The last thing Vermont Treasurer Beth Pearce wanted to do was to propose reducing pension benefits for teachers and state employees. The last thing Ms. Pearce, a Democrat, wanted to do was to stand in front of both groups and propose taking more out of their pockets and giving them less in return. If there were any way to easily correct the trajectory of the pension system’s soaring liabilities, Ms. Pearce would have leapt at the opportunity. There weren’t.
Vermonters should be grateful Ms. Pearce faced the reckoning. The total of our unfunded liabilities for both state employees and teachers has now reached a stunning $5.6 billion. The pension for state employees is 66 percent funded. The pension for teachers is 51 percent funded.
For the last several years the state has been paying enough into the pension funds to roughly stay even. But according to Ms. Pearce, last year the gap jumped $600 million, which tossed the issue into an orbit beyond anything we’ve experienced. It’s akin to waking up to learn your credit card has been maxed out and you just lost your job. The last thing you’d do is to go a spending spree.
In the state’s case, that $600 million jump means the Legislature needs to allocate an extra $100 million. That $100 million doesn’t reduce the level of our unfunded pension liabilities. It just keeps it even. All total, we spend about $300 million yearly to service the teachers’ and state workers’ pensions.
If nothing is done, if Ms. Pearce’s proposal is rejected, then we can expect more of the same; the unfunded portion goes up, the Legislature will have to spend more to stay even, and will have less money to devote to its regular spending programs.
That’s an enormous amount of disruption to shoulder when considering Ms. Pearce’s proposal deals with the issue and does so at a level that leaves state employees and teachers with a pension that, long term, would be better protected than it is now.
There isn’t a person in Montpelier who doesn’t know this. What makes it difficult is the politics. The teachers and state employees are represented by unions and the unions have let it be known they want no part of Ms. Pearce’s proposal. They agree with the need, but suggest that an income tax surcharge be assessed on the wealthy to make up the difference.
That is not going to happen and everyone knows it.
In this mix of politics and logic there is also opportunity. Specifically, for the Democratic leadership of both the House and Senate. This is their chance to move toward the political middle. The Progressive influence — particularly in the Senate — is less than in the recent past. If the leadership can take advantage of the ground already plowed by Ms. Pearce, not only can the pension issue be put on a more solid footing, it can open the way to resolving other similarly intractable issues.
The leadership also needs to recognize, and appreciate, the role of Gov. Phil Scott, who noted the bravery of Ms. Pearce’s proposal, but did not make recommendations of his own in his budget speech. The leadership was critical of the governor’s decision. But they also know that had Mr. Scott proposed something of his own, that it would have been rejected.
It’s better for the new leadership in the House and Senate to take advantage of their new positions to establish their own reputations and their leadership styles. The opportunity before them is the chance to broaden their appeal and to deepen their effect. There is so much to be done, and with the blessing of the stimulus money, the resources are available. The objective should be to resist being pulled to the edge of the political left and to avoid the political polarization that exists almost everywhere else. This is a time when progress should be determined not by a political scoresheet but by the sort of consensus building that solves problems and puts us in a stronger position to prosper.
The pension problem will be one of the key tests of the new leadership’s ability, and its willingness, to step beyond partisanship and to establish itself as a force for the political middle that represents the majority of Vermonters. This is the vision and the leadership Vermont needs to set it apart. Ms. Pearce took the first step, the next is up to the Legislature’s new leadership.
by Emerson Lynn