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.
The measures are expected to reduce the combined $3 billion unfunded liability of the two pension systems by about $293 million. They will also cut an estimated $2.75 billion retiree health-care benefit shortfall by about $1.73 billion.
Legislators were stunned by the governor's veto, thinking he would honor a deal reached by a 13-member task force made up of lawmakers, labor leaders and the governor's own commissioner of financial regulation, Michael Pieciak, who will be leaving his position on May 16 to pursue other opportunities. The task force was formed in 2021 following strong opposition to an earlier, more aggressive proposal to revamp the state's two largest pension plans last March.
"Lawmakers told us loud and clear that they are on the side of hardworking teachers, state employees and troopers by unanimously voting to override the governor's misguided and cynical veto of a pension reform package devised after months of work," said Don Tinney, president of the Vermont National Education Association, in a statement.
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.
"If the governor feels there is more the state should do to shore up the fiscal health of the pension funds, we certainly hope he will bring actuarial and legal analysis along with demographic projections to support his reform measures," said Rep. Sarah Copeland Hanzas, chairwoman of the House Government Operations Committee, in a statement.