BURLINGTON, Vt. — State pensions have shown steady improvement since their 2020 lows, but Vermont’s long‑term retirement obligations and rising retiree health‑care costs mean significant budget choices remain, Joint Fiscal Office analyst Chris Roop told the House Appropriations Committee on Jan. 8.

Roop, introduced as being “from the Joint Fiscal Office,” told committee members that pension systems have benefited from recent investment returns and from the supplemental payments enacted under Act 114. “Our retirement obligations are a very significant component of our state's long‑term liabilities,” Roop said, adding that those obligations limit the state's capacity to issue bonds for other priorities.

Why it matters: Vermont funds pension and OPEB liabilities on long amortization schedules that concentrate much of the principal pay‑down near the end of those schedules. Under current law the pension amortization is scheduled to close in 2038; OPEB pre‑funding is on a longer track, scheduled through 2048. Roop warned that as the pension schedule approaches its end date, contribution volatility can rise and that the committee should plan for scenarios if markets underperform.

Key figures offered to the committee include the one‑time payments placed into the systems under Act 114 — $75 million to the state employee system and $125 million to the teachers' system in FY22 — and the ongoing “plus payments” that began at $9 million per system in FY24, rose to $12 million in FY25 and are now $15 million per system per year until each system reaches 90% funded. Roop said those extra payments “are kind of like making an extra mortgage payment” that reduce future interest costs.

Roop reported recent encouraging investment performance: the systems exceeded the 7% assumed rate of return for three consecutive years and now show deferred market gains that will be recognized over time. He said those deferred gains amount to about $55 million for the state employee (VCERS) system and $88 million for the teacher system, which will help tamp down future ADAC (Actuarially Determined Employer Contribution) growth if future assumptions hold.

At the same time, Roop stressed persistent obligations. He reported an unfunded liability for the state employee pension near $1.0 billion and $1.75 billion for the teachers' pension system. The ADAC and the amortization schedule assume payments grow 3% annually to align with payroll; Roop cautioned that “as you get closer to 2038, the risk factors driving volatility in the employer contribution heighten.”

Legislative next step: Roop said a bill (H.567) introduced in House Government Operations would create a working group to model “life after 2038” and options to mitigate contribution risk; the bill was scheduled for consideration in that committee the following day. He described the working group as a modeling and planning step, not an immediate policy change.

OPEB (retiree health care): Roop defined OPEB as “subsidized health care benefits to retirees” and said the state only recently began pre‑funding those obligations. He reported very low funded ratios — roughly 16% for the state‑employee OPEB pool and 13% for the teachers' OPEB pool — and warned that health‑care cost trend assumptions were revised upward this year, producing substantial ADAC increases (Roop cited an illustrative $31 million figure for an increase).

Tim Duggan of the Retirement Office told the committee the treasurer’s office negotiated a change in health‑insurance vendors that reduced an initially proposed 50% renewal increase to a roughly 16% renewal for the teachers' side. “We ran a bid process, and we found a new vendor, HealthStream,” Duggan said, adding the procurement and the retirement division's work limited how much worse the ADAC increase would have been.

Committee members pressed on tradeoffs. Several legislators asked whether shifting or reducing the state’s supplemental pension payments could free short‑term budget resources for other priorities; Roop and others replied that scaling back the state’s commitment would increase long‑term costs and could harm the state’s credit profile, arguing it would be a trade‑off between near‑term flexibility and substantially higher future expense.

What’s next: Roop and committee members agreed additional modeling and scenario work is needed. The committee paused the presentation to proceed with the rest of its agenda; Roop noted the systems are cash‑flow positive now and that recent progress is meaningful but that the bulk of principal reduction under current schedules remains concentrated in the final years before amortization ends.

Sources and attributions: Statements and figures in this report are drawn from Roop’s presentation to the House Appropriations Committee and follow the committee’s recorded question‑and‑answer exchanges. Direct quotations are attributed to Chris Roop (Joint Fiscal Office) and Tim Duggan (Retirement Office), as identified in the transcript.

Ending: The committee did not take formal action on pension or OPEB policy during the hearing; Roop pointed members toward further actuarial modeling and the H.567 working‑group proposal as the next procedural step.