Editor’s note: This commentary is by Richard Dunne, a member of the Democratic Party who was a candidate for state treasurer in the Democratic primary. He is a practicing political consultant. He lives with his family in Waterbury Center.
[L]et’s get it Dunne! (Maybe next time …)
I’m writing this piece to inform Vermonters of the positive impact we, as a state, can have. All too often politicians take the stage to incite fear. They tell you how dangerous our current situation is, how frightening the future will be and that it can all be avoided if you simply vote for them.
I’m not here to tell you that Vermont absolutely must be fixed. I’m here to tell you Vermont can be improved if we collectively decide to do so. Vermont is a strong state and the citizens are some of the most secure in the country, as well as some of the happiest. All our legislators are competent individuals and Vermont is not going to fall apart overnight. We have a working economy, decent health care, an OK wage, mildly successful schooling … my point is, Vermont is fairly healthy.
Now, a state’s health is relative to the country and as treasurer I wanted to raise Vermont well above that standard of relativity. In my first term, there were four main topics I intended to tackle. Forming a state bank, fixing our current unfunded liability within the pension, balancing our state’s debt and divesting the pension from risky investments.
The formation of a Bank of Vermont is long overdue. We have let corporate banking interests charge us millions of dollars in fees and deter us from forming our own competitor but if we elect the visionary leaders needed to institute this reality, it will be a turning point which will open the door to a much brighter and more prosperous future for Vermonters. A benevolent competitor would be sure to keep commercial banks throughout the state as honest as bankerly possible. The main methodology behind it is to adjust citizens’ relationship with finance. Banks should be a tool used by people and communities for growth but somewhere along the line banks began using people as tools for profit. Vermont has the opportunity to change this reality.
By changing this reality, it would allow Vermont to offer the best rates in the country, which will drive business, and by extension, the economy, and help our rural communities attain the incremental growth which they seek. I cannot stress enough that the success of a state bank rests solely on its people and the people of Vermont are absolutely ready to become a model of success for the country.
A state bank’s business model is steady, predictable and depends on sustainable growth. This means you do not see a year of tremendous earnings followed by a year of losses. What you do see is dependable progression year after year because the success of the Bank of Vermont depends on utilizing predictable returns from low-interest rates which, economically speaking, forms a symbiotic relationship between the lender and borrower, between the state and the community. This type of sociological and financial relationship promotes maintainable systems and allows finance to work for the people, which is the essence of a state banking system.
Perhaps one of the biggest benefits to forming a state bank is the cyclical nature it can create within Vermont’s economy. Vermont should not wait around and depend on the country to figure out a way to improve the standard of living for low-income families and individuals. The only way this is possible is to have a significant change in the minimum wage in order to remove the elephant in the room known as inflation. This is one of the most challenging aspects. How do you require small businesses, and some large businesses that are struggling, to pay their employees more without increasing the costs of their goods and services to cover the difference?
Well, this is where the cyclical nature a state bank has the ability to create comes into play. By lending money to the government in order to enact a supplemental income loan program which covers the cost of the wage increase for struggling businesses, we allow the price of goods and services to remain constant while average income rises. More money to the people equals more money in the economy which equals balanced revenue for the state and by extension, the state bank. This can be done.
Banks should be a tool used by people and communities for growth but somewhere along the line banks began using people as tools for profit. Vermont has the opportunity to change this reality.
In addition, this means any loan whether it be student, auto, mortgage, business, etc., low- to mid-income earners previously acquired and are still paying off becomes easier to pay. In the eyes of a state bank it means you are much less of a risk and that refinancing at a lower interest rate would be beneficial for both parties involved — symbiotically speaking.
Moving on. In conjunction with a state bank, securing Vermont’s debt can have an incredible impact on social policy by placing Vermont in a position of outstanding credit and standing which will attract more impact investment. My plan was to solidify any doubt in our ability to repay the state’s debt by feathering safe investment opportunities utilizing stable market returns with capital gained from a small percent of untapped revenue sources the state has yet to implement. This would have undoubtedly allowed Vermont to move up on the list of most financially healthy states.
This transparent, systematic backing of Vermont’s liabilities would have provided a priceless amount of stability, and with that stability, the social policies legislatures and the public often see rejected due to budgetary concerns would have begun to dissipate. I’m not suggesting this is the silver bullet which will allow all our monetary concerns to disappear, but implementing the strategy I’ve developed would have greatly improved the financial structure which social impact policy relies on.
Now, on to the unfunded liability concern the pension has attracted. This, I’m happy to say, can be adjusted in a relatively simple manner. We must allow private businesses who participate in defined benefit retirement programs to join the state’s pension portfolio. This is a win-win for all involved because it awards more bargaining power to our investment managers. By doing so, we incorporate a larger age range of beneficiaries which is a variable the actuarial scientists use in order to calculate risk. Simply put, the broader the age range, the less risk associated.
To those people out there who are thinking, “How does adding more people provide stability?” the most important thing to consider when allowing the addition of other defined benefit systems is the insurance their plans are protected by. This way, the addition of their funds will be fully insured and thus, pose absolutely no risk to the health of the current pension system.
The only risk associated with the pension fund, to my current knowledge, is the risk associated with the volatile nature of oil stocks located throughout our portfolio. The best way to go about ridding our portfolio of this liability is either to remove our holdings or use the state’s leverage to have the individual portfolio managers divest.
Many of you think divestment is/was a political strategy used to gain control of pension investment decisions. This is far from the truth. Divestment is a method which is being used, hopefully or at least it was by me, to help the oil industry begin to develop a business model based off of the current consumer demand. And the current consumer demand is one of renewable, clean energy. Divestment is a tool used to drive market change. It’s not about forcing the oil companies, who employ thousands if not hundreds of thousands of people, out of business. It’s about helping them realize they need to allocate research and development to utilize their assets to match the transition of the market. Soon, they will begin to realize that their financial health could be greatly improved by dropping the costs associated with their current business methods.
However, the pivotal fact to remember when talking about divestment is that oil stocks are not needed to keep our pensions secure. If anything, the lucrative nature of the industry attracts risky hedges and spits out inconsistent returns which damage our fund. Our contributors and retirees deserve investments that have a history of consistent, stable growth. Furthermore, fossil fuels have the potential to become a stranded asset, meaning, they will be worth nothing some day and given the finite capacity of the commodity this is no surprise.
So, are/were all these things absolutely necessary to accomplish in order for Vermont to survive? No. Would a treasurer who concentrates on these policies improve the living conditions of every Vermonter? Yes. We Vermonters should move toward policy and decision makers who not only want to improve the lives of everyone in the state but can also envision the methods on how to implement the plans that will secure the future of our state. Vermont can become America’s outright leader and innovator — an entrepreneur of economic and social policy.
