Treasurer’s race: Wilton and Pearce face off over pension, debt
By David Taube
VERMONT PRESS BUREAU | October 21,2012
AP File Photo
Beth Pearce was named Treasury Secretary by Gov.-elect Peter Shumlin in Montpelier, Vt. on Monday, Dec. 20, 2010 during a news conference. Pearce now serves as deputy under current secretary Jeb Spaulding, who is resigning to serve as Shumlin’s secretary of administration.
MONTPELIER — The two most prominent candidates for state treasurer are an incumbent who points to a track record of savings to taxpayers and a challenger who sees alarming shortfalls in funds.
One of the most closely watched statewide races for this year’s General Election is between Democrat Beth Pearce, the state treasurer, and Republican Wendy Wilton, the Rutland city treasurer.
“We’ve got serious deficits we got to deal with,” said Wilton, who says her city’s $5 million deficit has become a $3.8 million positive fund balance during her time as treasurer.
The pair’s viewpoints clash in several key areas, including pension reform, how debt affects bond ratings, and when one should issue financial forecasts of the state’s proposed single-payer health system.
The campaigns also have made personal and professional issues part of the race, concerning whether it’s questionable if a top state official rents or owns a home and how much overtime is acceptable in the treasurer’s office.
The state could have a $3 billion unfunded liability for pensions, but taxpayers and public employees have 30 years to come up with that projected amount. According to the U.S. Government Accountability Office, unfunded liability refers to the amount of benefits earned for which no assets have been set aside.
Pearce says the unfunded liability will be retired by 2038. Wilton suggests structural problems are still adding problems.
For pension reform, Wilton says her opponent assumes that the Legislature will step in to fix the problem every year, adding there are still structural issues that remain, like excessive overtime costs that make pension base pay formulas higher than they should be.
“There are likely unfunded liabilities being created even as we speak because the structural problems still exist,” Wilton said. “We haven’t necessarily assured ourselves we’ve dealt with the structural problem, but we also don’t have a guarantee that the Legislature can and will do this every year.”
Wilton also says another problem is the teacher’s pension plan is also paying health care costs to retirees, which she says is atypical of most defined benefit plans. She says changes are needed, such as other funding sources, or the pension could be unsustainable.
She recommends a multi-pronged approach, which could involve increased contributions on the employee and state side, and raising the pension eligibility age.
Pearce said the state secured some $4.5 million this past year through an Obama-created program called the Early Retiree Reinsurance Program for retirees not yet eligible for Medicare for certain health care expenses in the Vermont teacher system.
“We’ve been working on this for a long time. It is an issue. ... We’ve made incremental changes,” Pearce said. “It’s a problem I addressed, I identified and brought to the Legislature.”
Pearce also says she’s already been involved with key negotiations with teachers and certain state labor groups, creating a $20 million savings each year through changes like increasing contributions and raising the age of retirement for teachers.
The state’s pension system has at least one of its three plans with a funding ratio that needs significant improvement. The municipal employees plan is 90 percent funded, the teachers plan is 65 percent funded and the state employees plan is 79 percent funded, according to sunshinereview.org.
For pension funding ratios, Standard & Poor’s Ratings Services considers 90 percent or above as strong, 80 to 90 percent as above average, 60 percent to 80 percent as below average and below 60 percent as weak.
Pearce also said the state employees pension plan at 79.6 percent funding was in a surplus by $11 million before the Great Recession, suggesting a significant external factor to that pension plan’s funding ratio.
Debt and bond ratings
For bond ratings, Pearce has sought to make the state’s ratings from bond rating agencies the signature of her campaign. Better ratings mean lower interest rates and better savings. The state currently has AAA ratings from Moody’s Investors Service and Fitch Ratings. Standard & Poor’s Rating Service has listed Vermont as AA+.
The state’s Capital Debt Affordability Committee previously approved a recommended ceiling of $158 million for fiscal years 2014 and 2015 for long-term tax-supported debt. The cap could put pressure on certain state projects if federal money doesn’t come through as initially expected for the Waterbury state office complex.
But Wilton says the state might have to increase its debt because of Tropical Storm Irene.
“It’s not going to jeopardize the bond rating,” she said. “You work with the bond rating agencies: ‘Look, we had an unexpected disaster. We need to rebuild this. We’ll recoup as much as we can out of those federal sources and insurance.’”
Pearce said the state’s response now is to manage a reasonable amount of debt. “We want to make sure that we stretch our tax dollars first ... take a look at what FEMA’s going to do, and then assess the situation,” she said.
Wilton has also warned that the state could face a $2 billion deficit in five years if the state adopts a single-payer health system. Pearce said she doesn’t have any preconceived notions because the state doesn’t have any formal materials to review.
Residency and overtime
During the race, the WCAX news station reported Pearce owns a home in Massachusetts, then informed viewers the information was incorrect. The Pearce campaign then suggested the misinformation was from the opposition, and the Wilton campaign questioned Pearce’s commitment to the state, the alternative news weekly Seven Days wrote. Pearce defended the decision to rent as a lifestyle decision.
The Wilton campaign has also questioned overtime in Pearce’s office. A records request by Wilton showed a deputy director of retirement operations for the state logged 1,132 hours in fiscal year 2012, adding $31,684 to a $58,219 salary. Pearce says personnel costs including overtime for her office during the fiscal year are still less in 2012 than 2010 by $153,000.
Contributing to the drama are TV ads on Wilton’s behalf through super PAC funds from Vermonters First.
Wilton has served as city treasurer since 2007. She has also served as a state senator from 2005 to 2006. As part of her financial career, she’s worked in the banking sector as a mortgage lender and on the small business commercial sides, and also as a specialist at the Vermont Small Business Development Center in Rutland.
Pearce has worked as deputy treasurer since 2003 and was appointed as state treasurer in 2011. She’s also worked state jobs in Massachusetts, including as deputy treasurer for cash management, along with town government jobs in Greenburgh, N.Y., and West Hartford, Conn.
“I think it’s about the objectivity and the nonpartisan approach to the office,” Pearce said. “I have 35 years of experience in government finance. My first priority is the citizens and taxpayers of Vermont and maintaining our high bond rating.”