Montpelier, VT - On May 17, 2022, Moody's Investor Service published an "Issuer Comment" announcing that the State's recent actions on pension and Other Post-Employment Benefits (OPEB) changes (Act 114 of 2022, S.286) are considered a credit positive.
Earlier this month, the Vermont General Assembly enacted into law changes to the Vermont State Employees Retirement System (VSERS) and the Vermont State Teachers’ Retirement System (VSTRS) that will save the State roughly $2 billion in combined pension and OPEB (retiree healthcare) unfunded liabilities. These savings are achieved through a slate of one-time cash infusions, employee contribution increases, structural changes, and improvements to the OPEB funding plan.
Moody’s wrote that “the benefit changes and future contribution increases called for by the legislation (S.286) are credit positive for the state because they will lower the state’s unfunded retirement liabilities and improve its asset accumulation prospects.”
Treasurer Beth Pearce noted that the recent announcement from Moody’s is a reflection of the State’s efforts to address our unfunded liabilities. “The passage of Act 114 represents months of study and critical discussions among all stakeholders and is in keeping with Vermont’s collaborative approach to meeting challenges.” A Task Force, made up of House and Senate members, employee groups, and representatives from the Administration and Treasurer’s Office, were key to success.
The State’s and the Treasurer’s Office’s goal is to restore Vermont’s Aaa rating, the highest rating available to governments. Pearce remarked: “While this is a significant step forward, we have more challenges to address including workforce and demographic trends. At the same time, we must continue our adherence to sound financial management and budget practices.”
Pearce thanked Senate Government Operations Chair, Jeannette White, and her committee, for initiating the legislation. White stated “The Moody’s comment is good news. I am proud that after nearly 18 months of problem-solving, we passed a consensus bill that will substantially reduce the State’s liabilities.” Treasurer Pearce also congratulated Senator White on her extraordinary service to the State as she moves on to other endeavors.
The legislation incorporated the Treasurer’s long-standing proposal for prefunding the OPEBs, which will result in approximately $1.7 billion of reductions in liabilities. Pearce also thanked Senate Appropriations Chair, Jane Kitchel, for her role in the effort. “I want to especially thank Senator Jane Kitchel for her technical skills, resourcefulness, and hard work to bring the OPEB proposal past the finish line. Senator Kitchel has, throughout her years as a legislator and Appropriations Chair, been a powerful force to address our post retirement liabilities.”
Senator Kitchel stated: “I have been concerned with the State’s growing pension and OPEB liabilities for some time and it is gratifying to see these changes and investments are already moving the needle in the right direction.”
Pearce concluded that “all parties have worked hard to come up with a tri-partisan solution that strengthens the State’s financial standing while preserving a defined benefit pension plan for our valued public employees. I am encouraged by Moody’s evaluation of these changes as credit positive.”