Speaker warns of pension shortfalls
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By STEPHANIE M. PETERS STAFF WRITER - Published: October 5, 2009
The state financial picture illuminated by David Coates was grim.
The bottom line of what Coates, a retired partner from international accounting firm KPMG's Burlington office and member of the Vermont Business Roundtable, told the audience gathered at College of St. Joseph Tuesday night was that the state's unfunded obligations to debt service, education funding, retirement plans and other post-employment benefits place it on an unsustainable path.
For instance, the state currently is facing down a combined unfunded liability of $466 million for its state employee and teacher pensions. Its responsibility for other post-employment benefits — namely health-care plans — for the same group of workers is even worse: As of June 30, that figure approached $1.6 billion.
State employees, teachers and 434 of the 534 municipal pension plans in the state are all defined benefit pensions, in which what an employee will receive is guaranteed and determined by a formula. Most private employers have done away with these plans, which got Detroit automakers in trouble, Coates said.
To support these retirement plans, the state's actuary has determined that, as of June 30, 2008, annual contributions to the state employee plan would have to be $23 million, while the teacher's pension would require $25 million. In the next five years, those requirements will rise dramatically, Coates said. The state employee pension will require an annual contribution of $40.1 million, while the contribution to the teacher's fund will increase to $52.4 million.
"We're on an unsustainable path," Coates said. "My concern is that we don't sit here and pass and leave these problems to the future Vermonters."
Still, by the end of his presentation, Coates stood before not a sullen audience, but an enthused one.
Led by the remarks from Coates himself — a Democrat who has served as an economic adviser to four governors and is currently a member of the seven-person pension commission — the question-and-answer portion of the presentation focused largely on the need for a grassroots effort to spread the word about the state of Vermont's finances.
"Keep the numbers out there and keep fighting because at the end of the day, someone is going to pay attention or there are going to be different legislators," Coates said.
State Auditor Tom Salmon, Department of Public Service Commissioner Dave O'Brien and Rutland County Republican Sen. Hull Maynard were also in attendance and echoed Coates' comments.
"If you can inspire this kind of change in grassroots, we're going to hammer away on the other end to get this state to wake up," Salmon told the audience. "This is a ticking time bomb."
Coates did acknowledge, however, that he thinks the Douglas administration and the Legislature have taken some "good steps" toward dealing with the problem. The pension commission, which also includes members of the House and Senate and the state treasurer, has put "everything on the table" as it tries to determine how to right the problem of the pensions' unfunded liabilities.
Other Rutland County legislators present included Democratic Sen. Bill Carris and Reps. Margaret Andrews, a Rutland City Democrat, Robert Helm, the Fair Haven Republican and Megan Smith, the Mendon Democrat. Rutland City Treasurer Wendy Wilton also was on hand.
This wasn't the first time Coates has made his presentation.
Coates and other members of the Vermont Business Roundtable have shared their findings with Speaker of the House Shap Smith, as well as several house committees, according to Lisa Ventriss, president of the organization. The response has been mixed, but the group continues to meet with members of the Legislature, Ventriss said.
On Wednesday, the state's Legislative Joint Fiscal Office released its own brief on the state's financial situation. The report maps out how Vermont's revenues have declined in 2009 to below 2005 levels, in large part because of the recession.
The report also highlights a list of measures that have been taken to balance the fiscal year 2009 and 2010 budgets and points out that the situation will only get worse when it comes time to develop the FY 2012 budget. But, like Coates' presentation, it doesn't offer solutions.
stephanie.peters@rutlandherald.com
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