Imagine you have a mortgage. When you close on your house, the bank gives you a schedule of payments that you’ll have to make each month to pay down the principal and interest. After 15, or 20, or 30 years of fixed payments, the mortgage will be paid off.

Now imagine that, instead of a fixed payment each month, you had to pay $1,000 in January, then $3,000 in February, then $7,000 in March, and increasingly variable amounts every single month. You have no idea what your monthly payment is going to be from month to month or year to year because it’s entirely driven by factors outside of your control.

That’s exactly where Vermont finds itself with its current pension mess.

Because previous governors and legislatures drastically underfunded Vermont’s pensions for years, 15 years ago the Vermont Legislature made a commitment to pay off the state’s unfunded pension liability by 2038. So, they set a schedule and started making payments. But the problem is that the payments are variable, based on the investment performance of the pension funds, the demographics and retirement trends of state employees and teachers, and the generosity of pension benefits.

As a result, each year, the state must pay more and more toward an unfunded liability that just keeps growing. For example, despite making payments toward the pension system that are more than double what they were ten years ago, the unfunded liability grew by billions over the same period.

If you’re confused so far by this mess, you’re not alone. That’s why lawmakers set up the Pension Benefits, Design, and Funding Task Force this year to come up with recommendations to deal with the problem.

Some would like us to do nothing. Just keep paying more and more money towards an ever-growing liability. For example, after State Treasurer Beth Pearce raised the alarm this past legislative session, Speaker Jill Krowinski pitched a pension plan, only to drop it and instead form a “task force” after pressure from labor unions. The response was predictable, but frustrating. Pearce called it “disappointing”.

But in reality, it’s much more than disappointing. It’s disastrous. Because the consequences of inaction (or of kicking the problem to task forces and study committees that produce reports that are never acted upon) are unbearable.

First is the cost to taxpayers. In fiscal year 2022 alone, the state will have to pay more than $316 million just to meet our scheduled payments in the pension system (and for other post employment benefits) for a single year. If our demographic, retirement, and investment assumptions don’t change (which they undoubtedly will) the state will need to pay an average of $400 million every single year for the next 16 years. But again, the true figure is surely higher than that as people retire earlier, live longer, continue to receive better-than-average benefits and pay, and as investment returns underperform.

What is the cost of $400 million per year to taxpayers? If we were to spend that money elsewhere, we could increase the state’s budget on higher education by 75%, double funding on housing and community development, triple funding on tourism, cut income taxes by 10% across the board, and reduce property taxes by $20 million, while still having more than $5 million left over. That’s just one example of the opportunity cost of doing nothing and maintaining the status quo. Hundreds of millions forgone on critical investments and tax relief every single year.

But what about the consequences to our state employees and teachers? State labor unions are experiencing tunnel vision on necessary changes to fix bad promises made in the past, but they want to ignore the costs of inaction on the very state workers and educators they represent.

If we do nothing now, it will mean even greater and harder benefit cuts down the road as the unfunded liabilities continue to mount. Today’s $5.6+ billion unfunded liability will look like chump change if we continue to kick the can down the road. If we don’t have these serious conversations now, it means much more difficult conversations in three, five, or ten years from now when the crisis has exploded.

We can’t delay the conversation any longer. Unless the latest task force has the courage to propose real solutions that make meaningful changes to the state’s pension system, the costs will only grow exponentially to a point where we simply cannot afford them.

David Flemming is a Policy Analyst with the Ethan Allen Institute (EAI). This is the first commentary in a multi-part series that EAI is running on Vermont’s pension crisis.