 Good afternoon. You are with the Vermont House Government Operations Committee. We are meeting this afternoon with the president of the VSEA and the executive director of the Vermont NEA and looking forward to hearing their thoughts and reactions to the bill draft that we have been considering this week. The goal of the bill draft was really to be responsive to what we heard from the many teachers and state employees who came to our public hearings and who have also contacted us through their own representatives in the Vermont House who said we need to slow down, we need to take time to look at all of the aspects of the pension system and so the bill setting up a summer task force and also incorporating some of the consensus governance changes that we think will help improve the performance of our investment side is the draft that we are seeking responses from these folks on today so I think we'll go first to Jeff Fannin. Thank you Jeff for being with us today and please share your thoughts with us. Thank you very much Madam Chair and good afternoon committee. My name is Jeff Fannin, Executive Director of Vermont NEA and I appreciate the opportunity to speak with you today about the draft bill concerning the Vermont Pension Investment Committee VPIC and the Pension Design and Funding Task Force, otherwise known as the task force, the summer task force. We appreciate this process is slowing down as you just mentioned and as was the case in 2010 and 2014 we will continue to participate in this process because maintaining a strong defined benefit plan for our pension for our teachers is critical for our students and communities we believe. I have several specific observations and a general comment about the draft bill. As a general matter, I think the draft lacks balance and balance by that I mean balance between the plan participants and other interested parties. For example, the troopers are not mentioned anywhere and should be I think the recent public hearings and outpouring of comments that you just previously mentioned Madam Chair from plan participants demonstrated a genuine need for fairness in the process, including VPIC and the task force so that any recommendations have buy-in from those affected by the proposed changes. Balance therefore must be achieved. So as it relates to VPIC, we have several concerns and highlights that'll bring to your attention. First, increasing the size of VPIC from 7 to 10 dilutes the voices of the three plan participants on the committee. And as I mentioned on March 25 when I testified to you about the earlier proposal on governance, the current composition of VPIC is perfectly in line with the recommendations of the Boston College Center on retirement research. Among other concerns raised by that group, adding political appointees to the committee as the draft does now is current is likely to diminish investment returns exactly what we don't want to do. So according to the BC research, we recommend the governor's appointee should be reduced to one the Commissioner of Finance and Management. It's also unclear why the VPIC chair has a 20 year term limit. Oftentimes board members are accused of becoming too cozy with board advisors their consultants and staff. And we think therefore, and what happens then is they fail to ask the critical questions that are really necessary as a board member. So we think the chair should have the same 12 year term as all other members. And of course, you know there's a cycle to that I understand but that ought to be included. And the draft lacks a removal section which we think is critical. The committee must have the ability to remove a member in cases of malfeasance or other egregious acts minus such removal language or VPIC member could overstay his or her welcome, and possibly harm the committee and its work. So I think we think the draft needs a removal section. Additionally, we recommend it propose section 523 D policies adding a simple word written in the first sentence as follows. The committee shall formulate written policies and procedures. I'm concerned that it may be perceived as ambiguous, and we got to remove that ambiguity. As for the task force, again as as above. We think the task force lacks balance, which is absolutely critical to convey fairness. I believe the composition of the task force must be revised to include greater participant participant voice. It's a tough one for me sorry. There are, we don't understand the rational reasons to include a member of the business community when the plans are all public sector plans not private sector plans. It's notable however that the private sector plans are governed by a risk, which requires of collectively bargain plans to include an equal number of employees and employers on their boards. While we're standing the private sector is requirement for balance the business community we believe members should be removed from the task force and likewise the Commissioner of DFR should be removed. Again regardless of position or affiliation that balance of the task force must be must include an equal number of employee and management representatives to achieve fairness and integrity of any possible recommendation. In summary, I guess you could say this could be achieved by adding to Vermont in the a VSE a and and the troopers associations appointees or subtracting from the employer side it doesn't. It just but to achieve balance that's got to be accomplished. The charge of the task force, specifically recruitment and retention. As you did earlier in your public hearings. The concern over recruitment and retention of teachers and state employees. On the teacher side, there already is a teacher shortage in Vermont and just yesterday the Secretary of Education Dan French spoke in the Senate Education Committee about the concerns with the shortage of qualified educators in Vermont. To examine the effects of current benefit structures and contribution characteristics on the recruitment and retention of public school educators and state employees and evaluation of any proposed changes to current benefit structures and contribution characteristics on the recruitment and retention of public school educators and state employees in the future. The impact on other state benefits. I remember this but in the early 2000s many retired teacher. Pensions were so small that the state had to step in and you laterally increase teachers pensions to get such retirees off public assistance programs. And I worry that we're, we're heading down that path again. So we should in this task force should evaluate proposed changes to current benefit structures and contribution characteristics on the pre retirement and post retirement welfare and financial security of public school educators and state employees who identify as female or female and public school educators and state employees irrespective of their identity who are in less than the federal poverty level during their years of active employment and during their retirement. Underfunding. We hear a lot of discussion about this and I think it's it's well documented that teacher system was underfunded dramatically from 1979 through 2006, except for four years and that's an alarming achievement frankly. Underfunding is clearly displayed by the fact that the teacher system is underfunded more significantly when compared to the state employees, if you just look at their funding ratios which are 66 and the state employees and 50% for the teachers. The task force should conduct an actuarial in depth assessment of the annual investment returns, estimated to have been lost to the teacher system and the impact of those losses. Dedicated revenue and one type funds. So the teachers and state employees have put in every penny every required of them by law. And while we appreciate the state has paid the full a deck, at least in the teacher system since 2007 and always for the state employees. The underfunding the teacher system cannot be disregarded. The task force should investigate funding and revenue enhancements including contributions from the state. Municipalities and money is generated from the increased taxes on the wealthiest for monitors including individuals, businesses and other potential revenue sources. Additionally the state should use at least the previously discussed and mentioned $150 million in one time funds towards the pensions. Most stimulus funds have been a proverbial shot in the economic arm of the state. And using these state these increased revenues to begin to shore up the pensions is that we think is the best use of the dollars complication manager. The intersection with healthcare costs are real. One of the buckets often discussed mostly by the governors the teachers OPEB bucket, other post employment benefits and that's healthcare. We think the task force should examine and study the health benefit designs, innovations state regulatory measures and other alternative measures models of providing pooled health insurance to both active and retired school employees to lower healthcare costs for employees retirees school boards and the state and drive those savings into the pension. Economic analysis. The task force must evaluate the intermediate and long term economic effects the state and local economies, because of any proposed changes to current benefit structures and contribution characteristics, and their potential effects on retiree spending power, which is sizable. And finally, we think the ties forces timeline seems overly and unnecessarily aggressive, and the report should be delivered on or before October 15 to allow for some genuine analysis and consideration by the task force. We think a hastily drafted report will only cause more harm and anger amongst those possibly affected by the recommendations in the report. I'm happy to answer any questions my written comments are afforded to Andrea earlier. Thank you for that. Thank you for the opportunity to speak with you today. Thank you for being with us and also for submitting your comments and writing it'll help for us to be able to go back and review them after we've had a little bit of conversation so committee I will give you an opportunity to ask any. Questions. Rep McCarthy. Jeff thanks for being with us and coming with some suggestions for us as we're, we're doing this difficult work. I guess I want to go to your point and ask you a little bit about the frame that you're viewing the balance question through and I've been looking a lot at the frame of the balance between expertise. And I want to go back to our, who are amateurs on VPIC specifically so and set the task force aside for a second really just think about the investments. And I'm wondering if you could comment on, you know, some of the feedback we got from your members at the public hearings which said, you know that their, their confidence was really shook in the states management of their funds the states management of their funds again and and I think a lot of those folks who who talked to us were really frustrated, not with the legislature's management of their funds, but with the way that their funds have been invested weren't performing. You know, and the pressure that that was putting on us and them in in this difficult question of how we save the pension so I'm wondering if you can comment on, you know, this balance between amateur versus expertise on VPIC moving forward. Thank you. So I wouldn't call them amateurs I think some of the plant participant people on these boards are very experienced they've received they've been there for some amount of time and the tenure, for example, on the chair. I address saying, I don't think they should have a 20 year term I think they should have a 12 year term, along with everybody else so I think, you know, getting the rolling the cycle you know the staggered terms is important for everybody to have background knowledge and education as they go forward so you constantly have a churn, but you also have a constant stable set of people who are very knowledgeable so I don't know that I necessarily agree with the term amateurs. Other folks who get up to speed work hard, and their interests are, frankly, in the preservation of the planet cell for their perhaps their own benefit, but for their colleagues benefit as well so I think they have the, they have a very good sense of what's right and wrong and what how to proceed, I would say, and they finally they also all of these folks are receiving the advice of that investment experts in the VPIC context. The state pays a lot of money to investment expert experts and has for many years. And I think, even if you had a financial background on the Wall Street, you might ask some critical questions but those come with knowing the plan and understanding the needs of the plan, I would say, and it's not just, you know, I think we should invest in this company or that company. Those are investment advisor decisions I think and they make recommendations that any board member whether they're so called expert or amateur as you described them would be hard pressed to go against and then that goes to I think that the fiduciary roles that they all play and stepping aside and stepping outside of that fiduciary role and rejecting an investment advisors recommendation I think they have to have really good reason to do so. And I think that anybody who's got enough education, and most of the board members all do and given that the fact that they beyond be picked for 12 years I think they would get it if they don't have it immediately. I think would be equipped to answer those questions and ask those critical questions so I think that the answer to your question really is, they're not amateurs. They don't put us off of the level of ignorance of the plan when they arrive, no matter what their baseline is and how they arrive. It's about getting education once they do arrive, and making them knowledgeable about the plan and sorting through the investment advice they get from the Wall Street experts if you will. Well thanks Jeff if I could just follow up madam chair, you bring up an interesting thing which is. Do the members of EPIC now, who represent the boards, not coming from a level of financial expertise, I know some of them have had some outside training and I appreciated some of the testimony received on that. But it strikes me that if an investment advisor came to them, a professional, with bad advice, would they be able to look through the numbers and the advice that they were being given to see through that. And I'm an amateur, I'm not a financial expert, but it strikes me that some of the decisions that EPIC has to make could easily be, the advice that they get could easily be shrouded in a whole bunch of numbers. We throw around words like fiduciary a lot, but it strikes me that folks that don't have a deep level of financial expertise wouldn't be able to push back against a bad investment advisor. Well, that may be true. And I guess what I would, I've often said this in some of these meetings over the many years, that I think I said at this committee some time ago, I believe in index funds. I mean, so there have been, frankly, Warren Buffett, wagered a small bet for him, unbelievable bet for me. I believe of a million dollars to five hedge fund, active managers of funds. It was a 10 year bet. And the idea was he would put a million dollars into an index fund and they would actively manage their millions of dollars. And after 10 years, he outperformed them dramatically. And so I'm not sure that somebody questioning the investment advice, I mean, there are structural decisions that the VPIC board could make that would be a whole lot more healthy rather than selecting a particular investment vehicle that somebody might recommend. So I think there are ways to do it in a thoughtful manner. And I think anybody with a reasonable education about investing, understanding the plan as they must, is equipped and well-equipped, frankly, to make those decisions. Rep Gannon. Thank you, Jeff, for testifying this morning. Excuse me, this afternoon. And I really appreciate your written testimony because I wanna make sure we capture the details of your concerns. So I really appreciate that. But I wanted to follow up, first of all, on Rep McCarthy's questions. You cited the Boston College Center for Retirement Research. And one of the things they state in their research is extensive research has related a higher proportion of board members with financial expertise to improved investment performance on pension funds. So if we were to eliminate the two public members that you've suggested, where would that financial expertise come from? Well, I think that you could, I think the governor's appointee could have it. I think if we wanna assume for a minute the treasurer's appointee would have it. I mean, there are other people that can bring that too. It also, the Boston College report also talked about having a balance between planned participants and experts. And so we can argue about whether, which is more important. I think that leaning as it does currently on non-planned participants, I would say, is out of balance with what I read in the Boston College report. So just to follow up on that, should we require that all members of EPIC have financial expertise? I don't think that's what, I don't think that's what the Boston College study talked about. I was just trying to get how we get some financial expertise on EPIC because representative McCarthy said, well, they make poor investment decisions. Well, if you look at some of the past history of EPIC, one can definitely argue that there were some poor investment decisions. And well, I agree with you, simpler investments like index funds are great for many people. The pension right now invests in some very complicated investments. Private equities has invested in fund of hedge funds in the past, those are not your everyday investment that you or I would invest in and require a sophisticated knowledge of investing to truly understand. So I'm just trying to figure out how we get an expertise on the EPIC to push back when the investment advisor makes poor recommendations. Well, I think that's a delicate balance. I mean, I think that's the, right? That's what the Boston College study I read at least read into it is that the delicate dance between having experts, so-called experts and planned participants who have that sense of what's needed. So I think that, frankly, that's a historical argument this country's had. We've thought of in the past that the US Senate would be the upper body and the hot house, if you will. And so we've had that dichotomy in this country for many years and we're finding it out here. I think we're seeing it here play out as well. We want to have everyday average planned participants who are knowledgeable, who get up to speed, who have a baseline of understanding of the plan as well as experts and not dominate one way or the other. I think that's the challenge that I think in fairness to the EPIC board, I think they need both voices in the room, if you will. And sticking with the Boston College Center for Retirement Research's paper on this, I mean, another point it makes is adequate stakeholder representation, which it says includes planned participants, government officials and general public members. So three groups, but we're eliminating some of those public members. Now, if you think there's a better way to appoint them than having the governor appoint them, I'm open to hearing that, but I do think there needs to be that balance between those three groups. Absolutely, and it also talked about not having too many political appointees. And so, I mean, there's room for improvement, I'll say that, and we can have that discussion and should, I think from our perspective, at least initially, and again, we want to engage with this conversation and figure this out. But certainly having planned participants, the voice of planned participants on this committee in a balanced, measured way is a necessary first step for us. Okay, thank you very much. Rep LeClaire. Thank you, Madam Chair. Good afternoon, Jeff. Well, I'm gonna commit this just a little differently as you can probably imagine. One, I guess I'd like to know a bit more about what you feel the plans, participants' perspective would bring to the investment side of this. And can you, I think, touch upon what would be the downside of totally professionalizing this? I think most would agree that we've gotten, we have the right people with the right skillsets in place recently with Mr. Galanca and a few others, and we've seen the benefits of that, but what would be the downside if you totally professionalized the investment side of this and you got the rate of return or that above that you were looking for? Well, equally true, if you don't get that rate of return, then you're not gonna have buy-in, you're gonna have angry folks who don't have the rate of return that they want. I mean, I think that's part of the equation. I think Representative McCarthy was, frankly, driving at that point, right? It's buy-in from everybody. So I think that's part one. Part two is having planned participants' voice on the investment group might help steer investments this way or that way that are consistent with the values of Vermonters, everyday working Vermonters. And so I think that's another critical voice that should be heard in these investment decisions. Well, with the structure that we've had in place, haven't we had that already? There are certainly planned participants, but we're not proposing a change feedback and that's the draft before you. And if we're gonna, yes, there have been planned participants' voice in there and we think that voice needs to be there and remain so. Thank you. Any other questions from committee members? Rep Gannon. Thanks, Jeff, again, two quick questions. One, Representative Hooper has repeatedly stated that OPEB should not be part of the discussion involving the task force. And I just wanna hear your opinion about that. Well, maybe Representative Hooper and I went different on that. Certainly, OPEBs are in the process and I mentioned it. Mostly the governor has talked about the four buckets that is the reality and so we have talked about it mostly in the form of pensions. But OPEBs are in the mix and so I didn't wanna shy away from it and that's why I put it in there. So if we're gonna talk about OPEBs, we gotta talk about how we frankly reform the system as it relates to teachers at least because that's what I know. And we think if there are savings to be had, plowing them into the pension system is not a bad thing. Thanks, and I appreciate your written comments about some of the things we should look for with respect to healthcare benefits. Another question just about, I know you're worried about the aggressive timeline that the task force is under. Do you have any concerns about when it would start? If we started it earlier than July 15th, would you have any concerns about that? Yes, so I think the task force, I am worried that of COVID fatigue, I'll say it that way. Honestly, I think when we all get vaccinated and I'm scheduled next week and I hope everybody here gets whatever is available to them ASAP, there's gonna be a push and a desire and perhaps a need for all of us to get out and about and see the landscape again. And I worry about a July start when many people are gonna be on break. So I just frankly speaking and realistically speaking, getting people to the table in July may be hard. So if you started earlier, some of the school employees are just finishing up a really hard year and state employees as well. I mean, they've had frankly a really tough year. And that's why I suggest stringing it out on the other end, maybe to October 15 to allow for a necessary series of meetings, public as they may be and analysis from some experts if you've talked about to take a look under the hood and answer some of the questions that we think need to be answered as well as what's in there now in the task force. The task force is gonna really scratch the surface and really needs to be given the time to do so. The charge is pretty significant and I don't think we ought to shortchange it. So if it needs to start earlier, I think people can do it. I hope they can do it. But also I would say giving them some more time at the other end when they might have a bit more energy if you will. Thanks for that. Just one final question. The task force is supposed to seek out stakeholders. Are there any specific stakeholders that we should be focused on ensuring that we reach out to? Obviously, is there any specific group that you would want us to include? If I may represent again, which you're suggesting is somebody not or some group or otherwise not on the task force as it is now? Yeah, well, I assume we're gonna take public testimony. I assume we'll hear from state employees and teachers but I'm just thinking is there any specific group of people or organization that we should definitely hear from from your perspective? Well, you mentioned teachers and state employees and I think you should and will hear from them certainly. And I hope that they're engaged and I'm sure they will be. So their voice will be on the task force itself and that's important. And again, it needs to be a balanced voice. I would say that. I think people who might be affected by their decisions should be heard. I don't, it's a great question. I don't know. I mean, it's a sizable list of people and yet I can't think of anybody specifically right now. Okay, it was not a trick question or anything. I just wanted to make sure if there was some specific group that you thought we should reach out to that we will and that we put that. For example, I had a conversation recently with a business owner and they took, they weren't laying people off under the past year. And so they took the federal stimulus monies and instead of laying people off, they hired a bunch of people to expand their work. They saw this as a stimulus opportunity and good for them for so doing. I mean, when the economy thrives, we all thrive. That's good. But can they, for example, pay a little bit more than taxes, they've expanded their business. That's good. And we typically think of growth in that regard as potential revenue source for the state. Should we explore that? I think we should. You know, it's the roads on which they travel, the telephone lines, everything that the infrastructure of the state that helps business grow. And I once heard Bill Gates Sr. talk about the resources of the community that gave him the ability to achieve what he did and certainly what his son achieved. And it's important that we give back. And I think that's what we're suggesting here now. I mean, the business community got some major tax cuts the last few years into the Trump administration and certainly looking at those and other revenue sources. New business models, for example, ought to be explored as well. Thank you. Any other questions from committee members? All right, thank you so much, Jeff. Please stick around in case other conversation prompts more questions for you. Thank you. Welcome to Amy Town, president of the State Employees Association. We appreciate you being with us today and please share your thoughts with us. Thank you. Good afternoon, Madam Chair, members of the committee. For the record, my name is Amy Town. I am the president of the Vermont State Employees Association. Thank you for the opportunity to testify on the governance and task force proposals that you are currently considering. Let me begin with some of our concerns with the governance proposal as they relate to the Vermont Pension Investment Committee. Draft 1.1 would change VPICS membership to 10 members. Only three of whom would be members of the labor community. Six members would either be managers or their designees. This composition would mean that the people that the pension systems are designed to support would always be dramatically outnumbered by their bosses. We feel that it is crucial that the committee be at a minimum, equally balanced between frontline workers and their bosses. As such, we suggest a committee makeup that would include two members and two alternates elected by the employee and retiree members of each of the three retirement boards for a total of six. Excuse me for a total of six retiree selected members. We would not change the number or composition of the other committee members proposed by the draft. This would yield a balanced board of 13. Currently the board is balanced. It's 331. If the legislature is truly dedicated to working hand in hand with employees and future beneficiaries to this plan, we need to safeguard the future of our funds and it cannot begin by suggesting a new VPICS structure that would see our voices and danger of being drowned out before the work has even begun. The draft language would bar current legislators from serving on the committee. We oppose this provision. We believe that as long as Vermont has a citizen legislature, a member of VPIC who becomes a legislator or a legislator who is interested in serving on VPIC should not be excluded based on that basis. One provision in the draft language would bar people who are not Vermont residents from serving on VPIC. At the VSEA, we have members who live in New Hampshire, Massachusetts, Connecticut, Rhode Island, New York and Canada. As telecommuting becomes more prevalent, even more Vermont state employees may live out of state. We do not believe that state employees, teachers or municipal employees should be barred from participating simply because they live across the border. We support the proposal ban on the acceptance of gifts from vendors to members of VPIC. We believe that the propriety of the state's investment choices must be beyond any reproach. VSEA supports the shift from a five-year to a three-year experience study. And currently, VPIC and the retirement boards have come to a consensus on the actuarial assumptions before they are accepted. The draft language would end this collaborative process and place the power solely to VPIC. We oppose this proposed change and support maximizing the number of members who weigh in on these important decisions. Moving to sections of the bill that concern the new task force, we have some recommendations about the group structure. We believe that the balance and inclusion is key. If you want to work, if you want the work of the task force to have credibility and to yield a result that can be supported by our members, then you have to have balance. In our proposal, or in the current proposal, excuse me, only four out of the 15 members are selected by labor unions, 11 out of 15 are non-labor and most of those are managers. This would doom the task force to the perception that it is stacked unfairly against labor before the work has even begun. Also, one of the affected labor unions, the Vermont Troopers Association, has been omitted entirely from this draft plan. This is unacceptable. Instead, we suggest the following balance. Three members selected by the Vermont NEA. Three members to be selected by the VSEA. Three members selected by the Vermont Troopers Association. Three legislative members from the House Committee on Government Operations. One from each Vermont Major Party. Three legislative members from the Senate Committee on Government Operations. One from each Vermont Major Party. The Director of the Retirement Division, or His or Her Designee. The Commission of Department of Human Resources, or His or Her Designee. A school board member chosen by the Committee on Committees. And finally, a chair elected by the members of this task force. You will note that we have removed two proposed committee members who were included in the draft proposal, the Commissioner of Department of Financial Regulation, as well as a member of the business community. Although we appreciate the committee's desire to include these members, we do not see an essential nexus between these parties and the work of the task force. Furthermore, their participation would only add to the imbalance of labor and non-labor participants. Our proposal would yield a tri-partisan, balanced task force, ready to represent the voices, both of labor and other stakeholders. Our plan is equally structured with nine labor members and nine non-labor members in a mutually selected chair. Again, if this process is to have any success, we cannot allow our members or the general public to have the perception that the cake has already been baked. We need true balanced collaboration and input. We believe our plan accomplishes that. One additional note to point out, this bill should be clear that leave time for state employees and teachers serving on this task force shall not be withheld. With regards to the powers and duties of the task force, we support the additional two charges. First, the recommendation of a temporary dedicated revenue source or sources to raise no less than 100 million in new dedicated revenue. It should be made clear that this charge shall include consideration and a recommendation on a temporary income surcharge on the wealthiest Vermonters. Second, an evaluation of and a recommendation on the creation of a so-called retirement group G to include frontline staff from the Vermont Veterans Home, Vermont Psychiatric Care Hospital, Middlesex Therapeutic, Community Residence and any other successor facilities, the Department of Corrections, both staff in our correctional facilities and those involved in community supervision, as well as our members at the Vermont Criminal Justice Council. The merit of giving these dedicated workers additional consideration in their retirement is contemplated by the current statutory group, Carvout and Representative Anthony's Bill H-305. We appreciate the desire for the board, continued stakeholder input, and we believe that it is vital that all of the members of the public have the opportunity to share their views. That's why BSEA supports a series of public hearings requiring pre-registration where speakers are given five minutes. The task force should be required to hold sufficient meetings and hearings to allow for all those who have registered advance the opportunity to be heard. This task force should be open and transparent. As Justice Brandeis once said, sunshine is the best disinfectant. That's why this task force should be required to broadcast all of its meetings on YouTube and allow meetings to be viewed there retroactively. Finally, given the great part of the unfunded liability can be attributed to the sins of the past, we strongly urge that the legislature invests that 150 million and either the prepayment OOPAB liability or directly into our pension funds. There is no good reason of which we are aware that that money should be just held in reserve. The only other difference of opinion that we have about those funds is that we think there should be more. The past few months of this process have been incredibly difficult. And if this committee takes seriously the issues that BSEA has raised today, particularly concerning the 50-50 balance on VPIC and the task force, I truly believe that we have an opportunity here to work together and safeguard the future of our pension funds. And with that, I will stop and welcome any questions. Thank you. Thank you, Amy. Any questions from committee members? Rep Colston. Thank you, Madam Chair. And thank you, Amy, for your testimony. Assuming we would have a successful task force process, if you were to speak for your members, what are some goals and outcomes that you wanna see accomplished through the task force? I think BSEA has been pretty clear with their position all along. Our priority is you have a strong pension system and to retain our benefit levels. Our members have spoken loudly in support, moving forward with the task force in order to accomplish those goals. Thank you. Dr. Bihowski. Thank you. This is a conversation, this is a question actually for both of you. And it's a conversation that's come up a couple of times in committee. And I just wanna hear what your thoughts are, but the conversation around an independent facilitator to sort of navigate and help support these groups has come up a few times. And I'm curious if you have opinions or you think your members would have opinions on that. Amy, I can take it if you like. So we have some experience with it. Representative Bihowski, we at the statewide healthcare bargaining, we're using a facilitator to kick off the conversation right now. So I actually think it'd be helpful. And I think that yeah, I mean, they would be helpful to get the parties to at least sort of baseline understandings as the task force begins its work. So that we're not arguing about the setting of the table. We're arguing about what is on the table, what's important, not who's sitting where and that kind of stuff. I think it's a good suggestion. I can piggyback on that. I think our concern is that the split would be 50-50 and certainly an independent facilitator to guide those conversations and have a very clear charge. So the work is defined, I think would be helpful. There is a goal, right? To come out of this with the recommendations. So to have someone to help navigate that conversation I think would be helpful. Thank you. Replicler. Thank you, Madam Chair. Good afternoon, Amy. Thank you for being here. I'm gonna probably ask you roughly the same questions that I asked Mr. Fanon and one is that can you explain to me from your perspective what having your members perspective would bring to be on the VPIC board for one, to what in your opinion would be the downside to having this investment side be totally professionally managed and by having your members continued having a presence on VPIC, how could we expect a different outcome than where we are currently? I will do my best to answer. Thank you for the question, Representative LeClaire. So I first just want to interject that the assumption that a member of this committee is less educated or less able to make decisions is a little bit insulting. I think that there has been some incredible representation on both VPIC and VCERS by members with extensive backgrounds. We had a member with a PhD in economics. We have certified fiduciaries who sit in labor seats. So to make the assumption that the sins of the past are caused by labor representation is quite insulting. I believe that the split needs to continue the way that it is because we have skin in the game and to out to shift the balance takes away decision-making from stakeholders. And I don't see that that could have a positive impact. I'm sorry if I didn't answer your question is articulate maybe as Jeff did, but that's kind of where I stand on that. So thank you. You did a very nice job. Thank you. Rep Tannen. So Amy, I just want to ask you a couple of questions about VPIC. I guess you reject the Boston College Center for Retirement Research on who should be the stakeholders on a pension board which says that the stakeholder should be plan participants, government officials, and general public. I don't believe I said that I reject that. I just said that I don't believe that the split should change. Our position is that the split remained 50-50, 3-3-1 or our proposal is 6-6-1. That's not what BC says, so you reject that. Okay. I'm sorry. I'm not gonna back myself into a corner and say that I personally reject a study. I'm representing the views of my members and if you would like, I could go back to my members and ask them broadly, do you reject this study? I'd be more than happy to do that. Our members are asking that this body consider any changes made to reflect that it is still important for our stakeholders to have an equal opportunity at the table to make decisions in a plan that we support. So if you're asking me personally, if I reject the study, I would have to think about it and get back to you. But if you're asking me if my 6,000 membership rejects a study, again, I would have to get back to you. Thank you for that. So do you think there should be a requirement for financial expertise on the VPIC board? I think that financial expertise is part of the equation that lends itself to a successful board. I think that there's more to it, right? I think the members of the VPIC are appointed by members of the retirement boards to serve in a capacity, making difficult decisions. They are chosen by their peers based on a lot of different reasons, their skill set in particularly. I do not see any malfeasance for many members of the VPIC. I think they take their role seriously and spend an exhausting number of time becoming certified traditionaries and increasing their education so that they are able to have those conversations and make those decisions. So I'm not sure what you're asking me. Well, I was just going back to the Center for Retirement Research's research, which indicates that extensive research has related a higher proportion of board members with financial expertise to improve investment performance of pension funds. Right. And I'm saying that those members that are elected or appointed to the VPIC are represented, are appointed by members of the retirement boards because of their experience. I don't believe that having a degree in finance makes you any more wise to financial decisions than anyone else. I think that people are appointed to that committee based on their experience and desire to serve. Thank you. Any other questions from the committee members? Rep LaFave. Thank you, Madam Chair. I have a general question. How many members on VPIC are currently certified for your series? I don't know. I'll just say that. Thank you. I don't know the number off hand, but I can speak to our representative, Jeff Briggs, who is a certified fiduciary. Rep Anthony. Thank you, Madam Chair, and thank you, Jeff and Amy. I want to go back to a bit of advice that the committee got last week, believe it was last week, from one of the consultants who have been helping the Treasurer and the current VPIC board work their way through a number of these issues. And two of the areas that were stressed in my to my ears were in either task force context or a rejuvenated VPIC were independence in the sense of not being directly tied to some kind of electoral context and continuity. Let me start with continuity. I think, I believe it was Jeff talked about having the chair serve longer than some of the members. What in either of your views, does continuity mean to you in the sense that we definitely want and I respect the comment, I think it was Jeff who talked about removal and there was a removal clause in some of the earlier versions we looked at. But if each of you would give me some sense as to what continuity means in terms of the renewal cycle, history with an organization, history with the issues. Let me stop there. I do want to ask about political affiliation and interference too, but let me focus on continuity first and see what your perspectives are. Obviously, the closer you can focus, the faster we'll get through this, so thank you. So I will just jump in real quick and say that this proposal or bill came out on Wednesday. Our board has not met to take an official position on any of this. So as far as speaking to continuity and things that we'd like to see moving forward, that's a bigger conversation that I could offer here today. So I can take that back and certainly report back to you on the feedback that I receive. And Jeff, I may represent Anthony. I think what you're asking, maybe if I'm understanding correctly, but I think there is 12 year terms on the proposed VPIC and that terms that are staggered. So you talk about continuity and I think if you stagger the start or the on and off, that does provide enough continuity between knowledge of the plan, knowledge of investment resources and just for the record, they just do more than, they do some more than just investment, strictly speaking. But I think that does provide enough continuity and fresh voice to come on and off the board, if you will. Okay, thanks, and the involvement in electoral politics cuts several different ways, obviously. The treasurer is elected. I consider a surrogate or a point of view of the executive branch to be equivalent of elected. Quite frankly, I'm elected. And yet, there's an issue, I think, with wanting legislators or someone from that world to be present. And yet I sense that there's a reluctance to accept a finance and management or department of financial regulation as a sort of surrogate for governors appointees. And yet all of us obviously have perspectives, fortunately or unfortunately, I'm not hired and fired by a single individual, but I am hired and fired by a community. I don't know if that makes a difference, but give me your cut on political appointees because that changes the complexion, nevermind the issue of balance, which I respect, but that changes the complexion greatly if we really get hardly respectful of definitions in that regard. I think I'll try to take a stab at this. So there's two things going on here. We've got the VPIC board, obviously, and political appointees, and that's sort of what Representative Gannon and I have been chatting about, the Boston College. Amy, in fairness to Amy, I was the one who raised it, and she may not have had a chance to read it yet. It's a good, it's a page turner. But on footnote 13, I think it is. If I'm right on that, Representative Gannon, correct me, please. It talked about not having too many elected officials on VPIC on the investment side of the equation. Where I was talking about it, Representative Anthony, is on the task force and about the commissioner of DFR, Department of Financial Regulation. So that's where I was talking about that. So it is confusing a little bit, VPIC and the task force, but the task force, I think, as Amy eloquently said, is the place where we really are pounding on the need for balance, because that's gonna look under the hood, look at where we have been and where we're gonna go in a thoughtful, methodical way, hopefully. And I think it's really important there that we have balance. I mean, it's important on VPIC too. I don't mean to diminish that, but certainly on the task force, the balance is necessary. And you've gotta have enough planned participant voice to get, as Amy said, buy-in and credibility from those who are affected by the proposed changes. Right. I don't know if Amy has any thoughts on the, okay. Let me just point out the obvious. The reason I'm a little worried about VPIC is part of the, how shall I say, wake up call came from the reasonably drastic and recent reevaluation of the assumption of rates of return. And one could say, so how come it took so long? And you could argue that there are interests in elected amongst elective circles who are not really looking for bad news. And so I respect your emphasis on the task force. But unfortunately, I'm afraid VPIC's history argues that there are some tendencies to shy away from bad news and politicians are pretty good at that. And I say that being a politician myself. Thank you. Brett Fyhowsky. Thank you. My understanding is that the current VPIC board already skews towards so-called experts. I believe there's three members of labor and four various members of experts, however we define that. And that it's a little bit of a false implication to question whether it was the employees, groups, representation that caused this problem and that they're somehow responsible for the current state of the funds. I think this outcome is actually the product of several factors, one of which is the decisions that have been made over years by investors and by the legislature. So I think that's just a statement more than a question. Representative Hayley. Thank you, Madam Chair. This is a question for Amy. Amy, thanks for being here today. I guess maybe you're aware that I've been hoping for and looking for a possible hybrid option. So I guess I'd just like to ask, it is happening across the country in some regards. I know that some of your members from state colleges, they have a contribution plan. It's not the benefit plan. I believe that Beamer's has an option for that as well. One of the things that I see, as long as it's a good competitive program, it is an option. There's no vested issues. It's portable. Folks can invest the way they want if they have some real issues around what the treasurer or the VPIC board is looking at investing in. So I guess, again, the other concern I have is even in talking with options with JFO, they talk about how we could maintain what we have but make changes around the edges. And I'm just wondering if that's, I know that you've spoken and I've heard loud and clear from your members that they want to keep things as is, but that changes around the edges concerns me. So I guess in that, there's a couple of questions there, but any input into any of that? Sure. Thank you for the question, Representative Higley. I haven't seen you at all this week. For a while there, I was seeing you almost every day. So I think it's safe to say that the BSCA supports maintaining a defined benefit program. We don't have any interest in switching to a hybrid or defined contribution system. And I recognize that the colleges does have a defined contribution system. We would love to welcome them to define benefit by the way. So I understand that there is certainly the desire from some to learn more about the defined contribution BSCA does that support that we absolutely stand by defined benefit and maintaining the dignity and retirement that the defined benefit system offers our members. So again, though, as actual Vermont State College members reached out and been disappointed in their plan, their current pension plan. We have had state employees. We have had members from the state colleges voice that they wish that they had to find benefits. Absolutely. Okay, well, thank you. And I think, you know, from our end of things, I think it's important, like I said, to be able to go to this with a sustainable good plan going forward that is attractive to employees out there. And I just hoped that there's something that can be worked out where we're not gonna be fiddling every five or 10 years with this defined benefit plan. On that, we agree. Thank you. So committee, any other questions for Amy or Jeff? All right. So Amy and Jeff, I hope you'll stick around. I think you'll find the next hour of committee to be just as interesting as the last hour was. Thank you. And at this point, we will shift gears because I understand that, oh, representative LeFave. Thank you, Madam Chair. I'm sorry, I'm still struggling with reception today. Can you hear me okay? Yes, we can. I had just a quick question for whoever would like to answer it. So while there might be an opposition to a hybrid plan, is that still being talked about for those who would like to learn about it? Because while people had wished they had a DD plan, we have also heard during testimony quite frequently that people wish they had opportunity to a DC plan. So I'm hoping while some people may have reservations to a hybrid plan, that that's still something out in the open. And I know there have been proposals to a plan that do exactly what everyone's asking and they leave people's current benefits alone. And there are other options, options for everybody where, and if you aren't comfortable with a DC plan, then you can go into an annuity. And my ask is, is even though there might be some reservations to something, is it still being spoken about and not just dragged off the table? I could jump in. So our members are currently discussing pensions pretty heavily. And while we are incredibly supportive of maintaining a defined benefit plan, there absolutely have been rumblings about what it would look like if we had a DC plan. We have members who independently invest in their 457 plans who have seen enormous returns over the last year in question. The investments made in our defined benefit. But as we have those discussions with our members and we explained to them the benefits versus the pros versus the cons, the DB versus a DC plan, the consensus has been continuing to have the DB plan. The state of Vermont offers a 457 plan for those who elect to be in it. So in essence, many of us have a hybrid plan. We have the stability of a DB. And then we have the ability to invest and watch those investments in the 457. We as VSEA have absolutely not changed our position. We hold firmly to you with the stance of maintaining our DB system today and moving forward for future state employees. Thank you. Madam Chair, may I ask another question? Absolutely. Would we be able to receive a copy of the explained pros and cons that you are explaining to your members? And the other question is, I guess for both of you, do you both feel right now you currently have a true defined benefit plan? Because in my thinking of how people enjoy a defined benefit plan is that you have a low risk, low to no risk. And to me, you guys are picking up the risk again. And again, you're coming back to the table to fight for something that is supposed to be defined with low to no risk to you. So in both of you, I would ask that question too. Do you truly believe right now you have what you are asking for? I can answer, I'll jump in first. I saw Jeff reach you for the mute button but I was already unmuted. I will speak from a personal point of view. So we're moving my hat as president of VSEA. I am a 21 year state employee. I started with the state because I had a family and I knew that I wasn't gonna get rich working for the state but I was working for the state making an investment in my family through the benefits that were offered with state employment, great healthcare and a pension. The pension was important to me. I knew when I started that I would need to work 30 years but it gave me enough time to raise my family, buy a house, pay that house down and be prepared in 30 years to then move on to my second life, right? So every year I received this green folded thing in the mail that showed if I retire here this is what my benefit is gonna be. That's defined benefit. I have known all along through my years of service when I retire what my annual benefit would be. Defined benefit for the rest of my life this is what I'm gonna receive. Defined contribution. This is what I'm gonna receive point in time for the rest of my life unless things change. There's no it or until the money runs out, right? So there's not the same level of security provided in a defined contribution as there is in a defined benefit. So the, and then I just wanna circle back through the list of pros and cons. There's not a formal list of pros and cons but we explain to people what the defined benefit system is versus what the defined contribution is. They start thinking about their personal life. When I retire is it more important to me to know that I'm retiring at 65 and this is what my annual benefit plus cost of living is gonna be and I could live comfortably until I die at 90 or is it scary to think this is how much I have and I have to die before I turn 80 because I'm gonna run out of money. There's a civilian plan and not the same amount of stability any other. And then you did ask if I'm comfortable in my defined benefit plan. No, I'm not. As of November after Thanksgiving when the discussions around the plan came up I started getting scared because I'm not sure that I have the same level of stability in my defined benefit plan that I did a year ago. I might have to work 17 years longer than I had planned on. I might have less of a benefit because there's gonna be changes potentially to the AFC. So I'm not sure if I answered your questions in order but I certainly attempted. That's okay. To me, I don't feel that you currently have what people dream or have as a defined benefit plan because if you would have opened the green and I think that's what you were saying if you would have opened that green folded envelope up last year, that's what you were set at. And now we've came at, not we but there has been proposals put on the table that wanna change that and take that away from you. That's not defined in any way. That is uncertainty of it's as good as it is until something changes and there's another mishap. And that's just the point that I've been trying to say is right now we're not as solid and promised as a defined benefit plan should be. So thank you very much for your comment. Thank you. If I may, Madam Chair, represent a little favor. I think the more fundamental question you may be driving at is about whether there can be any changes to a defined benefit plan. And I think that's correct me if I'm wrong about that but we have, I do believe we have a defined benefit and I'll just say that firmly but it's not to say that there aren't changes along the way. And so for example, and as I mentioned in my testimony in 2010 and 2014, we made adjustments to the plan that collaborative fashion and to short what we thought particularly in 2010 was we were shoring up the plan we re-amortized the system for 30 years. So we're a third of the way through that plan to pay down the unfunded liabilities. We've got two thirds more to go but certainly a defined benefit can change and it has over my tenure. And that's what we're discussing here. It does not mean that we don't though have a defined benefit plan. We certainly do. Yes, thank you for that. To me, Karen sitting through and reading through the hours and hours of testimony I've heard people say they were forced into something and now it's again changing if there was gonna be so much uncertainty they would have gone with the DC plan to start with. And my only fear is that my only ask and appreciation would be to have it be on the table and to talk about it and to not have it completely removed or just thought of as something bad. That was my only ask moving forward and I appreciate both of your time testifying today. Thank you. Can I answer any? Sorry, so I just wanna be clear that my uncomfort in the DB system is not the system. I believe in the system. I believe that the benefits are there. There's over $5 billion in assets. I don't think there's gonna be an issue of insolvency. That's not where my discomfort is, my discomfort. And I think I'm speaking for members broadly. My discomfort is the discussion that we're having here. My discussion is, or my uncomfort is the proposals being moved forward to potentially cut the benefit, to potentially add the years, not in the system itself, the uncomfort lies in this discussion. So I just wanted to be clear with that. Any other questions from committee members for either Jeff or Amy? Okay, so we have two folks who've just joined us and it is my hope that we can, hear from folks on the point of the reorganization of the governance of our pension system from the VPIC changes that are proposed in the bill. And then we'll talk separately. And secondly, about the makeup of the task force, which is the other major part of the bill. So I understand Tom Galanca and Beth Pierce, you were both just in a meeting with the VPIC and that you have a document that is up on our committee page. And I'm not sure if you already flipped a coin to tell us who was gonna report out on this document. But I will defer to Tom as chair of the VPIC and we just finished a meeting. And so if Tom is willing to do that and I can make any further comments on that. And I presume we'll also have time to talk about the task force today. And I think that that's not something that VPIC is testifying on, but certainly in my role. So it might be better if Tom went first and I can continue on the discussion after that. Tom, you may not agree with that, but I just volunteered you. That's good, Beth. Thank you, Madam Chair. And I appreciate the opportunity to talk again today. I know we've been going back and forth in regards to governance. What you should have up on your website or the file document from VPIC. And this was approved unanimously from the VPIC members today. We've only had a chance to talk some of the ideas because we only had an hour today before this meeting came on. So we do commit to review as soon as possible other items that we didn't have unanimous consent on at this point. But I do wanna briefly, and those items that we'll talk about in the future will be ideas of term limits and ideas of legislators on the committee. We've deferred those two issues for future discussion. But in general, VPIC is very pleased with the progress that's been made on this document from the original document. And I've had numerous discussions with members, board members about VPIC, as well as the chairs of all of the underlying pension boards over the past couple of days. So I think I have a general feel for how the boards feel about this as well as VPIC feels about different items on this topic. You will notice that we've listed five different items where we think the current bill that's been proposed could stand some tweaking from minor changes. The first item is on how it's defined, how VPIC is defined in the, attached to the office of the state treasurer. Beth and I agree that that needs to be changed and VPIC agreed to that. We've offered some language that we think would make sense in that area to make it simpler and also to continue the process on making VPIC more of an independent structure that works in concert with the treasurer's office. The second idea that we talked about was the idea of shall a VPIC member be a state resident? And we unanimously agreed that you should strike that. We felt it would, from your prior conversations at the House GovOps committee meetings that we could be limiting financial experts that we wouldn't want to limit. So leaving that open for the underlying pension boards to decide who they want to appoint, we thought would be best left in their hands. So we suggest striking that. A legal position on number three, we noticed that there became an issue of voting with the structure that you would put in place that would make it every vote would have to be a super majority it seemed if we only had six members. And we felt that could be potentially cumbersome if we had to rapidly move on, say an investment manager or some type of contracting decision. We didn't disagree that that could be the intent of this committee for say the rate of return assumptions or some of the more significant decisions that VPIC would make, but we strongly recommended that you reconsider that. I think we missed the section 522 F3. The one section in four where it responds to 90 days and that was a recommendation that came from our consultants. They said they can do it in 90 days but if we do it in 90 days you may be missing current actual values from June 30th. And so he recommended extending that a little bit more maybe 120 or 180. We listed 180 because we figured that would coincide with the dates of the reports that you've requested in other sections. It also would meet the requirement that you'd have this report before the beginning of the legislative season. But we don't get actual values on private equity and private debt until about 90 days. So we figured that constraint may make values a little bit different. And the last item is number five. We had a long discussion today about the definition of independent and we thought it was a little confusing. So we just wanted to be some clarification on that specifically whether participation in the plan would be material under this definition to exclude people from being on VPIC. So we just wanted some clarification on that but overall we felt it was we've made some tremendous progress over the past couple of weeks. And I think we have further work to do in regards to term limits and legislative membership. But I think these are five steps that I think would make it more palatable for VPIC and we unanimously approved this recommendation. So with that, I don't know, Beth, if you wanted to explain more about the independent language in one because I knew you helped craft that. Well, certainly, thank you very much. And I do think we've made some progress. I did present the piece that Tom and I sent to the board. I think it was a week ago. This is moving kind of fast so that time kind of compresses in some areas but it went over that with the teacher board yesterday and they had a lot of questions. There was a lot of interest in this but they wanted to wait themselves until VPIC took a position on that. And now that VPIC has, we'll go back and talk to the Vistas board as well as the others were meeting next week with the state board as well. I'm not sure off the top of my head what date that is but we'll certainly include that on the agenda as well. The big piece for me is moving VPIC to an independent entity. And to do that, I think there are a couple of things. Number one, VPIC needs to have its own budget and be separated out from the treasurer's office budget. Inappropriations would be happy to work with that so that there's a salary right now for not much for all the work he does. Tom, you never thought you'd be doing all the work you've come in and done over the years when we asked you to do this project. But, and I think that the statute itself says one third of the salary equivalent of one third of the salary of the treasurer. I think the VPIC as a separate entity should be allowed some flexibility there to set the salary of the chair and the CIO and that the CIO would be in a position now and in the future to hire staff and to set compensation. So separate that out from the treasurer's office, create their own budget and then we would work with the now in other states that have these, they have memorandums of agreement between the treasurer's office and Prim, for instance, in Massachusetts, I managed to find a copy of their operational trust agreement which goes back many years and updated as a 1998 and they haven't had updated apparently since then. But we would certainly have some type of relationship. There would be some reimbursements, for instance, if we provide services to the VPIC, they would reimburse our budget line item over time, they may hire more of their own staff to do these things. For instance, right now they would probably use our office to do electronic transfers and direct our staff to do that. We would still be preparing the financial statements at this point in time. At some point, both SWIB, which is the State of Wisconsin Investment Board and PRIM, produce their own annual financial reports. Perhaps they would wanna move in that direction down the road so we would have to work out some of those things in a transition. But I think step number one, and it's a very visible step, is that it has its own budget, its own staffing plan and it presents its own budget to appropriations and through that process. So I think that that's very important. And I would agree that, well, and I do think that they should have some flexibility on the salary of the chair. I would agree with Tom about the six out of nine members, voting members, because there's 10 members, but six, nine voting members. And I think that that could be cumbersome. Beyond that, the pieces on the standards that conduct the conflicts of interest and the job duties, we already have pieces for that, but I think it's a great idea to put them in here so that they continue to have them, that it's about checks and balances. And I've thought about this a great deal. I think we've got a great share. I think we've got a great team, but you don't know what the future's gonna look like. And then we wanna have those checks and balances in place for the future. I look at our committee now and I was looking at the qualifiers. Right now we have Tom as well as another individual that are registered investment advisors. That second individual is appointed by the governor. And there's no guarantee that the governor in the future, she or he, I did that on purpose, would be appointed an expert under the other piece. The other gubernatorial appointment has 15, 20 years as a president and CEO of a major company, as well as a legal background. I would consider her an expert, well done, but I don't know what the governor would do necessarily in that case. One of the board members that we have that is an employee member, he has a undergraduate degree in math, MBA with a concentration in finance and teaches courses on finance and the mathematics of finance in colleges. Now, I think he, and he's also been on this thing forever, but that doesn't mean that the next board is going to pick. I just had nice things about the guy. So I said, that doesn't mean the next board is gonna pick Joe Mackey, okay? I think that we wanna have that checks and balances in the system moving forward. So I think that there's a great deal of good expertise, but we wanna make sure that there is in the future, no matter who's treasurer, no matter who's governor and no matter who's in the general assembly as well. So I think that this is very good. I would agree that we need to have a more conversation about the term limits. I don't think Tom is ever gonna complain that we got a 20 year limit on his, but I was thinking about one board that I'm on, David Coates and I have been on the capital debt affordability committee since for a long time. David's been on there since he was a founding member in 1991. And I hope as long as I'm treasurer, he's still there, okay? We're not gonna agree on pensions just for the record. He and I have some different views about defined benefit and defined contribution. Be happy to have that debate anytime with folks. We've done it four times, including in front of the legislature on a couple of occasions. But the reality is that I think some consistency and tenure is good as people are learning things, but I recognize that that's an issue as well. So I think we're generally in agreement. I think that the checks and balances are good and I compliment the members of the committee that have put the time and effort into this as well. So step in the right direction. I hope I wasn't on mute that whole time. No, goodness, no, we would have flagged you down by now. Thank you both so much for your work on this and for your thoughtful recommendations here. I very much appreciate it. Rep Anthony. Thank you, Madam Treasurer and Madam Chair and Tom. It came up earlier in today's conversation and has come up in the past to have some mechanism independently of the term limits or the reappointment cycle or who the appointing officer or organization is to have some sort of removal escape language. That is to say, if it turns out that someone is not participating or for whatever reason, I can imagine they're being just cause language in there too, but I wonder if as the numbers expand, there might be some reason to have a removal section in there of a board member that has not proved out in some sense or another. Well, I'd like your opinion on that. Thanks. If it's okay, Tom, I'd like to take the first crack at that. Right now, much aligned in this process was, well, we have a report on attendance and education and we send that out. That's sort of the boards, the three trustee boards knew the members were in fact attending and they were in fact taking the types of requisite coursework and investments. And in fact, I believe when I read the current bill that that is still included. So there was a reason for that. In addition, if you look at our ethics policy and conflict of interest policy, it does have consequences for violating those in there, whether you're prohibited from voting. And I think that there are, we've talked about trying to tighten those up a little bit more as we move forward. And I think that that would be part of the policy, but we do have a clear ethics policy. You can't, for instance, be talking to vendors outside of a procurement process. You can't have them dine, take you out for dinner. You can't take gifts. If you go to a conference, it has to be one that VPIC approves of. It's not one that's essentially a marketing thing where they want to treat you to a meal and get you to talk to them about their investments. We also have a limitation on what's called placement agents. And I'm sure John is shaking his head on that one where people become an intermediary between usually old politicians, older politicians after they've left service. Let me rephrase that one. And in trying to be an intermediary and a paid basis between pension boards and investment managers. So we do a lot to try to exclude all that. We do have, in our ethics statements, consequences to violation of those. I think we can certainly look at those as well. Part of the statute requires that we provide for those ethics and conflict of interest policies. And we can certainly take another look at it, but I think there's recourse there. And I think that that's where the recourse should be. If you do it wrong, there's a consequence to it. And I think that that's where it belongs. Beth, I would add too in that we had a conversation at our back in November or December when we had our fiduciary session where we bought in that the group from Aeon who talked about what's our fiduciary responsibility and the problem with having sort of ability to remove members, it brings in politics into potentially removing members for not doing what you want or certain members. And so people wear fiduciary hats when they come into a board such as ours. And I think who do you give the right of removal to and how do you exercise that? I think would be a dangerous thing to go down. I think there are reasons for removal that are obvious, whether it's a criminal behavior or whether it's a non-attendance. Then it gets a little sort of gray area. Is it because you didn't vote for divestment or is it because you didn't do XYZ? I think it's dangerous to have that in the hands of whoever, whether it's the appointing body, whether it's the governor, whether it's the EPIC itself. So I'd be careful on language like that other than strict reasons of ethics or violations of policy because if it's strictly because of their opinion, I think you're on the risk of having unintended consequences. So I'd be careful on that type of language. The other reason I mentioned it or one of the reasons is you have confirmed what many of us have have divided from many of the comments, namely if this board moves out of the Treasurer's office and becomes sort of somewhat insular or at least independent, that raises a question of how you would manage essentially internal integrity and whatnot. And I respect your worry about being overly broad about the grounds for removal, but I just think independence begets a certain internal self-discipline about that issue. Thanks. If I could add one more comment to that. There are certain SEC requirements in terms of investment managers, for instance, in the pay to play field, for instance, that have been improved over the years. And so I think that from the investment manager side too, there's more, if they approach you in an inappropriate way or try to add to your political campaign or do all these things, there's recourse. And I think that the regulatory environment's addressing that, the ethics policies and the practices I think do, I would be careful that you create that political for sure, you know, I'll go back to the divestment issue as well. You know what I mean? I wouldn't have wanted to see a member removed because or either by a gubernatorial appointee or by a board because they had a different vote putting their fiduciary hat on. And I think that people do a good job of understanding that. And we do have fiduciary training, by the way, as part of our coursework. All right, other questions from committee members with respect to the memo on the makeup of VPIC. All right, so we should shift gears then and wanted to give Treasurer Pierce the opportunity to share any comments or reflections on the makeup of the task force, the timeline of the task force, the duties of the task force, any advice or recommendations you can give to us on that? Well, certainly very, thank you for the opportunity to speak on this. You know, I was here in the 2009, 2010 study as a deputy treasurer, not as a treasurer. And I noticed that a lot of the language seems to, came from the 2009, Act one of the special session had a piece on this and it was E something, E one, three, nevermind. But the, so it follows that in many, many respects. One area it doesn't is the size of the, well, it does two things. Number one, it does have representation from the employee groups, which the prior 2009, 2010 study did not. And that was a mistake back in 2010. We definitely need to have stakeholders at the table. So I want to compliment you on doing that. I think that was a very, very bad mistake and part way through the process that was apparent to many. That group was a group of seven. This will, as I counted up last night was 15, I understand that there will likely be more representation from the Vermont Troopers Association that was not included. So we're probably talking 15, 16, 17 people. That's a large committee. So I would just point that out in terms of the size and getting something done. It's hard to do that. And if you're looking at a period from July 15th to September 1st, that's a heavy lift with a large body like that, getting up to speed and getting things done. So that would be a comment in general as I look at committees that I've been involved in. VPIC started off as a committee of 17, the committee of the whole because they couldn't decide who should be on and who should be off. And in 2007, 2008, we did that study to get it down to its current seven. And now we're gonna move to 10. It looks that way anyways, but I think it's a manageable number. So I would caution about that. As far as the committee itself, and I've been putting some thought into this, and I think there are a couple of practical issues and then there's one to me that's really about a philosophical issue of underlying principles. As a practical matter, I'm concerned about our involvement in the plan, specifically the director of retirement. As you heard in testimony and you heard my praise many, many times over, we did 495, I won't exaggerate, 495 retirements in the month of July last year. And those start up and big people determined in the month of June, possibly earlier, that they're ready to retire. And that is an incredible amount of work that has to get done. Last year was done remotely. It was people coming in getting what they need, going through teams or Zoom or phone calls and working with folks. It's very difficult in any normal year with COVID, it's been even more difficult. So I had some concern about the ability of the retirement division to staff this. And in addition to that, I'm thinking back to 2009 and 10 again, a member of the retiree staff took the notes and did the follow-up pieces and that type of work as well. And they don't have the bandwidth to do this. In addition to that, I'm thinking about the timing. Once the retirements are done, we also go through a process where we're with our IT people and our retirement people and the actuaries of literally going person to person, taking a look and making sure that dad was right before we move on to the actuararial process. And we're also doing the financial statements between August and then to September 15. So it's not a good time period. So that was the practical side of it. The philosophical side of it to me is that this is an independent task force. And as I'm thinking this through in the process here, that we very strongly feel that we submitted a report, the Treasures Office submitted a report in a series of recommendations, you have those. We've continued to provide information and we continue to do that. But the fact of the matter is that the general assembly is the body that sets benefits and sets this and puts those into statutes. And that's the purview of the legislature. And that while we've made recommendations, again, those decisions rest with you folks. And we believe that the task force should be independent of the Treasures Office and that we will be happy to testify that the trustees or the boards, I'm sure would be happy to testify. We'd be happy to provide information. But this task force in the issue of what you are doing, bottom line is you should be the creator and the owner of the solution. And so I would respectfully ask that the Treasures Office and or the retirement director be deleted from the members of the task force. And again, that you be the creator and the owner of the solution, we will be there to provide information as you need it. We will be there to certainly comment as we moved on, just as other elective offices will, but we feel very strongly about that. In addition to that, given the practical matters of our staffing and giving the fact that again, I believe that you are the owner of this solution and the owner of this process and it should be independent. I would also want to make changes to this, recommend changes to the section that says that we will be the administrative, technical and legal support to the committee. I'm going to go back in with a not as serious as this stuff is. I remember going back in 09 and Steve Klein giving me a copy of the draft bill where it said that the Treasures Office would staff it. I crossed it up and put JFO and send back and of course he had left dibs on it. And you folks put the Treasurer in there instead of our JFO. I think it's time, given that this should be independent of us that it should be staffed by JFO. When you talk about the legal issues, number one, we had to hire a legal consultant because in the event that there was a lawsuit or there was any litigation around this, the AG would not be able to provide legal support to this and have to make independence. Our legal staff person in our office is an employee of the AG's office. So you would have to go out and get an RFP done for legal representation or consulting. And frankly, we could issue it just as we did last time but if the legislature is going to be taking the lead on this, you will likely, JFO can issue an RFP just as easy as we can. Then you get to interview the firms and you get to pick the one that you feel most comfortable working with. And I think that that would be a good step in terms of the legal consultation. I would recommend you do that sooner rather than later because procurement processes, as you know, take an awful lot of time. And so I would recommend that. As far as the actuarial work, during the last few months that you've been working through looking at our report moving forward, you used the actuaries that we had, but you paid for those separately and the process was independent. And I would invite you to do the same thing in terms of those technical services. Now we are going to have to have a hard conversation because I put everything we had on hold while either legislature did its process so that you folks would have the priority time with our actuaries so that you can get your recommendations out the door. July, August are tough time with our actuaries. So we would have to have some discussion about that and maybe you would need to seek some other technical services elsewhere, but that's a problem because, frankly, it gets, our system is complex and it would be hard to get up to speed with it. But we could work that out, but you would be paying for it separately. I saw it in the, and you already have built a relationship with JFO with our actuaries. So that we would think that that technical skill could be supported through that process. You've got the legal cover that way. And from an administrative perspective, JFO, and I forgot the other legislative body that supports organization that supports you folks. I think that they have the capability of providing that. Now, if you want our retirement director to come in and testify about benefits, we'd certainly be happy to have that. And any representative or senator that would like me to talk about DC versus DB, I think that I stand with the employee groups and stating again that DB is the best, most cost-effective way and best bang for your buck and I'd be happy to come in and talk about that or any other pieces you would like. But I think we would rather be witnesses. We would rather be in a position where this is independent of our office and that you would continue, as I say, as the body with the preview of our benefits to be the creator and owner of the solution. Thank you, Treasurer Pierce. I appreciate you being with us. Let's give a moment to have any committee members who've got questions. Go ahead, Rep Ganon. Thank you very much, Tom and Beth, for testifying this afternoon. I appreciate it and I appreciate all the hard work that you've put into this, especially the Treasurer who's been working on this for months. So I appreciate that. Just a couple of questions to Beth. So I think the 2009 Retirement Commission had a outside law firm do some research on our benefits. And so I think following that path is a good part and I think that we kind of played that in this piece of legislation. Speak a little more to the challenge of working with Segal, your current actuary as we move forward, as a task force, I should say, moves forward because what you said did concern me a bit because I think there is some urgency of getting this work done. Yeah, I agree there's urgency and we're gonna need to work through that. When we submitted the report to you and I appreciate the months, it's actually been years that we've been working on these issues, but when we submitted the report to you in January, the General Assembly wanted to take its own look at this independent of our office. You also recognize that getting an actuary up to speed on our system. And I will say again, that I've worked in the New York system, the Massachusetts system, the Connecticut system, and we have the smallest of the systems that I've worked in and the most complex. I mean, it's as simple as that, but getting somebody up to speed would be difficult so used our actuary. And at that point in time, we understood the speed at which you needed materials. So we said, we'll put our workload aside. The boards had asked us to do some work, follow up work off of our study. We put that aside. We're just getting that prepared and presented to the boards as we speak. So we prioritize yours. We would have to have a long conversation with the actuary about what needs to get done on our end, what needs to get done on your end. It does not make sense for you to find, you could, you could hire a whole different actuarial firm, but by the time they got caught up to all the nuances of our system going in and looking at our data, and we'd have to go through all these confidentiality pieces with that anytime we've had an actuarial audit and we have done that. But we could certainly work with you. We would certainly prioritize that, but we also have to be able to close the system and produce a valuation. So we would need to work together on the timing of that. I could not guarantee as I did this last time and say, we'll put all of our work aside for the next three or four weeks, whatever that was, while you folks do your piece. We're just gonna have to work together on that. Okay. So if we coordinate, you believe that that likely we could get some access to the actuary? Absolutely. We're gonna have to. And we can certainly help push their buttons on that. They're a good team. They're a very good team and they do good work. And we've been very, very pleased with the quality of their work. But even as you folks, and can you get it done faster for your stuff as well as ours, there's just so many hours in a day that they can work and they do have other clients too, but I know that we're their favorite, but we'll go from there. And just another question. I mean, there's a huge sense of urgency of getting this done. Do you have any thoughts about the appropriate timeline for the task force to meet? Because I mean, you've been through this before. I have. Yeah. So I would appreciate your thoughts. Well, trying to get a report out from July 15th to September 1st, you know, you do have vacations and you do, I mean, it is, we're just gonna all be looking to meet relatives we haven't talked to in a very long time. So it's gonna be on a personal level, folks are gonna have to make some sacrifices. And with a group of 15 trying to schedule that during those months is gonna be difficult. The work takes, I think that, you know, even if you looked at what you folks are trying to accomplish this year, it was a lot to accomplish in a very short period of time. I have my doubts. That said, you folks can do fantastic work. And, you know, I would not try to say it can't be done, but it is a hard lift, you know, and we met with the, we started this process, I said December was probably earlier late November when we were meeting with folks on a regular basis. And so I had in most weeks, not all, but in most weeks, four meetings a week, two with the VSEA and the VTA and two with the NEA. And so that was taking four separate meetings of our time, plus talking to actuaries, plus working through issues with our staff. It's a lot of work. And to get this done, it's going to take that kind of commitment. It's tough. I'll leave it to you, whether you folks believe it's doable. And, but I would say that it's a heavy lift. Thank you. Rep Colston. Thank you, Madam Chair. I also had a timeline question, but specifically, Madam Treasurer, and given the eight distinct tasks that are laid out on page 19 of the bill and your intimate knowledge of that work, how much time would be needed? How many months do you think to do this well and to have a report that's meaningful and impactful? I could go back and look on our web page. We have the final reports of the committee and some of the starting points. As we're talking, I'm going to try to pull those up. It might take me a minute as we're talking, but it's really hard to gauge. And if you, let me come back to that question. I'm going to pull up on our web page, the commission materials itself and kind of look at what one of the intro reports were and when did we get to the final one, if that's okay. And give me a second to take a look at that. Thank you. Yeah. And in the meantime, if it's okay, I can do that and take another question if in the interest of time. If there is another question. Any other questions from committee members? Okay. So I'm looking, okay. I'm sorry, go ahead, Madam Chair. No, no, no, if you are, if you're ready to move on. Yeah. I'm trying to find one of the initial PowerPoints that I did. It's hard to believe that I would have done a PowerPoint. I am taking a couple of shots at myself on this. Okay. So the agenda started, I'm looking at the committee meetings and these war-worn meetings. So we started on first commission meetings with July 14th, 2009. And the final report was dated December of that year, I believe. Give me one second here. Yeah. December of 2009. And then after that, frankly, as the treasurer Spalding used to say at the time, it was the beginning of the end of the beginning process or something along that line. I'll get it. The bottom line is we ended up coming to an agreement, I believe, sometime around March, because it was during the legislative session. And so even though the committee had completed its work, the work did spill into the into, I see one document that says our tentative agreement was 12810. So it got into that level. And then I do remember tweaking this right to the end and during that legislative session. So I don't know if that's helpful for you in terms of timeline. If that answers your question. Thank you so much. Rep Vihotsky. Thank you. Madam treasurer, would you, and of course this is an opinion, but one of the challenges I know you brought up was that labor wasn't at the table the first time. Would you anticipate that bringing them to the table from the beginning would mitigate some of the time it took on the far end of last time to come to an agreement? Theoretically, if we're all at the table building something together, we agree on it when that final report comes out. I think it's helpful to have, I think it would have helped. There's no doubt in my mind, I remember some of the meetings and the periods of public comment and I think that that would definitely have helped. I would point out that again, we had numerous meetings with the VSEA, the VTA and the NEA and while I have incredible respect for the folks I was listening to Amy today and I have to tell you it's a pleasure. She may not agree with every, I think it was a pleasure to work with her to be very candid and the folks, but we didn't come to a conclusion. And if we had you folks probably would have been a little happier with us if we had given you a report that everybody was in an agreement and in January of this year. So it doesn't guarantee the result, but bringing people on at the front end is absolutely in an open process is absolutely critical to any success. Absolutely. We are trying to be very responsive to the suggestions that we've heard through the last months of this process. So, all right. Any other questions from committee members? Rep Hooper. Hey Beth, Madam Treasurer. Beth is fine. You're gonna stick with that. So am I. So information requests that are outstanding now, you've said a couple of times, the actuary is backed up. Do we have any idea when we're going to get like the breakdown of unfunded liability stuff and tributed plans, et cetera, et cetera. So the first request that we've completed after we issued our report, the actuaries, excuse me, the two boards, the state and the teachers board asked us to prepare some materials, some amortization schedules and looking how it impacted different groups. So if you took our recommendations and you put it in a 44 year old person who's going to retire 10 years down the, 20 years down the road, what would that do the class of living? And we've done those and we submitted a set of those to the teachers board yesterday for them to review. And we're doing the next piece for the state employees next week. And we're going to be presenting that material. That was a material we wanted to do on February 22nd. And again, we put it aside while the general assembly completed its piece. I've had an initial discussion around the subsidy issue across subsidization issue with one of the actuaries. We have not put it into a project queue. If you still want us to do that, and it would be a request of the legislature and to just be candid on your dime, you have put some money aside for your work and we would be happy to do that. But in as much as it's not a request of the boards, it would have to be funded to the dollars that the general assembly put aside. I believe there are dollars available. I checked that the other day to do that. But we would want a specific, what specifically are you looking at? Because I think that when I look at the other information, that was done a few years ago, frankly, I think I might have done that a little different. And I do have to point out there's one other piece that we asked the actuary to work on which was some language around risk sharing. And that hasn't been submitted to us yet too. So we're still working a little bit on that. And there was another piece about, if X number of people left, and that one's a very difficult one to do, it just, we're having trouble even coming up with how that scenario would look at. So we're still trying to get some other projects done. We could certainly at the legislature, if you folks direct us, we will ask them to prioritize that one ahead of other projects and get that done and defined exactly with the scope of what you're looking for. And we would put that at the front prioritization if that's what you want to do. I don't know about the legislature, when we talked about cost sharing this morning, and I don't think we can make a determination within the intricacies of the three state plans or the four actually, since plan eight, proactive, without knowing what the plans cost and what the attributable unfunded liability is in each plan. And after this, I wanna call you and talk to you about healthcare. So if you're available, I'd be happy to talk about healthcare and to be very candid since you gave me the opening. I understand the task force and I understand the moving forward on that. I would still ask the house, the govops in the house to consider dealing with the issue of OPEB funding this year. I was disappointed to see that the dollars and the language was taken out of H315. I thought the language would be stronger and not eliminated and there's an opportunity here. We sat here and said, how did we get here? I think there clearly was messaging all the way along, but I do not wanna be here 10 years from now saying, how did we get here with OPEBs? And I think that since you gave me the opportunity representative Hooper, I decided I'd put that in. We need to continue to work and address that issue. I don't think there's anybody here that disagrees. Thank you. So your first choice would be for that to be on the table immediately. Would you agree that the next best thing is that we should direct the task force to consider OPEB in the context of its summer study duties? I think that dealing with it now, we're talking about a very small amount of money and a commitment to pre-funding, which is a type of discipline we should have, would lower the state's liabilities by 1,680 million. And I think that putting that off into another legislative session would be a mistake. If you make a mistake, how do you fix that mistake? You take it on and I would say, if you make a mistake and don't do it, that you don't do it at all would be a bigger mistake. So you would certainly need to take a look at it, but it is a mistake not to deal with this now. It is a simple fix that has a big impact on our unfunded liabilities and our balance sheet. It's a message about discipline, fiscal discipline, and frankly, it protects us from getting down the road and saying we can't afford these benefits. And it was that same process back in the 90s and early 2000s that we can't afford to do this now. We'll catch up with this later. That mentality is what got us in trouble in the first place in the pension plans. And I would urge the committee not to make that same mistake. And we sent a memo to that effect several weeks ago on this process. I'm trying to remember the date and I'd be happy to send it with another cover letter with our specific requests that this be, we considered for action this year. I think we can all find it on our committee page to go back and review it again. And I guess what I need to make sure folks understand who are maybe tuning into this conversation from a fresh and haven't been a part of all of the conversations leading up to this is that when we have an ADEC bill that comes to the legislature that we must pay that is ballooning with a $96 million increase over last year that is an extremely difficult time to be considering also obligating ourselves to pre-fund the post-employment benefits absent of some sort of action that would try to curb the rate of growth of the ADEC payment. And so that's why we're putting all of these issues together to solve at the same time. Because honestly, the chair of appropriations would chase me out of her room if I were to go to her and say, I need, oh, by the way I need an extra hundred million for the ADEC and I need more for OPEB. It's just, Madam Chair, to be exact, you need about 40 million to do both the teacher and the state OPEB and a policy that's in place in statute, 41 million in change to be exact. And you could do the teacher one which is in a very good shape ready to go with 20 million and we could even work it to reduce that a bit further if necessary. But we've worked through the protocols. We've worked through the modeling with the actuaries. We're not in the scope of things. This is money that is manageable to do a big thing and that secures people's healthcare moving forward and lowers our liabilities. And I'm reminded of a joint fiscal memo from 1989 that explained that the reason we should not do pre-funding or we should not fully fund the ADEC or the pensions was because that A, investments were gonna solve the whole problem which is obviously not gonna be the case in any environment and B, that we can't afford these with all of our other programming needs. And that was a step that took us down the road, down the path of a lack of discipline and I would recommend that we not repeat those mistakes. So thank you. I believe that we share the objective of getting to a pre-funded OPEB benefit. Rep Vihovsky. Thank you. I have two questions. One is sort of related to this healthcare piece and while I certainly wanna ensure that everyone has healthcare, when we're looking at this as a whole picture would you agree that we also need to look at better ways of administering healthcare to find healthcare savings? I mean, our rate of healthcare cost growth in Vermont is astronomical compared to the rest of the US and the US is astronomical compared to the rest of the world. So do you think that that needs to be part of this picture? Well, absolutely. We sent a memo back in September to the house and it identified a three-point plan with respect to the teacher's plan in particular. One was the pastoid pre-funding. Second was to take a look at our claims experience versus the national trends because when the actuaries do work on developing your liabilities, they tend to use national trend rates. And our claims experience in both the state and the teachers but particularly the teacher's system which has had a long articulated wellness program for a number of years and I have to give the state HR department a lot of poodles as well because they've developed a great deal of that over the most recent years. But our claims experience is better than the national trends. So as you talk about the cost of healthcare, our retiree health claims experience has been better than those national trends. So we actually ended up working with them to get at least some of that into the equation, lower the liabilities by about 25 million for that. This again, the change in pre-funding would be 1.6 billion, a big piece of that. We also identified as a third component that we would be looking at ways to change the contractual processes as we looked at healthcare without changing benefits. And I wanna be very clear. And I think we've got a path forward. We should be able to announce something on that fairly soon. I don't wanna do any more than that at this point in time but we think we have a path forward to lower those costs without changing the benefits. And just for the record, in the past we've done a number of things there. We went to something called EGWIP, Employer Group Waiver Plan, which is a way we structure our prescription benefits with the federal government. That's taking in, it started with $4 million a year. I think we're up someplace around $7 million a year of dollars coming in to pay for some of those things. We changed, we created a tiered structure. So you had to work longer and this was with the employee groups on both the C8 and teacher side that you had to work longer to get a subsidized benefit and that lowered the liabilities considerably at the time. And to the administration's credit, in 2018 they made some contractual changes on the state healthcare system. The retiree healthcare for the state and the state employees, the current employees they're linked together. It's one big plan as opposed to the teacher plan where we work separately from the statewide active teachers. And they made some changes there that lowered the liabilities by about 230 million in 2018. So I wanna commend the administration for that. Clearly we're working on the liability side and we hope to bring to you an announcement that we will have some changes in those liabilities as we move forward because we will continue to, we look at both sides of the equation. Great. Thank you so much for that. My other question, I hear that you feel pretty strongly that we need to invest in prefunding OPEV as soon as possible. Would you, what are your thoughts on the need to invest in any additional monies into that unfunded liability sooner rather than later? Longer we wait, the larger the problem becomes. And we need to take advantage of that. I took a look at a chart the other day that years ago I went back to the old actuarial reports after 1979, dusted them off and put some numbers together. And I looked at the interest rates and the investment returns and I sent a copy of this chart to Tom the other day. And he had the same comment that I did. Where we had really very high inflation rates and investment return rates was in the late 80s and into the 90s up to about 2000. And I would remind you from 1990 to 2007 was the period of time when we did undefund the system. And if you look at the returns that we had back then and put them into context and those returns are driven by national. I mean, if you take a look at the rates of inflation back then, I mean, I remember double digit inflation back in the 80s. If you take a look at that, the opportunity lost on that money. Now I remembered in your public hearings that there was, I think it was a school teacher and I think he should be a math teacher based on his skill set there. And he took a look at the interest earnings that would have been made on those dollars. Now I would disagree with a couple of pieces of that because of the nuances of how the ADEC is computed and how you amortize the unfunded liability. But his thesis was well taken. We had an opportunity there and we blew it. So we don't wanna blow opportunities here. We wanna be taking care of business as quickly as we can for the benefit of everybody in the system. And that's the urgency of which we tried to put our recommendations forward. We'll continue to be partners in this thing. But again, as far as the study is concerned, this is the study of the legislature. That is clear in the focus. And we think that the staff support to it, you have available the resources. We've talked that through that. But we are willing to provide our technical expertise as witnesses in the process. But delay is not a good thing. When you've got a crisis, putting it off isn't what I would recommend. I would add, let me add to that too because I took best numbers because she sent them to me this week and I ran them through the actual return. So I know what that opportunity cost actually is for every year since 1979. And it's staggering to know. So I would strongly recommend, at least whenever you can't add more and because it minimizes the effect. I'll just give you an example. 13.9 million underfunded in 1992 would have turned into 109 million with the actual VPIC results from that period in the teacher's plan. So it's material. And yeah, add them up each of these years. I know they're individual decisions each year but they're significant. Thank you so much. Tresor Pierce, I think he was a math teacher. That's fine, that's fine, please. Hope he is a math teacher because he did a nice job. Yeah, I think he was. Lastly, I'm just curious if either of you have thoughts on and I know you weighed in a lot on the VPIC earlier and I kind of waited until the end but would you say that it is the fault of employees on the VPIC that it has underperformed or that that is a combination of many factors? So I wanna do, wanna point a few things out on that. And I, so when I went back to 1979, I had to take a couple of those years out because I was missing a few of the binders from the 79 period. So I took it from 1983 on and took a look at the rate of return assumption and the number of times that we exceeded it and the number of times that we did not. And I was kind of interesting and taking a look at this. So out of that whole period from 19, I think that's 1983 through 2020, the investments. Now this is the teacher system because they at that point investments were separated by group back in the 80s but they had similar processes and similar structures. But 24 out of 38 data points, the rate of return assumption, the investment yield actually exceeded the rate of return assumption. And I took a look at the last 20 years. So the last 10 years, so from 2011 to 2020, the VPIC exceeded the assumed rate of return five out of those 10 years in the previous 20, 10 year periods over the same thing. So over the last 20 years, 10 times over 10 times under, which in a market cycle is not entirely unexpected. The real shame is, as I said, that period of time when we were underfunding, that's when we had some incredibly high interest rates out there in the markets and lost that advantage. So I think that it's performed, it hasn't missed the mark in that way. It has not been everything that we would want and I'm clear on that, which is why I think, and I give Tom a ton of credit and that's why I think we should be able to have some more opportunity in terms of salary for him or future folks because you want the quality of the person in there that can be at the helm of this. We turn the ship around in many ways. I think that our structure was over complicated. I think that it did not perform as well in all market cycles. And I think that we've got a good mix now of upside and downside protection. I think that we take more advantage of index funds instead of active management where it's appropriate. So I would say that, yes, it could have been better. We learned from our experience and we've put together something that I think is very, very good. And I give both Tom and our current CIO Eric Henry and Matt Constantine who was transitioning into that period as we move forward and made these changes and they all did good work. We learned from it, we built on it. The difference in I think moving forward is we, A, we wanna build on success. That's why we wanna make the changes that we're talking about in creating an independent body. And you may not have an Eric, you may not have a Tom in the future. You may have a treasurer who does not have 40 years of experience in government finance. You wanna be having, you wanna have a VPIC that can stand the test of those changes and have the appropriate checks and balances, which is why we wholeheartedly agree with the changes that we're talking about in the current proposal that's out there version 1.1 I believe that you have out there. We think it's a good proposal because it builds on success. It helps us move forward from the things that we have made mistakes on and move forward and done a better job and reflected on that and put those into a new structure and create that checks and balances so that we continue to grow and not go backwards. So I think it's all in all a very good piece of work. And we're proud of being part of that and we appreciate the opportunity to weigh in on that. It's an understatement to say we weren't real fond of the initial proposal but I think we're in the right direction. And again, what I would say to you is hindsight is 2020. You know, when I look at the chart that I sent to Tom and you look at the periods of time and we have market disruptions all the way through. You know, you have in the early 80s you had record high inflation rates and 30 year treasury rates. Then in October 1987, again, John, I'm not sure. I was working when this was happening. There's a, you know, if you take a look at the front page of either the Times or the Wall Street Journal back then, this look of a very frazzled analyst looking up at the screen as the stock market took an incredible plummet down. Then you see the dot-com crash. You see the great recession. We've had the disruption with the in 2015 with the meltdown of the Chinese markets and the impact it had on markets across the world. The Brexit and then of course COVID. So as you take a look at this, you know, markets have been much more volatile of late but I think you have to build a portfolio that performs in these markets. We had some glitches. I think we've learned from them. We move forward. I think that we're in the right direction now. Thank you. This brings it the next step forward in terms of success. So thank you. Thank you. I appreciate that. I've got three more hands up and it is Friday afternoon on a lovely day. We've had a long week in front of the Zoom. So let's see if we can fly through the last few committee questions. Rep Hopper. Madam Chair, I appreciate getting the lightning round. This is important stuff though. So lightning round, Beth. How much money is in the current OPEB fund? Roughly. Okay. In the state system, I believe it's an excess of 50 million. I know that I've got one staff person who's gonna be texting me right now. Whoa, whoa. That's fine. That's fine. But when we did the when we did the adjustment in 2009, I believe I have on my floor here a memo from our friend Cynthia Webster that said if we implemented that staged, it would save us $309 million. Is that a number that rings in your head? And where did that money go? Sure. It saved on the liabilities, I believe. So let me go back. When we made the tiered structure in 2010 or 11 for the state's teacher system, right up front it lowered the liabilities by over a hundred million dollars. The big problem we still had was, as you recall, that and by the way, the 2009 commission pointed out that the failure to appropriate the dollars needed to pay even the current premiums being added to the credit card was adding to the unfunded liabilities. We changed that in 2014 with recommendation from our office that the General Assembly adopted. That changed, that saved the taxpayers about $480 million. Okay, between 2010 and 2038 and it's on target. I don't have the $300 million figure in front of you that Cynthia and for the record, Cynthia Webster was the previous director of retirement operations. That doesn't sound off what I would have expected with the tiered changes that we made. Okay, thank you. Tom, previous two things, quick ones. Previous director of investments has been following VPIC still and he submitted testimony, I guess you would call it or maybe a letter to this group that said he would attribute 10% of the unfunded liability to VPIC controlled or influenced actions. Question one, questions two, can you address the fact that we are now positioned so that we lose less in a down market than we make in an up market as a strategic sort of positioning? Because there's been a lot said about us failing and you can't look it up without looking it down. Thank you. I'll start with the first one, Matt. I spoke to a couple of days ago just to get his opinion and I did get his spreadsheet. Matt was wonderful at spreadsheets and I think I would take his spreadsheets over anything with some of these. So historical records when he was there would, I'd lend a lot of credence to that. Whether or not it's exactly 10% or if it's 15% or what it works out to be, I guess it's all dependent on the date when you value things. And so I'd leave that up to the joint fiscal office or financial experts and actuaries to evaluate that. In regards to the characterization of the up-down market, I think it's a perfect example of what we've accomplished over the past year that highlights what we've done. And it shows a market that dropped 30% with COVID crisis last February and then recovered. You can look at the fact that we were in the top 30% versus our peers before COVID and now we're in top 19% versus our peers after the recovery to tell you that exact answer that we did better in the downturn and we did just as well in the recovery. And I think that's what we've structured our portfolio to do. And I think that answers your question. We do have an eye on liabilities, we have an eye on cash flow. There's significant trying to make it not complex but also not to get caught in problems because losses are harder to make up. And I think we've really attempted to do that. I think this past year has shown that to be the case. Thank you. Representative McCarthy. Thanks Madam Chair. Senator Pierce, I was a little confused by your response to Representative Vihosky and I just wanna clear something up for folks who are watching outside because I feel like there's been a lot of conflating of different things in all of the political rhetoric outside of our committee surrounding these conversations. So my question is, is it true that it's a very different thing for us to hold off a few months and make sure we're spending additional money above and beyond the ADEC to pre-fund OPEB, set us on a course, a glide path to have that liability which we did discuss in this committee and I really believe in pre-funding. I wanna take your recommendation on that. That there's a big difference between holding off on that and reserving all of those additional funds over and above the ADEC and the historic underfunding of the ADEC that you spoke about. I just, I really want people at home to hear that there's a big difference in that because I feel like we as a legislature, we got the ADEC, it was an extra $96 million this year over last year and we put it in the budget, we're funding it. And then when I heard your comments, I took them to mean, oh, if you don't fund the OPEB, you're doing the same thing that your predecessors did in the 90s back when I was in high school. I mean, I just wanna be really clear that like we're not doing that. We are funding the ADEC. We also are talking about putting extra money in and we wanna make sure that we have buy-in from stakeholders, from other legislators that this additional money we're talking about putting into our future goes into the right bucket. So I wanna make a real clear distinction. I wanna make sure I'm not confused. And so I just wonder if you agree with my assessment of that. Okay, well, I'm struck by the fact that you were in high school back then. I had graduated from college and was well into my career at that point in time. So we'll just leave it at that. But, and I was in my career when I was looking at the October 1987 debacle in the markets. And but I think that there are a couple of pieces of this. Number one, I do not, I very much appreciate the fact that you're tackling these issues and you're taking a look and you're moving forward. And at least that's my hope that we'll move forward. I do wanna point out that we brought these issues up with the respect to healthcare. Let's go back to the old pavement in the teacher healthcare. I must have written at least one memo a year to the house as they were looking at the budget to get out from under the fact that we weren't even funding the premium payments. We were putting them on our credit card. So as I said to you folks earlier that in 2012, I think the bill was someplace around 24 million in the premiums in the appropriated 20, excuse me, appropriated four left the other 20 million without having been appropriated. It was a sub fund of the pension plan. So essentially it created more losses in the pension plan and that and asked each year all the way out to 2014. We finally, it was part of the 2009 report by the way when I was a deputy treasurer. I don't mean to interrupt you and I'm sorry to do that but I just want to make it clear for folks who can't quite follow what we've been following for the last few weeks that there's a difference between the historic underfunding of the ADEC and us. Not having yet made the decision to commit ourselves to the OPEP. I think it's what you're trying to say. That's exactly where I was going madam chair. Thank you. So let me just try. So I appreciate that. I guess what I'm trying to say is it took a long time to get to the point where action was taken. So I'm cognizant of the time it takes when we define a problem and we've been at this for a very long time. In 2019, we started a risk assessment process around this very issue. And we brought in the employee groups. We brought in members of this committee. We brought in members of the legislature. The speaker was involved. And as I said in previous testimony, that did not happen back then. In 2000, we did a report and that hasn't happened. We put it off. And my problem is that will we have the will to do all that is necessary down the road? I don't have any doubts or sincerity. Okay. I have no doubts about the sincerity of everyone to try to get this done. My question is, will we have the will to get it all done? And for me right now, there's an opportunity to do the OPEP. Let's do one to demonstrate that will and then move forward with the rest of this package. I don't disagree with you at all, Madam Treasurer. And in fact, I could just follow up with a question that might sound rhetorical, but won't it be easier to the chair's point earlier for us to find that will if we reduce the other ballooning expenses and have a path forward that allows us more flexibility in where we make all of our funding decisions across all of the buckets? I think that that is one path. And I think that another path is to work with us now to try to find a solution in this fiscal year and we can work on how to prioritize that and get as much done this year with the dollars that are available this year. I was very disappointed that the $20 million that was put into H315 was ultimately removed as well as the language. Let's work on it. Let's find a path forward. Representative LeClaire. Thank you, Madam Chair. I got a couple of questions for Tom and then hopefully we can sort of move on. Tom, there's been a couple of comments made here this afternoon about how somehow people are assigning responsibility or blame to the non-professionals on VPIC in particular, the plan beneficiaries and that was never stated and that was never said that way. The questions have been in relationship to what does their perspective, how does it contribute to the overall earnings of the plan? And I think one of the questions was those that are non-professionals. I would have to say you as an example, I guess Eric and some others, it's pretty clear that you are the right people at the right time and right positions because obviously since what, 17, 18, we are on a trajectory towards where we want to be. But the question is on the investment side, on the VPIC side, wouldn't we be better off to have people that have the skill sets that you need in that regard? And the last question I would have is, can you give me the downside on what it would be to totally professionalize the investment side? And... Yeah, I'd be happy to answer that. I find non-professionals to be of tremendous value on the investment committee. Whenever you get a bunch of investment professionals in a room, sometimes they think they're smarter than they are. And I've found that you have really good balance when you have a mix of professionals and non-professionals. So I wouldn't, and also I'd say, and I wouldn't place any blame on prior actions. We've had professionals advising us. I'd almost place the blame on lack of investment in an infrastructure for VPIC that has caused us to rely on financial experts more than we should have from the local perspective. So I think what we're doing and what we're moving towards is really localizing it and having non-professionals and professionals as a mix. I don't think, I think you need them. I just don't need, you think, to make them all members. Hopefully that answers it. Yeah. Thank you, Tom. Thank you, Madam Chair. Absolutely. Madam Chair, if I could follow up on one point about this if I know that everybody wants to get out on Friday but if you indulge me one more here. So I came to the State Treasurer's Office as a deputy in 2003, okay? And in 2003, when I arrived, there was one person who was the responsibility for the investments of the pension fund. He was also responsible for the debt issuance for the state. So he was a debt and investment director. And because they thought he would have not enough to do, they also made him the director of the bond bank, okay? And that was just not workable. So the first thing we did is we a few, after that was deemed as a little more than somebody could handle, they moved it off and the bond bank became its own entity again and now has a professional staff as well as a director. I don't remember how many other staff, but they do. And that person was now in charge of investments in debt issuing the state's bonds. That continued for a while into another individual. Eventually we were able to just before I became treasurer, they were able to split the function. So we now have one person doing investments, okay? Since that time in our budget, we've asked for additional people. So we now have three people in the office full time working on investments. I used to say when I was in front of the Appropriations Committee, we should have at least one person for every billion we have. We've got five billion, so a couple of people behind on that. But I think that we had been moving in the right direction, but we were trying to do this without putting the necessary resources historically behind this. We now have the right resources. We have the right teams to be able to do this. And we need to apply additional resources as we need it. You cannot get the type of return you need if you don't have the staff and the internal resources to do that. You do need, and I will agree wholeheartedly with Tom, the corporations by the way, you see studies, corporations do better when they have a mix on the board, diversity on the board. You need to have that same thing here, but you also need to have the resources in place, the staff in place, the types of folks that you need to get this done. And clearly we're in a lot better shape than we were in back in 2003 with somebody doing three jobs. So I am so thankful that we've had a thorough conversation here about how we're moving forward, about VPIC's perspective on modernizing itself and for lack of a better term or refreshing, refreshing the way you are built as an organization. So the document that you have shared with us, Tom, I very much appreciate and we will take a closer look at that over the weekend and come back to a fresh look at the bill language on Tuesday when we get back into session. And so I guess I just wanna ask if there are any other committee members who have questions either for Tom or Beth before we sign off. Thank you. Thank you for checking this weekend. Thank you very much. I like the scene behind you, Madam Chair. It's something to think about for the weekend. We can all wish that it was that green out there right now, but at least the sky is equally as blue. Thank you. Take care. All right, thank you all. That is it for the day.