Vermont Gov. Phil Scott has vetoed legislation unanimously passed in the House and Senate to reform the state's pension systems for teachers and state employees.
In a letter to lawmakers on Monday, Mr. Scott rebuked the bill, saying it "does not include enough structural change to solve the enormous unfunded liability problems the state faces."
He raised concerns that despite adding $250 million in additional taxpayer money, the state in several years "will be faced with the same unsustainable system we have today."
The proposed legislation is expected to reduce the combined $3 billion unfunded liability of the Vermont State Teachers' Retirement System and the Vermont State Employees' Retirement system by about $293 million. It also cuts the $2.75 billion in unfunded retiree health-care benefit liabilities by about $1.73 billion.
The bill incorporates the recommendations made by a 13-member task force that was formed following strong opposition to an earlier, more aggressive proposal to revamp the state's two largest pension plans last March. The task force was made up largely of lawmakers and labor leaders.
"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," Mr. Scott warned in his letter.
Lawmakers were quick to react. "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," said Speaker of the House Jill Krowinski and Senate President Pro Tem Becca Balint in a joint statement.
Rep. Sarah Copeland Hanzas, chairwoman of the House Government Operations Committee, said she expected "a swift and overwhelming override" later this week.
Labor leaders also assailed the governor. The "veto is an affront to teachers, an affront to state employees, and an affront to troopers who all worked with lawmakers and a high-ranking member of the governor's own cabinet to craft this bill in months of open — and publicly available — meetings over the last year," said Don Tinney, president of the Vermont National Education Association, in a statement.
The bill calls for teachers and state employees to boost their contributions gradually over a three- to five-year period and to accept more modest cost-of-living adjustments. The state, in turn, will make a one-time $200 million payment to the pension systems to pay down unfunded liabilities in fiscal year 2022, plus ongoing additional payments beginning in 2024 that ramp up to $15 million and remain at that level until the pension systems are 90% funded.
Mr. Scott has pushed for adding a defined contribution retirement plan as an option for new employees. He has also asked lawmakers to incorporate a risk-sharing provision through which employees' contributions could be adjusted based on the fund's market performance.
