Vermont Treasurer Calls for Pension Cuts for State Employees, Teachers

Vermont’s treasurer is recommending cutting pension benefits for state employees and teachers in a move intended to reduce the state’s unfunded actuarial accrued liabilities (UAAL) by nearly $500 million. However, her office acknowledged that the cuts would be “painful” for workers.

Vermont Treasurer Beth Pearce released a report containing recommendations that she said could reduce pension UAAL for the Vermont State Employees’ Retirement System (VSERS) and the Vermont State Teachers’ Retirement System (VSTRS) by $474 million and reduce the actuarial determined employer contribution (ADEC) by $85 million.

“While shy of the total target of $604 million in the UAAL and $96.6 million for the ADEC, it is a significant reduction to the existing liabilities and costs to the taxpayer,” said the report, which added that the net other post-employment liabilities could be reduced by $1.68 billion by directing a “minimal amount” of funds for prefunding. “All in, these recommendations will reduce the state’s post-employment liabilities by $2.2 billion.”

But the cuts would be painful for employees, as the report says the implementation of the proposals will significantly reduce benefits while also raising employee contributions. The report said employees are taking on a “substantially greater” portion of the actuarial losses, and, if all recommendations are accepted, workers will be responsible for as much as 78% of the increase in liabilities and 88% of the contribution increases.

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“These recommendations are painful, and this report is not submitted lightly, but action is needed to continue to provide retirement security for all our employees,” the treasurer’s office said in a statement.

The report provided a series of recommendations to reduce pension liabilities and other post-employment benefit liabilities for both VSERS and VSTRS. These include reducing or eliminating cost of living adjustments (COLA) for active employees upon retirement; increasing the years used to calculate the average final compensation; combining years of service and age for the purposes of eligibility for normal retirement; and increasing employee contributions.

“Eliminating or reducing a COLA significantly reduces the lifetime benefits of a retiree as purchasing power is diminished over time,” the report said. “The treasurer’s office, however, reluctantly, sees some level of COLA reduction as the only viable option to make a significant reduction to approach the targeted savings.”

At the same time, the report recommended maintaining a defined benefit (DB) system for current and future retirees, and said that any benefit changes to the retirement systems should not be made for the 17,000 existing retirees. It also suggested the system continue to fund the ADEC.

The report also suggested possibly using excess revenues or federal Coronavirus Aid, Relief, and Economic Security (CARES) Act money to establish a reserve that gradually reduces the ADEC requirements and eases some pressure off operating budgets. Despite the grim assessment of the situation, the state treasurer’s office said it is hopeful the state would benefit from a change in power in the federal government.

“With the new administration in Washington and changes to both houses of Congress, there is a possibility of additional revenues without strings/restrictions,” said the report. “Paying down the state’s debts with a portion of these funds should be a priority.”

However, state teacher’s union Vermont-NEA voiced its disapproval with Pearce’s proposal.

“We think that would be unfair to our teachers, who have held up their end of the bargain and paid every single dollar that they’ve been asked to pay,” Don Tinney, president of Vermont-NEA, told Vermont Public Radio. “That [cost-of-living-adjustment] has been part of the bargain—that as they retire, they know their pensions would keep up with the rate of inflation.”

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Tags: ADEC, Beth Pearce, COLA, Treasurer, UAAL, unfunded actuarial accrued liabilities, Vermont, Vermont State Employees Retirement System, Vermont State Teachers Retirement System, VSERS, VSTRS

Blackstone Group Chairman Stephen Schwarzman

One of Donald Trump’s biggest financial backers, Blackstone Group Chairman Stephen Schwarzman, declared that the Biden administration would take a “softer tone” regarding China, and that he expected less animosity between the two countries.

Schwarzman, who also happens to be an investor in China, has remained a Trump confidante, even though the financier publicly urged the outgoing president to accept Joe Biden’s victory.

On the question of punitive relations with China, though, Schwarzman and Trump really part company. “There is really a very substantial overlap of interest in these countries and the interest of the world,” the private equity chieftain said Tuesday in Hong Kong, according to Reuters. “I expect to see much less tension” during the Biden presidency.

As his time in the White House grew short, Trump added to his blacklist of Chinese companies that are off limits to American investors, Under Trump’s November executive order, investors must unload the securities of 44 Chinese companies allegedly linked to that rival nation’s military. Tech giant Huawei, computer maker Xiaomi, and oil company CNOOC are among those on the roster.

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Whether Biden will revoke his Republican predecessor’s order remains to be seen. The Democrat, who takes the oath of office today at noon, also is critical of the Beijing regime. But some observers expect him to ease off Trump’s tariffs and re-engage on a diplomatic level.

Schwarzman headed Trump’s Strategic and Policy Forum, comprised of 16 business leaders. Trump disbanded the panel in 2017 after several of members quit. The Blackstone chair also was involved in trade talks between the US and China, his 2019 autobiography contended.

Blackstone invests in China’s real estate and pharmaceutical sectors. In November, the firm bought a major Chinese logistics center for $1.1 billion. Schwarzman also founded the Schwarzman Scholars, an international postgraduate scholarship program at China’s Tsinghua University.