MONTPELIER -- Top state and teachers' union officials proposed a plan Friday they said would ensure the financial security of the Vermont State Teachers' Retirement System by setting up a separate fund to pay for retirees' health care.
Gov. Peter Shumlin, State Treasurer Beth Pearce, legislative leaders and the head of the Vermont chapter of the National Education Association issued a joint statement saying the plan would address a shortfall in the state teachers' retirement fund projected to grow without a fix from $20 million in 2015 to more than $50 million in 2037.
They said the plan was the fruit of six months of negotiations between the administration, treasurer's office, NEA and Vermont School Boards Association.
At least one lawmaker questioned why legislators were just learning of the plan now, with an estimated three weeks left in the 2014 session.
Administration Secretary Jeb Spaulding made clear that parties to the deal hoped lawmakers would not tinker with it much. "I think we've all seen a package where sometimes if you pull out a string, things come unraveled quicker," he said.
Spaulding and Pearce also noted that House Speaker Shap Smith and Senate President Pro Tem John Campbell had been involved in the talks. A news release from Pearce's office included words of praise for the deal from Campbell and Smith.
Pearce and Spaulding told the House Government Operations Committee that the problem with the fund stemmed from the fact it was being used to pay retiree health care costs. They said continuing to do so in an age when retirees are living longer and health care costs are climbing sharply could threaten the fund's long-term solvency.
That in turn could damage Vermont's credit rating, increasing costs to taxpayers for borrowing by all branches of government, they said.
"By paying more of the costs today, we will save taxpayers millions of dollars in the future and provide for the retirement security of our teachers' system," Pearce said.
The plan includes the following components:
-- A $28 million loan from the state's operating cash, to be repaid with interest, to provide an immediate infusion of money to pay retirees' health care costs.
-- A fiscal year 2015 state appropriation of $10.5 million, up from $4.75 million contained in the budget passed recently by the House and now before the Senate.
-- An increase in pension deductions to teachers' paychecks for new hires or those with fewer than five years of service from 5 percent to 6 percent of their gross pay.
-- A charge to local school districts of $1,000 per year in a new health care fee for each educator hired after this July 1.