The pension task force began their meeting with Co-Chair Rep. Copeland Hanzas collecting feedback from task force members of which areas they would like to see different presentations. Some areas committee members wished to see presentations on included a more detailed understanding of the benefits of pre-funding OPEB and the potential for different amortization options for paying down the unfunded liability in the pension funds.
JFO analyst Chris Rupe presented about the historical problems with the pension funds that created the unfunded liability, such as overly optimistic assumed rates of investment returns, demographic changes in the workforce, underfunding of the actuarially defined employer contributions to the Teachers’ pension fund, and paying post-employment teachers medical insurance premiums out of the corpus of the teacher’s pension fund. Pension Task Force Co-Chair Rep. Copeland-Hanzas suggested that all future savings from state employee premium holidays be invested into the State Employees’ OPEB Trust fund.
Following Lunch, Chief JFO analyst Steve Klein presented the newest consensus revenue forecast to the pension task force. The state of Vermont’s fiscal shape is in increasingly good shape. State revenues and likewise, the Vermont economy as a whole, have both recovered from the damage cause by the pandemic in aggregate, although the recovery remains uneven. In addition to the $200 million+ surplus Vermont ended the FY21 fiscal year with, revenues projections across the big three funds (General, Education and Transportation), were upgraded to assume an additional $500 million+ in additional revenues over the January forecast over the new two years, with nearly $400 million being attributed to the general fund.Steve Klein explained the budget process and timeline to the members of the pension task force and explained budgetary context surrounding various spending pressures, oh which paying down the unfunded liability in the pension funds is one. In addition to the massive upgrades in revenue forecasts, Vermont’s general fund reserves stand at the equivalent of 16% of the general fund. Legislative economist Tom Kavet says 60-80% of the new revenues can safely be spent on on-going, base funding, while the remainder should be allocated to one-time expenses.
The pension task force meeting concluded with a presentation by JFO analyst Chris Rupe presenting various bad options for pension “reforms” (cuts) which were previously presented and considered by the House Government Operations Committee this past legislative session. VSEA and NEA members of the pension task force pushed back against these unjust proposed cuts.
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