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Scott Vetoes $200 Million Pension Reform Bill


  • File: Jeb Wallace-Brodeur
  • Gov. Phil Scott
Updated at 6:41 p.m.

Vermont Gov. Phil Scott on Monday vetoed a $200 million pension reform bill, arguing that it doesn’t do enough to prevent the retirement system from facing another dire funding shortfall in future years.

Scott acknowledged that the bill would still likely become law, but he said he couldn’t stand by and watch that happen without objecting. The bill passed both legislative chambers unanimously last month.

“It is unfortunate this veto will likely be easily overridden, not for me, but for Vermont taxpayers and State employees who will bear the burden in the future,” Scott wrote in his message to lawmakers.

Scott argued that while the bill makes some improvements to the system, it does not include sufficient structural changes that would prevent the same unfunded liabilities from creeping up again to bedevil the state.

“I won’t be governor when those chickens come home to roost, and many of you will not be serving in your current roles, either,” Scott wrote. “But the Legislature’s unwillingness to question the deal reached between a handful of union and legislative representatives will come back to haunt our state in the not-too-distant future.”

Lawmakers tried to pass a pension bill last year, but public employees and the powerful unions who represent them howled in protest at the higher proposed contributions and less generous benefits for many workers. The legislature instead convened a task force that met over the summer. The unions signed off on the deal before the start of the session.

The deal was expected to cut the state’s unfunded pension liability by about $300 million over time and trim unfunded retiree health care benefit costs by about $1.7 billion.

This would be accomplished through a combination of lower cost-of-living adjustments for retirees, higher employee contributions and huge lump-sum payments now by the state.

After a phase-in period, state employees would pay about $14 million more and teachers $10 million more each year. In exchange, the teachers’ fund would receive $125 million to pay down liabilities, while the state employees’ fund would get a $75 million infusion.

Scott is unhappy that the bill would not allow employees to opt for 401k-style retirement investment plans instead of requiring them to participate in traditional pensions that provide retirees fixed monthly payments regardless of investment returns.

The Republican governor has argued that allowing workers to choose such plans would help the state attract younger workers and would reduce future pension liabilities.

But lawmakers heard testimony from many experts, including State Treasurer Beth Pearce, that 401k plans are actually not very popular, can increase a state’s administrative costs and some cases  leave workers less secure in retirement than pensions offering a defined benefit.

House Speaker Jill Krowinski (D-Burlington) and Senate President Pro Tem Becca Balint (D-Windham)  issued a joint statement saying they could not be "more disappointed." They said:

This bill passed unanimously through the House and Senate, sending a resounding message of support for a plan that provides teachers and public employees the peace of mind that they will have their pension after careers dedicated to public service. It will also save Vermont taxpayers tens of millions of dollars in future years. We plan to take action to override the veto expeditiously and leave no doubt as to where we stand in support of the stability of our pensions system and our public employees.

Vermont State Employees' Association president Aimee Towne said in a written statement that the union was "furious" about the veto.

"As we have said since the Governor first threatened to veto this critical legislation, it is so wrong for him to come in at the last minute and blow apart months and months of hard work by a talented and diverse group of individuals, including a representative of his own administration," Towne said.

The union will lobby for an override, she added.