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Unfunded health care obligations threaten teacher pensions

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State Treasurer Beth Pearce might soon run out of metaphors for the chronic funding shortfall in Vermont’s teacher retirement system.

It’s a “monster,” she told the House Appropriations Committee on Wednesday. “It’s at a tipping point,” she said. It’s like a credit card that charges 18 percent interest, when a 2 percent deal sits idle on your desk. “It’s taking the wind out of the sails of (the pension system’s) recovery.”

The Vermont State Teachers’ Retirement System (VSTRS) encompasses pensions and other retirement benefits of retired teachers. It’s one of three pension systems managed by the state treasurer — the other two being state and municipal employees.

The teacher pensions have been consistently funded by the state Legislature in recent years, Pearce says, but the health care benefits have not. The state is falling about $20 million short each year, she estimates, based on the current cost of healthcare and demand for services. The health care is getting paid for, Pearce emphasizes, but in a very expensive way.

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