(Host) According to State Treasurer Jeb Spaulding, Vermont’s pension and health care programs for state employees and teachers are facing a billion dollar funding gap.
A special commission that’s been studying the issue is looking at a number of controversial ways to reduce the liability in the coming years.
VPRs Bob Kinzel reports.
(Kinzel) You could think of this situation as "the perfect storm" for the state’s two largest pension funds.
As many as 25% of state employees and teachers are eligible to retire in the next five years, at a time when the national recession has decimated the value of the groups’ pension funds.
State Treasurer Jeb Spaulding says these programs are facing a one billion dollar funding liability unless steps are taken to fix this problem.
Spaulding is the head of a special commission that’s looking at a wide range of options, including: asking state employees and teachers to make larger contributions to their pension accounts, reducing benefits levels, changing retirement age standards, or shifting to a completely different type of system.
If no changes are made, Spaulding says the state will need to boost spending on these programs by almost 50% next year – that means an additional $35 million in tight budget times:
(Spaulding) "We also have to do it in a way that doesn’t have us going off a cliff in future years and saying we’re going to have to dismantle our retirement systems or our retiree health care systems completely as has happened in the private sector so if we want to have these kinds of retirement plans and retiree health benefits in the future we need to make them affordable today."
(Kinzel) Another controversial proposal is to shift responsibility for the teachers’ retirement program from the General Fund over to the Education Fund.
Joel Cook is tracking this issue for the Vermont Teachers Association. He says this plan is little more than an effort by the state to dump a huge financial responsibility onto local property taxpayers:
(Cook) "The entire issue here is how much of the cost of the retirement system does the state wish to offload to local school districts. That’s what this is all about – it’s a game of cost shifting at this point."
(Kinzel) Spaulding says if the transition is done over a period of time, it won’t necessarily create a big burden for local property taxpayers:
(Spaulding) "Should it be in the cost center with other educational expenditures? I would say personally the answer is yes – is it a cost shift? It probably is. But, you know, it can be done transitioned over a period of time and I think that that’s probably the only realistic way to get there."
(Kinzel) The commission is also seeking legal advice to determine if benefit levels can be adjusted for employees who are currently part of the program or if these changes can only apply to new workers.
The panel is scheduled to report its recommendations to lawmakers by the end of the year.
For VPR News I’m Bob Kinzel in Montpelier.