Treasurer Mike Pieciak speaks during a press conference on the health of Vermont’s public pensions in Montpelier on Tuesday, Jan. 7. Photo by Glenn Russell/VTDiggerMONTPELIER — Four years after the solvency of Vermont’s public retirement funds hit rock bottom, state leaders say that changes to the plans enacted two years later in a law known as Act 114 have helped right the ship and are on track to benefit taxpayers.“In short, the pension reforms are working, and it’s critical we stay the course,” state Treasurer Mike Pieciak said at a press conference in his office in the Pavilion Building on Tuesday morning. Pieciak shared data showing that the pension plans’ ability to meet their future payment obligations to public employees has improved steadily every year since 2020. For the state employees’ retirement plan, known as VSERS, this “funded ratio” of the value of the plan’s investments to the value of its future obligations increased from 66% to 71%, while the state teachers’ plan, known as VSTRS, saw a 51% to 61% increase, the data shows. In both cases, Pieciak noted, it’s the highest funded ratio in about a decade.State actuaries have projected out a $1.1 billion funding gap between current savings and projected obligations in the state employees’ system as of the 2024 fiscal year — which ended last July — and a $1.8 billion gap in the state’s obligations as of 2024 for the teachers’ plan, according to Pieciak’s office.Both systems are on track to be fully funded — meaning they would have enough assets to cover what their managers expect will be owed to retirees going forward — by 2038, Pieciak said. Officials have recommended the state pay about $150 million into the state employees’ pension system, and about $230 million into the teachers’ system, in the 2026 fiscal year, which starts in July.The 2022 changes, which lawmakers enacted unanimously over a veto from Republican Gov. Phil Scott, saw state employees’ and teachers’ unions agree to cost-of-living adjustments and higher employee contributions, while lawmakers promised a lump-sum payment of $200 million and agreed to begin pre-funded retiree health benefits.Those new health benefit funds are also in good shape, according to the treasurer’s office. For the state employees’ system, the funded ratio figure has grown to 14% over the past four years, while the figure for the teachers’ system has risen to about 12%.“This is not a quick journey. It takes time and it takes persistence. But we are, in fact, seeing the results that we intended to see,” said Eric Davis, who chairs the board governing the state employees’ retirement system, at Tuesday’s press conference.Leaders from unions representing state employees, teachers and Vermont State Police troopers also joined on Tuesday to sound positive notes about the pension systems.Pieciak’s office also manages a retirement fund for municipal employees, though officials largely did not discuss that fund at Tuesday’s press conference. An aging population and the state’s growing pension system liabilities have long been the source of hand-wringing in Montpelier and a drag on the state’s credit ratings. In 2018, Moody’s dropped the state’s longstanding triple-A rating (the highest available) down to its lower AA1 rating, citing slower-than-average economic growth, demographics and pension obligations. In 2019, Fitch followed suit, and in 2020, S&P affirmed the state’s AA+ rating but revised the state’s outlook from stable to negative.The agencies’ Vermont assessments have since improved, though, with all three signaling in reports last year that the 2022 policy changes had set the state in the right direction, according to the treasurer’s office.“Our view of the state’s risk management for pension governance has improved,” S&P wrote in an October 2024 report, adding that the public system was now “on a more sustainable long-term cost trajectory.” Pieciak said a November 2024 analysis by his office found that the reforms in Act 114 and the state’s payments since are also on track to reduce the pension plans’ burden on taxpayers by $5.8 billion over the next two decades. Those savings come, in part, from additional employee contributions and changes to benefits, he said.Read the story on VTDigger here: Vermont officials tout positive trends for major state pension funds.