Governor-elect Phil Scott is advocating a fundamental change in pension plans for members of public-sector labor unions — one that is steadfastly opposed by the unions themselves.
Currently, public school teachers and state workers receive “defined benefit” plans, which establish certain retirement benefits to be received by each worker. Scott favors a “defined contribution” plan, in which the state and the employee would contribute set amounts, which might or might not cover the cost of a retiree’s golden years.
Scott would allow current staffers to keep their defined benefits, while future workers would fall under a defined contribution system. But as far as Vermont’s two biggest public sector unions are concerned, the notion is a non-starter.
“We are steadfastly opposed to the idea and will continue to be,” says Doug Gibson, a spokesman for the Vermont State Employees’ Association.
Adds Darren Allen, a spokesman for the Vermont-National Education Association, which represents teachers, “This is one of those fundamental issues that hasn’t changed and won’t change.”
During the campaign, Scott didn’t draw attention to the idea. In response to a pension question in a Vermont-NEA candidate questionnaire, he avoided any specific proposal and never employed the fateful words “defined contribution.” Instead, he alluded to “a practical approach … to phase teachers’ retirement costs to the education fund in concert with a series of pension reforms to curb unfunded liabilities.”
That could mean anything from a commitment to fully fund pensions to slashing benefits for all employees.
Scott’s full proposal was reported deep within a November 4 story by the Vermont Press Bureau’s Neal Goswami. It drew no attention in the closing days of the Trump-obsessed campaign season.
In a statement emailed to Seven Days last week, Scott’s transition team confirmed his position.
“The most immediate and meaningful step to curb the state’s growing liability is to offer new State employees and teachers a defined contribution plan (similar to a 401k),” the statement reads. “[This] will help to limit the state’s liability over time and provide the employee with tax-preferred retirement fund. The state should study this [proposal] closely to ensure it is a cost-effective approach for taxpayers.”
Scott’s pre-election fogginess may have obscured his intentions, but union leadership has taken notice. “We think the governor-elect’s approach would be more expensive, less secure and undermine the retirement security of hard-working public employees,” Allen says.
“It would also hurt recruitment of state workers,” Gibson adds. “The current state pension plan is a benefit we should want to hold onto.”
Gibson notes the growing concern over a potential senior poverty crisis. In an age of defined contribution pensions, many Americans are not saving enough for retirement. “It’d be strange for the governor to exacerbate the problem,” he says.
State Treasurer Beth Pearce, who oversees the state pension funds, is no fan of defined contribution plans. In a campaign debate broadcast on VPR this fall, she asserted that defined benefit plans are actually “the most affordable for taxpayers” because more than two-thirds of retirement benefits are funded by investment income, not the state’s contribution. And in a 2012 story by the Vermont Press Bureau, Pearce said that when retirees have “reliable and adequate income,” they are “an economic driver for the state and important for the long-term prosperity of Vermont.”
It remains to be seen whether the governor-elect is determined to push for the controversial idea. The state workers’ pension is subject to negotiation with the VSEA, which seems a non-starter. The teachers’ pension is established by the governor and legislature. It’s hard to imagine too many Democratic lawmakers, who depend on union support come election time, approving the change.
Offering the proposal at all could poison the new governor’s relationship with the unions. Of course, confronting organized labor is a popular way for Republicans to signal their toughness. On the other hand, Scott professes not to be that kind of Republican. He has trumpeted his blue-collar roots, and likely earned a goodly share of votes from members of public sector unions.
Many observers and politicos see Phil Scott as a blank slate. This relatively obscure issue may prove to be a defining moment for his new administration.
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Scott’s idea is a terrible idea for seniors. It’s putting seniors at risk by making them vulnerable to ups and downs of the stock market – something they have no control over. That is a risk that needs to be spread out and borne by a large fund such as pension fund. The idea of a pension fund is to ensure economic stability to pensioner – not uncertainty. I voted for Phil Scott but I would NEVER had voted for him had I known he was pushing this. No wonder he was trying to hide his true intentions.
Young people seriously underfund retirement plans, leaving them in a big hole some later years. Defined contribution plans save the state money in those years, since they don’t need to fund as much while young people short out their savings. These same young people, when they find the hole they’ve put themselves into, haven’t got the means tor fill the hole, leading to much smaller pensions and possible poverty. The federal government learned this when it switched to defined contribution plans, but since it was cheaper, they stuck with it.
I know people nearing retirement in the federal government who will be lucky to draw a $500 pension after twenty years of service because they didn’t understand the process. That, with social security in the range of $1800 a month, will guarantee poverty in the coming years, enough that they will be eligible for Section 8. That’s a pretty scary picture. If Phil Scott pushes this plan for Vermont, it won’t be because he’s on the side of humanity.
I absolutely back Phil Scott on this issue. Pensions were originally meant to be a supplement, not the only source of income for a retiree. It’s bankrupting entire cities to fund retirements for public employees that often last for three or four decades, longer then they actually worked. Pensions were never meant to replace entire salaries, they were meant to keep people out of poverty. Then over the years they kept asking for more and more and more, and now communities are suffering while desperately trying to finance ridiculously high pensions.
This taxpayer is sick and tired of funding $60,000-$80,000 annual pensions for public employees, and it is unsustainable to continue to ask us to provide retirement revenue of this magnitude. $20,000/year is plenty to supplement savings and social security. We need more brave politicians like Phil Scott to put a stop to this, our education system is suffering, our infrastructure is suffering, so retired public employees can take cruises, buy big gas-guzzling cars, and play golf decade after decade after decade. Enough is enough!
If we follow Barbara’s assertions, we should support people because they do not want to figure out the proper way to save for their retirement. Everything should be a choice and the fact that young people do not understand the importance is because they have had things handed to them and expect to be taken care of. I have worked hard to put money away for retirement, often times going without things and my objection is now the government wants me to take my hard earned money and pay more so the ones who were frivolous and did not plan can not worry about things. I Object. Maybe making sure they learn math and understand this in school should be made mandatory
The author has only been “officially” in his new role at Seven Days for less than a month and virtually every “opinion” piece has been on Governor-elect Phil Scott. Does anyone see a common theme here? Perhaps its just a slow news day but anyone on Twitter knows that John Walters and some sordid trolls on Twitter have a fetish for Phil Scott and its so yesterday. After 6 long years Vermonters are eager to celebrate, rejoice and be grateful that the tenure of Governor Peter Shumlin is almost over. Vermonters trust in state government is at an all time low thanks to Gov. Sbumlin though Phil Scott provides Vermonters great hope that brighter days are ahead! #GoPhil
Less than 15% of private sector workers have defined benefit plans. Why should teachers have a better plan than the taxpayers who struggle to pay the taxes needed to fund one of the highest cost per pupil education systems in the country?
So, Neo, you’re of the “my house is burning down so I want yours to burn down too” school of thought. Assuming that you have some sort of retirement vehicle where you work, like a 401k that your employer kicks into and some sort of health plan that your employer helps pay for, we should pass a law that abolishes those benefits too because ultimately its coming out of the pockets of Vermont consumers in the form if higher prices. Why should anyone have to pay a dime for your healthcare and/or retirement? Further, again going by your logic, why should Vermont taxpayers that dont have children have to pay school taxes at all?