Editor’s note: This op-ed is by David Coates, who is a retired partner of KPMG, and Lisa Ventriss, who is president of the Vermont Business Roundtable.
Vermont has been faced with the underfunding of state worker and teacher pensions and retiree health care benefits for many years, and we have been reporting regularly to Vermonters on this critical financial issue. To date, nothing of significance has been done to curtail the upward trend of these obligations. We believe that we have a solution. But first, let’s briefly review the current situation.
As of June 30, 2012, the state’s liability for these obligations was $3.2 billion; up $500 million just since 2009. This is a path that will eventually lead to financial disaster for our state and future generations of Vermonters. For comparison purposes, the state currently owes $506 million in General Obligation bonds that it is paying from the General Fund; unlike the pension and retiree health benefits that is underfunded to the tune of over $80 million per year. In addition, the state has been taking over $20 million each year from the Teachers’ Pension Fund assets to pay for their retiree health care costs. This annual underfunding and raiding of the Teachers’ Pension Fund will not stop unless substantial changes are made now. Policymakers have been wrestling with this problem for years and have failed to find a solution.
We believe that dedicating this new revenue source (whatever the final number turns out to be) to these obligations, along with modest changes to the existing programs, will allow Vermont to craft a realistic plan to address our $3.2 billion obligation.
We believe we have found a solution that will allow for the orderly reduction of these obligations; a solution that requires money and policy reform.
Currently under consideration in Washington is a bill that would allow states to receive sales taxes on Internet sales. According to the Wall Street Journal, this could result in nearly $45 million in annual revenue to Vermont. We believe that dedicating this new revenue source (whatever the final number turns out to be) to these obligations, along with modest changes to the existing programs, will allow Vermont to craft a realistic plan to address our $3.2 billion obligation.
Using this new revenue source for any other purpose, given this existing promise to state workers and teachers, would represent a failure of leadership to make significant headway on this serious public policy problem.
Vermont finally has a chance to seize this once in a lifetime opportunity to settle this issue and put the state on a sustainable financial path to benefit not burden future generations.