MONTPELIER — The Vermont House has approved a bill that would overhaul the board that governs state pensions and establish a task force to address the system’s mounting debt.
The bill, H.449, which earned initial approval in a 125-22 vote on Thursday, comes after Democratic leaders proposed, and then shelved, an even more ambitious pension reform effort this year.
After learning the unfunded liability for state employee and teacher pensions has recently swelled to nearly $3 billion, House lawmakers put forward an initial plan to address the debt in March.
The plan, which involved trimming benefits while asking for higher contributions from teachers and state employees, was panned by workers and labor unions. After facing a backlash, Democratic leaders dropped it.
“When we heard loud and clear from our public employees … throughout our public hearings and in emails to us that they were not ready to engage in a final conversation about the changing of benefits and that they wanted us to slow down, we listened,” Rep. Sarah Copeland Hanzas, D-Bradford, said on the virtual House floor.
She is the chair of the House Committee on Government Operations.
“And we put together this bill that we bring before you,” she said.
Lawmakers pivoted and said they would establish a task force to work over the summer to come up with recommendations for changing pension benefits and raising revenue for the struggling system.
The bill would create the task force and proposes changing the makeup of the board that manages the pension funds in an effort to improve its investment decisions.
The pension task force created in the legislation would be staffed by 15 members.
The group would include six spots for union representatives, six for lawmakers, one for the commissioner of financial regulation, one for the commissioner of human resources and another for the retirement director at the state treasurer’s office.
Under the bill, the task force’s recommendations are expected to be delivered in September.
The structure of the task force has been criticized by unions who say their members should make up half of the body and that legislators have too much sway.
House Progressives and some Democrats voted against the legislation because they also felt state employees should have more representation on the task force.
“If we move forward with this position, we are undermining the process from the beginning,” said Rep. Selene Colburn, P-Burlington, who leads the Progressive caucus.
“Workers need to feel they are coming to the table in an equitable and meaningful way, or whatever work comes out of this task force will be questioned and likely rejected,” she said.
Rep. Brian Cina, P-Burlington, said the bill would “lead to an imbalance in power as the workers will not be on equal footing with the other members” of the panel.
“By having a lopsided task force, this bill does not create the conditions needed to build trust in the process and confidence in the final product of that process,” Cina said.
Rep. Mike Mrowicki, D-Putney, countered and said he saw a “balanced makeup” on the panel.
“I see equal members of labor, administration and legislators.
“And this continued assertion that somehow legislators are not going to bring open minds to this goes against the way I work here, and I would hope everybody,” Mrowicki said.
The legislation approved last week would also act to revamp the system’s governing board to help improve the performance of its investments.
Several factors have contributed to the combined $3 billion unfunded liability in the state employee and teacher pensions, including poor investment returns.
Legislators have expressed concern that current members of the Vermont Pensions Investment Committee have not been vigilant enough over the fund’s returns, which have consistently come in below expectations.
The bill would turn Vermont’s seven-member committee into a 10-member commission.
The new panel would include two financial experts appointed by the governor, one member representing municipalities, and another representing school boards, the state treasurer and the commissioner of financial regulation.
Its chair would be appointed by the other members.
The proposed changes come as lawmakers have said they want to increase the amount of financial expertise on the board.
“Extensive research has shown that a higher portion of members with financial expertise improves investment portfolio performance of pension funds,” said Rep. Rob LaClair, R-Barre Town.
After she voted in favor of the bill, Rep. Katherine Sims, D-Craftsbury, said that when it comes to tackling pensions, lawmakers “can’t let perfect be the enemy of good.”
“This bill is an important step forward to address the pension crisis and set our public retirement systems on a sustainable path for the future,” she said.