays the same and, actually, as it looks now, there’s a pretty good chance it will decrease in the not-too-distant future.
Obviously, you can’t keep living this way. In one way or another, you will need to significantly cut your essential expenses to try and keep paying down these debts. At some point, however, you won’t be able to cut any more expenses, as the ones left are for things you must have to survive. You then will have to choose between paying these essential expenses or paying down the debts, which still continue to increase. At that point, you simply won’t be able to keep paying down the debts.
Does this sound like an untenable situation to you? Of, course it does. Yet, that is basically the situation that Vermont taxpayers are in concerning the state’s obligations to the state employees’ and teachers’ pension and retiree healthcare plans (Plans). Our obligations to the Plans keep increasing and, unless we do something to get them under control, providing state services will be impaired over time or, in some instances, eliminated. Ultimately, the state will be unable to fulfill its obligations under the Plans. In this scenario, everyone loses – those who rely on state programs, services and infrastructure, the taxpayers, and state employees and teachers.
So, what to do to avoid these dark days? Well, there is some light on the horizon.
The Vermont Business Roundtable has called attention to this issue for more than a decade now, and our 2020 policy paperoutlined pathways and policy options for remedying the situation, the size of which grew by $1 billion in 2020 alone.
More recently, after being asked to do so by the Board of Trustees of the Plans because of the dramatic increase in the state’s liabilities over the last few years, the State Treasurer has provided recommendations to save significant sums under the Plans and get the state on a realistic path to meet its obligations in a sustainable way. These recommendations include reducing or eliminating cost of living increases for future retirees, increasing state employee and teacher contributions, modifying the method for calculating benefits, and extending the waiting times for drawing benefits. If all recommendations are adopted, the state’s unfunded liabilities under the Plans will drop by approximately $2.2 billion (current unfunded liabilities under the Plans are approximately $5.6 billion).
The Treasurer’s recommendations have been submitted to the legislature to act upon and have been discussed in detail with members of the administration. Initially, we were pleased to see the legislature’s willingness to take on pension reform this legislative session. But, as of late, however, it appears interest has waned and there is a feeling that this non-partisan issue has suddenly become very partisan.
Granted, the recommendations proposed by the Treasurer require some tough choices to be made. Looking at the bigger picture, however, these recommendations will actually help ensure that there will still be pension benefits there for current and future state employees and teachers to take, while enabling the state to continue to provide the other programs, services, and infrastructure we all so vitally need and want.
It is issues like these – the ones where hard choices must be made – where members of government must show their mettle and lead. It is also issues like these where we all must support achieving the greater good for our state and its citizenry. Vermont’s motto of Freedom and Unity is not always an easy balance, and yet it must be balanced here for the stability and sustainability of our state. We ask that the legislature and the administration take the steps necessary this legislative session to implement meaningful pension reform. The time is now.
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