David Coates is a retired managing partner for KPMG and current member of the Vermont Business Roundtable. Among other business and state ventures, he has served as interim head for the Bank of Vermont, Burlington Savings Bank and Key Bank.
Over the years Coates has warned of a looming financial crisis related to Vermont’s pension fund. As of June of 2017, the Green Mountain State has $4.5 billion in unfunded liabilities for state employees’ and teachers’ pensions. The unfunded liability is the gap between what the state owes plan participants versus how much the state has in the bank to pay those obligations.
In this episode of Vote for Vermont, co-hosts Pat McDonald and Ben Kinsley interview Coates about the state pension crisis and how it may affect Vermonters and state budgets. “This is the kind of thing that I see really being a problem for our children and our grandchildren — you are going to have to face it,” Coates says.
Each year, the state must pay the Annual Required Contribution, or ARC, toward the pension fund. In 2017, Vermont fell short on these payments for post-employment benefits by $85 million, which is over a 50 percent increase on the gap from 2016. Failing to meet annual contributions could potentially lead to a downgrade in Vermont’s bond rating, among other problems.
Coates says some positive changes have been made, however. The amount that new employees have to pay into the system has increased, and the time retirees have to wait until they get their full benefits is longer. Even so, he says the state is not on a sustainable path and that major policy shifts must be made to avoid an economic crisis.
Watch full episode: