As the Pension Benefits Task Force debated how to solve Vermont's $4.5B pension deficit, we heard repeated claims that public employee benefits (which are 2-3 times as generous as the private sector) were necessary to make teachers and state employees competitive because their salaries are lower. While this has been a long-standing claim, we decided to dig into data and what we found was surprising.

“As a former Commissioner of the Department of Labor and Commissioner of Human Resources, I was surprised by what we found in this report. I think everyone needs to read this report because there were a number of assumptions that were carried through the years that were just plain wrong.” - Pat McDonald (President, Campaign for Vermont)

TO:                   THE PENSION BENEFITS TASK FORCE
FROM:             PATRICIA MCDONALD – PRESIDENT, CAMPAIGN FOR VERMONT PROSPERITY
DATE:              DECEMBER 6, 2021
RE:                   FOLLOW UP FROM TESTIMONY ON DECEMBER 1, 2021

Dear Members of Pension Benefits Task Force:

First, I want to thank you for giving Ben Kinsley and me the opportunity to present the findings of our report entitled “The Public Sector Reality.” The purpose of this report was to examine the overall competitiveness of our public and private employee wages. We believe this question does have an impact on how we should address the pension crisis because it gets at what level of benefits we should be offering to new hires. We cannot meaningfully change the promises we have already made to fully vested employees (nor should we), but we can make adjustments for new employees as a large portion of our workforce potentially turns over within the next several years.

At the 8/17/2021 task force meeting, Chris Rupe (part of the Joint Fiscal Office) submitted a document entitled: impact of various possible changes to plan design. The task force reported that there are various scenarios that are being considered, to include:

• Adjusting employee contributions to the pension plans
• COLA (cost of living) adjustments for active employees, for all except those within 5-10 years of retirement
• New one-time or ongoing revenue sources. None yet been selected, but under consideration are:
  • Cannabis tax revenue
  • Sports gambling
  • High-income tax surcharges
  • Elimination of capital gains income tax exclusion

On November 10^th Campaign for Vermont (CFV) held a press conference to review the details of its report entitled The Public Sector Reality. For the record, I am the President of the Board of Directors of CFV.  Over the past months of pension discussions at the Legislature we heard claims about the state’s non-competitive wages and we decided to verify those statements. We set out expecting to find that pension benefits were an unquestionable asset to recruiting and retaining our public sector workforce. What we found surprised us.