Vt. NEA faults retirement panel's ideas
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By Louis Porter Vermont Press Bureau - Published: December 29, 2009
MONTPELIER – The union representing Vermont educators says the work of a retirement commission considering changes to the pension systems for teachers and state workers is incomplete and likely unconstitutional.
That critique came from the National Education Association's Vermont chapter Monday. The union also said a proposal the Vermont NEA is now finishing up will "achieve significant savings to the taxpayers of Vermont, while addressing the issues of falling student enrollment and education costs in general."
In a problem mirrored in many states, the growth in revenue for those retirement plans in Vermont is not expected to keep up with the growth in demand. The shortfall stems from several factors, including underfunding by the state in past years and longer life spans for beneficiaries, exacerbated by a weakened investment climate.
The union and its members have been sharply critical of the direction the commission's recommendations are headed (its work is not final yet). But the NEA report also raises the specter of a constitutional challenge to the commission's recommendations.
According to a draft of the Vermont NEA's response, the commission failed to take into account "the Constitution, and its ramifications and limitations on any changes to a pension promise" and will "tell teachers and state workers to work longer, pay more and get less."
The union did not offer its own plan – yet – for matching pension revenues to expenses, but will propose a way to save some money from the broader education system, said Joel Cook, executive director of the Vermont NEA.
The retirement commission did not look broadly enough at the implications of the recommendations it recently voted to present to lawmakers, Cook said. The commission voted to recommend increasing the retirement age and increasing contributions for many of the workers who will benefit from the retirement programs, among other ideas.
The Vermont NEA's counter-proposal is not finished, but will save money in the broader state education system without sacrificing the pensions of teachers, Cook said.
"We have been trying to come up with a way of helping the state to address its budget problems and do so in a way that doesn't harm people," Cook said.
State Treasurer Jeb Spaulding, who has been at the helm of the seven-member commission, said Monday he looks forward to the union's recommendations, but added that their critique so far has been more objections to the commission's recommendations than alternative solutions to the increasing cost of the retirement systems.
"It seems more of a rationalization to maintain the status quo than a substantive approach to address the problem," he said. "I am still waiting to see some actual substantive suggestions for making these plans affordable. They seem to be indicating they are working on plans and I hope they do."
The problem is clear, even if the answers are not easy, Spaulding said.
Five years ago the two main state pension systems were paying out $111 million a year. Now that figure is $172 million a year, and projected to be $256 million in five years, Spaulding said.
"We are not asking public employees to do anything that most of their friends and neighbors are not considering," Spaulding added.
As for the question of whether changing the retirement systems for public workers will violate the protections for contracts provided by the Constitution, that is why the commission hired a law firm with expertise in helping states deal with pension systems to advise it, Spaulding said.
"We think our recommendations have a good chance of surviving a legal challenge but there is no guarantee," he said.
The pension plan discussions will come to a head over the next few months, as lawmakers consider the recommendations of the commission and the future of the pension programs.
There is not unanimous agreement among the commission members on solutions.
State Rep. Terry Macaig of Williston, a member of the commission, a former state worker and a former member of the state's retirement board, voted against many of the more controversial recommendations.
"In my mind anyway, the ability to recruit, retain and reward teachers or state employees is not going to happen with the recommendations the commission is going forward with," Macaig said. "We are decimating a good retirement system."
Much of the blame for the issues around the retirement system comes from the current – and presumably temporary – economic situation, Macaig said.
"We are in a real predicament at this point in time," but one that will get better, he said.
Spaulding disagreed. There was a problem before the weakness in the investment situation and there will be one after the worst of it has passed, he said.
"There is no way the investment climate is going to allow us to sustain those kind of payouts for the years to come," he said.
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