Looks like I called at least one outcome of the COVID-19 bailout bill correctly and it didn’t take long to materialize. The editors of the Wall Street Journal point out how the State of Vermont has figured out the formula:
Vermont’s Democratic Legislature broke the code when it dared to propose pension reforms while the state is flush with federal bailout money. Vermont’s pension funds are 35% to 50% underfunded, and rising payments are squeezing government services.
“From the standpoint of the General Assembly, whose job it is to pay [an annual contribution], I would say that we didn’t realize that we would have to pay [a cost] that increases by $36 or $60 million in a year,†said Democratic Rep. Sarah Copeland Hanzas.
Democrats are proposing to raise the retirement age to the ripe old age of 67 from 62; increase worker contributions by 1% to 2% of their pay; and limit cost-of-living adjustments to the first $24,000 of benefits. Oh, and they want to progressively index worker contributions so those who make more pay a larger share of their salaries toward their pensions. Whatever got into these Democrats, can they export it to Illinois and New Jersey?
The legislators figure that they can afford this because Vermont received about $1.3 billion in federal cash from the Cares Act and is now getting another $1.3 billion in budget relief. Altogether that’s about 40% of the state budget. Democrats say pension reforms are still needed because state payments will continue to grow, and they can’t count on Congress to send a check every year to cover the bill.
But to make the pension reforms go down easier with unions, Democrats are proposing to deposit $150 million of this year’s state budget surplus into worker pension funds. Money is fungible, and federal cash has helped create the surplus.
There is in effect no way for the Congress to prevent this sort of shell game other than not to provide bailouts for states.
