Vermont-NEA News

Unprecedented Budget Surplus Gives State Opportunity to Significantly Reduce Unfunded Pension Liability

                                                          

July 29, 2021

For Immediate Release

Unprecedented Budget Surplus Gives State Opportunity to Significantly Reduce Unfunded Pension Liability

In memo to Emergency Board, Vermont-NEA urges the use of this once-in-a-generation extra money toward a smart, layered approach that can deliver win for public employees and other taxpayers

MONTPELIER – The state should dedicate its unprecedented budget surplus to reducing Vermont’s unfunded pension liability, according to the state’s largest union.

In a memo to the Vermont Emergency Board, Vermont-NEA President Don Tinney made it clear that in a year with billions of federal pandemic aid flowing into Vermont, lawmakers and the governor should not miss the opportunity to use the state’s own surplus toward reducing its unfunded pension obligations.

“Reducing the unfunded liabilities in the pension systems will not only help to sustain those systems, but it will also help to relieve growing pressures on the general fund, making this a win-win proposal,” Tinney wrote. “A more sustainable general fund will help to ensure that the critical programs important to the health of Vermonters, our environment, and our local and state economies can be funded well into the future.”

Making a significant dent in the systems’ unfunded liabilities – brought about, in part, from decades of past underfunding – is a key part of a layered approach to ensuring Vermont’s public pensions remain viable for the thousands of public employees and educators who were promised financial security in retirement. Especially at a time when school districts statewide are facing serious shortages of educators, working to strengthen the pension systems makes it easier to attract and retain school employees.

“The state’s pension liabilities are sizable, but they can be managed in a manner that works for the state and its citizens, including its citizen employees—teachers, troopers, and state employees,” Tinney wrote. “Using the surplus will help Vermont today and well into the future, as it will reduce the state’s obligations for years to come.”

# # #

A copy of the memo appears below.

 

MEMORANDUM

 

TO:                  The Emergency Board

FROM:            Don Tinney, Vermont-NEA President

                        Jeff Fannon, Vermont-NEA Executive Director

CC:                  Members of the Pensions Benefits, Design and Funding Task Force

                        Joint Fiscal Committee

                        Elizabeth Pearce, Treasurer, State of Vermont

DATE:            July 29, 2021

RE:                  Surplus Funds for Vermont Pension Investments

 

For decades, Vermont’s public employees have kept their promise to their fellow Vermonters: They’ve educated our children, plowed our roads, built our bridges, ensured our safety, and protected our environment. In exchange for a career of public service, they’ve relied on the state keeping its promise of a financially secure retirement.

As you receive word of the state’s 2021 fiscal year surplus and begin your work on how to address the truly rare “opportunity” of such a sizable amount of resources, we believe it would be wise and fiscally prudent to commit all these one-time funds to buying down the pension liabilities.

The state’s pension liabilities are sizable, but they can be managed in a manner that works for the state and its citizens, including its citizen employees—teachers, troopers, and state employees. Using the surplus will help Vermont today and well into the future, as it will reduce the state’s obligations for years to come.

The teachers’ retirement system was underfunded for 24 of 28 years beginning in 1979, and just recently the chair if the Vermont Pension Investment Commission, Tom Galonka, said the underfunding, plus the lost investments on the underfunding, cost the system $1 billion. While the state, since 2007, has put into the system everything the actuaries recommended, that hasn’t made up for the lost $1 billion. Using all of the current surplus funds to pay down that debt will partially address the lost funds, and it will buy down the costs associated with lost funds and the current unfunded liabilities.

Reducing the unfunded liabilities in the pension systems will not only help to sustain those systems, but it will also help to relieve growing pressures on the general fund, making this a win-win proposal. A more sustainable general fund will help to ensure that the critical programs important to the health of Vermonters, our environment, and our local and state economies can be funded well into the future.  Also, given the way the recent influx of money from the CARES Act and the American Rescue Plan Act have supported major one-time investments into so many other important priorities – like broadband and housing – dedicating the general fund surplus to unfunded pension liabilities is a reasonable action. 

Using these once in a generation one-time funds is a crucial component of a layered approach to the issues the Pensions Benefits, Design and Funding Task Force has been asked to solve. Any adjustment to both the state and teacher systems must include the use of these surplus funds.

We have been saying this measured approach is the Vermont way to solve the state’s pension challenges. We hope you agree.

 

Darren Allen Jul 29 2021
Your Union Issues Political Action Your Benefits