In January, Gary Kessler, the deputy commissioner of liquor and lottery, hopped on a Zoom call at his wife’s urging.
The virtual town hall was organized by the state’s largest teachers union and featured a presentation by Vermont Treasurer Beth Pearce, in which she outlined a series of painful cuts to the pension system she planned to recommend the Legislature take up.
Some 1,000 people had signed in to listen. Within weeks, Kessler had filed his notice to retire.
After more than three decades in state government, Kessler had been eligible to retire for three years. Eager to travel and get around to long-deferred projects around the house, it wasn’t the first time he had thought about doing so.
But it was clear from Pearce’s recommendations that current retirees would likely be held harmless, and this, he said, was the final nudge he needed to leave.
“I didn’t know if the Legislature might pass something, when it might be effective, who it might impact, and I was just like: I’m just gonna take all the variabilities out and just be on the other side of the fence,” he said.
Kessler is not alone. With pension reform front and center at the Statehouse, many others across state government and the state’s schools are reevaluating their options.
While many may be talking about early retirement, few are actually driving off into the sunset in their Overland campers — yet. According to figures provided by Pearce, about the same number of people put in for retirement during the first three months of 2021 as during January, February and March of last year.
But her office did see a “significant increase,” she said, in employees asking about how much it would cost them if they purchased enough retirement credits to exit the workforce early.
“Whether that will materialize in actual purchases is still not known,” she said.
Steve Howard, executive director of the Vermont State Employees Association, said it really did appear as if people were running for the door, particularly when the Vermont House unveiled its (now-shelved) pension proposal.
“We had to reassure them several times — this pension system is not collapsing. There’s $5 billion in assets. We’re well on our way to paying off most of the unfunded liability by 2038,” he said.
For now, that “sense of panic” appears to have subsided, Howard said, but “people are still very leery of what we call ‘the pause.’”
An exodus of older state workers and teachers could leave school districts or government departments scrambling to replace their most experienced employees. But a spate of retirements spurred by discussions about how to fix the pension system could potentially also compound the problem.
Vermont unfunded liability in its teacher and state employee retirement systems has ballooned from $1 billion to $5.7 billion in just the last 13 years. Pearce, alarmed by the prospect of adding $600 million to that liability this year, pushed for strong actions.
Several factors contribute to the retirement system’s ballooning debts, but one of them is demographics: There are too few paying in and too many collecting benefits.
That’s long been a problem in the teachers pension system in particular, according to Pearce, where school districts have faced pressure for years to cut personnel as enrollments decline.
“When you press the balloon on one end, it pops out at the other. And you do see an impact on retirement systems. And when you’re looking at these issues, you should look at the overall costs,” Pearce said.
Still, she said it’s too early to tell what kind of retirement decisions people will make based on the ongoing debates in Montpelier. She said she’s urging people to wait and see what solutions lawmakers and the governor ultimately land on before making any life-altering decisions.
Even if workers decide to stay put for now, schools and the state could have difficulty hiring.
In the Slate Valley Unified School District, superintendent Brooke Olsen-Farrell needs to fill close to 40 vacancies in licensed positions. The administrator has long operated in a difficult hiring climate, but she said anxiety about the pension is now another factor educators weigh as they consider whether to leave — or take a position in the first place.
Already, Olsen-Farrell said, she’s had out-of-state candidates back out, citing the retirement debate.
“I know other superintendents regionally also have people that have declined jobs in Vermont for next year because of the pension conversation and have decided to stay in the state they’re in,” she said.