Moody's, Fitch and Standard & Poor's have reaffirmed the bond ratings that give Vermont the best credit score among New England states. But Wall Street analysts say an aging demographic profile and unfunded pension and health care liabilities pose economic risks in the future.
Every year, the big three Wall Street ratings agencies reassess Vermont's bond rating. Democratic State Treasurer Beth Pearce says the latest results arrived in late September, and she says the news is good.
"So we're AAA by Fitch and Moody's and remain AA+ with Standard & Poor's," Pearce says.
The AAA rating is the highest available score — the AA+ from Standard & Poor's is their second-highest rating. Pearce says the scores are testament to sound fiscal management practices employed in state government, and she says retaining those scores will require continued discipline when it comes to taking on state debt.
"We don't want to be in a position that we were we were in the 1970s and all the way through into the early 1990s where we were putting a little too much on our credit card," Pearce says.
While Wall Street analysts say Vermont's outlook is "stable," however, they're also warning of economic dangers ahead. And they've expressed particular concern about the disproportionately large number of older people who call Vermont home.
"We don't want to be in a position that we were we were in the 1970s and all the way through into the early 1990s where we were putting a little too much on our credit card."- Beth Pearce, State Treasurer
The state's aging demographic profile could trigger workforce shortages, something many employers say is already a problem. It could also impose new strains on a social safety net funded with public expenditures.
"I'm part of that Baby Boomer generation. And as a whole, Baby Boomers have not saved for the future," Pearce says. "And that is putting some strain on government services and will continue to put strain."
Ratings agencies also say the state suffers from above-average unfunded liabilities in its public pension and retiree health care systems.
Pearce says Vermont deserves credit for fully funding what's known as the "Actuarially Required Pension Contribution" for state workers. That's the amount of money that fiscal experts say the state needs to put aside every year to cover the cost of pension benefits that will be due down the road.
But pensions aren't the only outstanding liability. Vermont is on the hook for the cost of the health plans that it will have to provide to retired state employees and teachers, and that's an area Pearce says the state will have to address in the future.
"We need to take a look at how to control the cost side of the equation for health care, and I think that's extremely important," Pearce says.
Pearce says the state has already taken some important steps. In recent years, the state increased significantly the amount that taxpayers and teachers contribute to the retiree health care system
But Pearce says additional work will be needed, either to increase contributions, or to limit expenses. The Vermont School Boards Association has recommended that schools limit health care costs by opting for less expensive insurance plans. Pearce says she's not ready to issue any formal recommendations on how to address cost containment.
