 So, Senate government operations, it is Tuesday, April 20th, oh, 420, and here we are. Some of you got that, some of you didn't. But anyway, we are here and we're going to be talking about retirement. Today, we're going to focus on the governance part of it. I did it a little later than I had hoped, but I had a few questions that I thought I would post so that if, as people are talking about it, they can keep those questions in mind. I didn't get questions from any other committee members. So, Gail went ahead and posted the ones that I have, and I believe they are on our committee page now. Is that right, Gail? Yes. Yes, they are. And there were just a few of them. But as you're going through your testimony, if you just, then I don't have to ask those questions afterwards. You can address them while you're talking to us. So, I think with that, what we'll do is we'll get started with Mr. Galanca and Mr. Henry. Are you here on behalf of the Treasurer? You are muted. I was really here on behalf of VPIC with Chairman Galanca. OK, all right. So, I'll let you start us off here and talk to us about why this is structured the way it is and what we should be looking at. And we've had, just for people's information, we have had a walkthrough of it. So, we've had our technical corrections answered, questions answered. But if you would walk us through the suggestion to change the VPIC and how that would work. That would be great. Thank you. You want me to start? Madam Chair. Sure. Thank you. And thank you for having me back. I apologize for having to leave the last week's meeting a little bit early because I had a pre-existing, pre-scheduled meeting. But I can give you my perspective on these changes, as how we develop them. I know Representative Gannon is here as well. And I know we work very closely with the House GovOps Committee in terms of this process. I'll give you a little history. Obviously, there was the initial proposal for the Vermont Retirement Commission that was proposed by the House GovOps Committee. So, Beth and I replied to that with our recommendations, which I've put all these documents on the Senate GovOps webpage under my name so you can look at them and you can get to yourself a history of, like you basically just copied everything that we had given to House GovOps from both Beth Pierce as well as myself in comments and how this thing developed. And so a working group of Beth and myself and some other interested parties would get together and we went over the initial proposal and we put down 16 different items, which we thought would be helpful for GovOps in the House to look at and consider as they drafted any legislation in regards to VPIC. So with that, Representative Gannon took that and developed the bill. You'll notice in there, I also have some follow-up emails from VPIC. There was a VPIC meeting in the meantime where we looked that over. We looked over the proposed legislation. They approved those recommended changes unanimously. We left off at that time the discussion on term limits because we felt that was a little bit out of our, we didn't have time enough really to cover it during our VPIC meeting at that time. And there wasn't the unanimous consent on that. So I wanted to give the House a feeling of what ideas on this proposed bill were unanimously approved by VPIC or unanimously endorsed by VPIC. And then the other issue was whether or not legislators should sit on the commission and we left that issue off as well. So you can kind of see some of the different emails back and forth in regards to specific questions that came up. There was a follow-up email from me which finalized some of the final terms and some of the nuanced terms and reasons why VPIC and the Treasurer and I felt that they were important to slightly alter some of represent again in the initial bill. So from that, they came out with the bill and I think it truly represents a good representation of both the house GovOps committee work as well as Treasurer Pearson myself. And we think it's a really good step in the direction of making VPIC more of an independent entity that works alongside the Treasurer's office instead of inside it. I asked Eric Henry to join us because he's our new Chief Investment Officer that we've had for the past two and a half for three years now, Eric, I'm not really... Time flies when you're having fun. I think we've made tremendous progress on VPIC and I think these changes really help us, I believe, get to the next level. So I haven't had a chance yet to read your questions but I can pull them up. Well, I'll just tell you what they were right now. Okay. Let's see, there's only one, there's a definition of independent but as far as I can tell, there's only one place where it's used and that's on the an individual shall be considered independent pursuant to this. If that's the only place I found any place that talked about independent person. We wanted to have it in there. We limited it to, I think it's the governor's appointees to make sure that... Because the problem was when we tried to limit other members with 50,000 beneficiaries and limiting it to in-laws and brothers and parents and siblings, you pretty quickly get to everyone in the state. And so we limited that definition to strictly the governor's appointees at this point. Oh, okay. All right, and I did have a question about what does it mean to be somebody servicing the plan? I mean, that's just a technical. I'd interpret that as being like an investment consultant of a money manager, maybe the actuary. Some of the private vendors we have, we have a proxy voting relationship with an outside vendor. So it seems to be the vendors that we hire at VDIC. Okay. And then very kind of a stupid technical question I had is the chair is appointed by the other members, but there's no qualifications for what the chair should be. But then if the chair leaves, the vice chair does not become the chair. And instead, there's an interim chair appointed and that person has to be a financial expert and independent, but the chair didn't have to be to begin with. And I just wondered why... I'll leave that to Representative Gannon. Yeah. Thank you, Senator White for asking that because that's one of my questions as well is why are we requiring this of others but not of the chair who is so important to have these expertise? Senator Polina. Well, just to continue that question, it's the same question. How did nine people point somebody that it's just wide open? Like these nine people haven't necessarily met yet. They have to meet each other and they have to pick somebody else to be their leader. It just seems like a pretty wide open process. Well, that's how it works right now. So VPIC right now is structured. So the six members of VPIC at this point elect the chair and they elect me through an annual process. We also go through an annual review process that's set up through VPIC policy. I think it works very well. They do hire, we had a vetting process. I put my name in that. I used to be a member of VPIC through my relationship with Vemors. But I think it brings at that point the level of expertise and it's actually a spokesperson for VPIC as well. So I think there's a multitude of reasons that the committee members might want to chair. I think mainly it's to represent them in places like this as well as to reporters, as well as to help facilitate the meeting. And I think it's not just financial expertise. I think it's a combination of skill sets that they're looking for. But the chair is not appointed from among those other nine members. Chair is appointed by those nine members. That's correct. Okay. So maybe representative Gannon, if you can just tell me very quickly why the chair initially doesn't have to be somebody with those qualifications and why the vice chair doesn't take over and why the new interim chair would have to have those qualifications. Thank you, Madam Chair for the record representative, John Gannon from Wilmington. And I'll have to be honest. I believe that was an oversight, Madam Chair. I believe that the chair should be independent of the initial expert. Okay. All right. We're glad that's good to know. So thank you. Okay. Madam Chair, can I? Yeah. Yes, Senator Rom. Well, I guess while we're going back and forth, I mean, what problem would that be solving in your mind from the existing way it's done? Well, right now. If someone supported by the rest of the committee to be chair, there could be a number of reasons. That's the case that they're a good leader that they listened to everyone. So I'm just curious what problem it's solving. Well, the problem it's solving is the lack that there was no requirement for financial expertise or dependence. So I think if you look at some of the research out of the Boston College Center for Retirement Research, you'll see that having a mix of people with financial expertise on a pension board is very important towards that performance. And so that was the reason that we moved there. But as chair, I mean, which is more of a leadership role. Well, I will have to say, I mean, if you look at the leadership under chair Galanca, I mean, the financial performance, VPIC of the pension plans has picked up and they've looked at fees. I think it's important that there is a financial expert leading VPIC because that is its mission is to ensure that the pension investments are performing well and that we're setting an assumed rate of return that is not overly optimistic. And under chair Galanca, they have achieved those things. I mean, it is amazing to me the dramatic turnaround with VPIC under his leadership. Okay, Senator Clarkson. Thank you, John. And I have to say that's good to know that it was just an oversight because you guys did such good work on this generally. So I think that it's important to have financial expertise, but I think Senator Rahm is right. It also a leader, there obviously need to be good skills that Tom himself referred to, leadership skills. So we can, I think, craft that in a way that would be additive and a little more fulsome. But financial expertise is certainly one of the many skills and talents that the chair should have. Leadership skills, good interpersonal skills and good financial skills, all three are really important. And then I think- Thank you, Senator. The only other question kind of nitpicky question I had is explained to me again about why in some places it's an independent board and in one place it's a standalone board. Why isn't it consistently either an independent or a standalone? Well, this is new language. So the goal is to move towards independence. So it, in the current law, it's a part of the treasurer's staff and treasurer's office. So we're moving towards the independence. I get that, I get that. And that's what it says. But when it talks about the consultant being hired, it talks about the consultant transferring it to a standalone entity. And that's my only question. Why you stand alone as opposed to independent? Is that just a technical- I believe that's just a technical thing. Okay, all right. It's the same meaning, the consultant is gonna look at, well, how are we gonna accomplish the goals that we're looking for with them? Yeah, no, no, no, I got that. I just wanted to make sure that we were being consistent with our words. So Senator Clarkson. Thank you. Thank you. I guess my, are we just talking, are we able to ask all questions about governance at the moment? Or are we still? Yeah, no, what I'd like to do though, is have other people weigh in before we get too deeply into the questions to hear what the VSEA, the VTA and NEA, what their comments about it. I look forward to that as well. I just, as we're talking about sort of how things are defined and what things are still needed, we talk about what expenses are paid for by the funds and shared equally in the funds. I found that the Chris Rupp's fiscal note was very useful as I went through this bill to look at. And all the costs and premiums and expense reimbursements are identified as being covered by the various funds equitably. But it doesn't mention the salaries for the four professionals, the chair and the three other paid professionals. So I was just curious, how are they being paid? Are they being paid also out of the retirement funds? And- Senator, let me, I uploaded a document that I shared with Housegov Ops. It's a fee, annual fee review that we did last year. And if you go to page four of that document, it lists every single fee. You've got lots and lots of documents here. Which is the name of it? It should be, it should say VPIC manager and vendor fees, annual review between 2020. It's about the fifth one down or six. That's correct. Okay. Now that lists every fee we pay that some you see, some you don't, whether it comes out of an individual investment management firm that charges back into the trust or if it's the separate consultants. And what you're talking about is investment staff. Yeah. Investment staff is lined out there at about $360,000 a year. So right now we pay our staff, the three staff people, a collective total about 360,000 in the budget. And that was as of last year. So, Beth, you're here too. So maybe you may know other expenses and other staff that are allocated. But I just used the investment staff and Tom that shared equitably from all the funds. That's correct. The same way the, okay, great. Thanks. And there's more for pension benefit individuals that work in the treasurer's office. I just listed out the ones that we had here through the investment management side. Great. Thanks. Okay, committee. Any more questions for Mr. Galanca? So Treasurer Pierce, I assume that you're supporting this since you and Mr. Galanca work together on it. That's correct. I apologize. I had the other Zoom link. So I was waiting to be invited in. And so I apologize for the delay in getting here. Yes, I do support it. There was some changes that are in memos from Tom that we think are important. Some issues around the definition of independence, although we support certainly the concept. I would like to just go back a step. VPIP was created in 2005. And at the time, no one could agree on who should be on it. It was a mess. And there was a gubernatorial veto of VPIP at one point in this. And ultimately the result was that we had a committee of 17, a committee of the whole. So everybody that was on a board got on. The Treasurer at the time was on all three boards. So he only got one vote, but it was unwieldy to say the least. And we were concerned, frankly, with the original proposal presented to the house that went back to a 15 board group with a two-tiered structure. It was unwieldy and it created some, it was cumbersome so that if needed, for instance, to fire an investment manager, which we have had to do. And on an emergency basis, when things are going apart in the market, for instance, we've needed to do that quickly. And that structure did not allow us to do that. Hence, Tom and some discussions with other folks and myself, we put together what you see primarily in the house bill. So you see the pieces that we, and one of the memos that was submitted that by Tom and with my support that we do that. And so we are in full support of this. Again, I think that having the 10 member board instead of the 15 two-tiered structure that we saw is important. I would like to point out when we went from the 17 board, I mean, excuse me, when we went from the three retirement boards having oversight of the investments to VPIC in 2005, we saved a million dollars in fees by doing that immediately. And the estimates back at the time, and it's a little difficult to compare apples to apples when you're changing investments and consolidating, but the estimate at the time was at increased return by about 45 million dollars. So I think we're on the right track. In 2008, there were changes to get rid of that 17 member construct. We had a consultant come in. He was a affiliated with the University of Oxford in Harvard Law. So I think his credentials were very good. And he came in and did a study. And we made the changes, as I said, to the seven-person board, the six plus the one that is elected. So it's very similar to now. And we have had an investment chair that's been a professional in both cases since the inception of VPIC. Again, I think that this current structure is very good. And as we look forward, I think that Tom has done a fantastic job. And I think you should get a lot of credit for that over time. We've done a number of things. We've simplified the portfolio. And again, I should, I have one vote in it, but the committee as a whole and with Tom's leadership, we've used more passive management where it makes sense. We've reduced fees. We've increased transparency and we've added staff. One of the comments I've made in numerous testimonies to the legislature is we should have at least one staff per billion. And at 5.3 billion, we're not there yet. But I think we recognize that VPIC is growing. The economies of scale when we looked at this in 2008 weren't there to spin off VPIC. But I believe very strongly that it's time to build on those successes and to have VPIC stand alone. We are gonna need to make some budgetary changes. Unfortunately, given the time frames on this, we're not able to, I don't believe at the pace that the appropriations bill is moving to make some budgetary changes this year, but I would hope that we could put some language in there about the intent to do that and to make that move after the consultant study in fiscal year 2023. I would also point out getting this question about investment staff and how that is, how the expenses are allocated. Since 2005, we've had a time sheet allocation process in the office. So the staff, for instance, in retirement will record how much time they spent in defined benefit with the state, how much in defined benefit for the teachers, the DC plan and so on. And I do the same on an aggregate basis as well as other staff. And so that, for instance, 18% of my time something might be related to investments. I don't have the figures in front of me. So that time is allocated to the pension systems. And that time is total. The time in each system would be allocated to some extent to VPIC. We allocate on the basis of assets under management for the purposes of investment funds. For the purposes of other pension expenses, retirement counseling and the like. It's a three-part piece, assets, time, and the number of the population of each plan. And we developed that, as I said, some years back. So that will get to the point. So we're gonna have to just aggregate some of that. And that will take a little time. We wanna see the consultant report. But I think that it makes some sense. And again, I wanna compliment Tom and the VPIC as a whole in the numbers that we've had now. When you say numbers, everything's end-point sensitive in investments. You have different economic cycles, whether you hit it in a bloom or whether you hit it in a recession period, whether it fixed income is doing well versus equities. But our numbers right now, for the period ending 12, 31, 20, were in the top third of the country for our seven-year returns in the top 19% for our one, three, and five-year returns. And you have to be careful. As I said, it's end-point sensitive. I saw one published report that said that took a period of 2008 to 2018. And frankly, that included the great recession. And so you would expect some not-so-great numbers. 10-year numbers from a performance side, I don't know, Tom, off the top of my head, whether we hit the 7% in the 10-year numbers. I know we did in the others. Through December, we were at 7.24%. For the 10-year. It was the bottom 70th percentile. So you show the improvement, but it was still 7.24% at the end of December 31st. So we did exceed our assumed-great return at that point. And when I take a look at the five-year period or 10-year period, we have five above, five below. So you're in a period of the assumed-great return. Couple of those low points were tough times in the market, the meltdown in China and Brexit, which both of those happen at the end of June. It never fails it. As you're looking at this thing and the measurement point as a June 30th, the market will recover after that. But it does, as I said, it is end point sensitive. And again, I think that over the years, we've taken a critical look at the governance structure. We've made changes. It's time to make this change now. Again, we'll build on our successes, build on the last several years. And again, I also want to compliment the staff that we've had in the office in the leadership of the last two CIOs, Matt Consonning and Eric Kenry. Eric is on the call here. As far as the professionalism goes, and I know there's been a lot of comment, I would support the current bill that says that the chair should be an expert. I do believe that the vice chair will be there and can add to that leadership. But given the complexities of the market and the role that a director, excuse me, a chair would take, I think that it's important to have an expert. Now we do now, and I would point out, I took a look at our board construct right now. And we have a pretty darn good board. We have the chair who's a registered investment advisor. And I'd let Tom elaborate on his great credentials if you'd like to hear those. I love the great school in Notre Dame. I thought I'd throw that in, Tom. But we also have a gubernatorial appointment that is also a registered investment advisor. The second gubernatorial appointment was the CEO of a major company for many, many years. One member of the employees, and we think about that and say, well, you know, they're employee members and they are, I think they add value and a good perspective to the board. But one member has a degree in math and an MBA in finance, one of the other three has a degree in finance. I might be an MBA, I don't wanna, I believe that's the case. And the third member is a long history of years of experience with VPIC and has taken the training that we have. And I've been doing this work for 40 plus years. So I think I know something about the game as well. That said, you could have a different governor and a different treasurer that have more politics in mind than investments. And, you know, I think we've been very nonpartisan. I, again, I think that the qualifications of these board members is very good. People spend time thinking about that. But it could be a different case in the future. And codifying this, putting it into statute that you need that type of expertise and board members. And I think that that is important that they would represent 30% of the total as well as the employer members that are appointed by various groups. I think that it's a good combination. I think it codifies that. And I would go back to the BC study that representative Gannon pointed out. It also says beyond the professionals that said you should have skin in the game by employee representatives too. The 15 board member concept that was originally produced over and presented to the house had board members three out of 15. And I think that was a little light. And I think three out of 10 is a good place. I know I'm talking a long time on this because I think these are salient points, but I do support the bill in concept. I think that some of the proposed changes that we had have submitted make sense. And we would urge that those be included. But as VPIC has also supported this in a special meeting to in concept as well. So I think that we should move forward on this. And I would urge the changes in the that have been recommended, but I think the concept is great and appreciate the time. And I'll be happy to answer any questions. Thank you. I do have one, two kind of general questions. First of all, is the chair a voting member? It doesn't say. The chair would not be a voting member. Okay. And I think that should be made clear. Yeah. That the chair is not. Members, I'm sorry, Senator. I was going to say with nine members, if they're all present, it's not likely that we'll have a tie, but there are cases when it may happen. Yes. I don't think I've ever voted in the five. I just think we need to make it clear because it does say for the others that they're ex-official voting members and the others are assumed to be voting members. So I just think we need to make that clear. And why did we choose looking at the asset and liability study every three years instead of two? I'll let Tom answer that question as our investment expert. I think that asset liability is extraordinarily important. I don't, I guess you could go, I would go either way on that. I think that three years is, is that the liability or the experience study? They're talking about the experience study, I think that's what I thought. We look at the assets and liabilities on an annual basis anyway. So we can talk, Eric could. The experience study, yeah. The experience study is where we have to hire an independent or we have our actuary run the experience. And that's a more expensive and intensive sort of review of the different levers that make up the pension plan. So we lowered it from five to three. And I think that's any more than that would be a little bit cumbersome every single year. Yes. Okay, other questions? Yes, Senator Rom. Maybe you touched on this briefly, but can you tell me what the previous practice was to now with determining the actuarial rate of return? I think before they had to consult the VP had to consult with the other three governing boards. And now they wouldn't. Can you speak more to that change? Certainly. So the pre-VIGPIC, by the way, each board hired its own actuary. Thankfully it was the same one, but you could end up with a different scenario. In fact, they had different investment advisors at one point. Under VPIC, what was created was a joint process. So it's a joint session. So all three boards in the investment committee are present at the same time. And so each convenes its meeting and the actuary will go over their data. Our investment consultant will provide their input into the process as well. And then there was a vote by all three boards as well as the investment committee. They have to agree under that model. And if they did not agree, you would not make a change to the assumption, which I think was not a very good construct. Right now we had a 7.5% rate of return. We really needed to move that down. And if we did not have agreement by all three boards in the VPIC, it would not change. You'd still be at the 7.5, which would result in having an unfunded liability that wasn't representative of where we think it should be. So I think that moving the investment committee are the experts on investments. They're the experts on the economic data in terms of inflation, for instance. So we believe that they should be the board or committee that weighs in on those economic factors. But the boards would continue to employ the actuary for the purposes of looking at other types of pieces that are part of the actuarial assumptions. Mortality, retirement experience, staff turnover, staff salaries, disabilities, and the others. So that they would retain the responsibility for the non-economic actuarial assumptions. Thank you. So my lingering question still is the number of employee representatives would still drop about 12.5%, right? Going from four out of, what is it? Three out of 10. Three out of 10. Instead of three out of seven. Three out of seven, that's correct. It's well within the range of the BC study and it is certainly an improvement over the original proposal submitted to the House of 15 members. We think it's representative. You also have three independent members that are selected by the legal cities, the Vermont, I'm trying to remember the correct term for the Education Association. And the third one is for the state would be ex-officio, the commissioner of finance. And I think that overall it's a good mix. So you've got three, three, and then three, including the commissioner of finance. So the governor would have two appointees and that would be an ex-officio appointee. So the governor would have two, the employees would have three, the employees or the boards themselves would have three. And plus myself to equal the nine. So the governor has two plus and then there's one that's part of the employer. It does, my interpretation of the current statute and I would support this, is that it's not necessary for the boards to elect a member of their committee. In other words, the members of the committee, the employee and the retirees in the case of the municipal, the officials that are on that, excluding the treasurer in all three cases could elect someone who's not a member of the board. And that's the case now. We have two of the elected employee representatives that are selected by employees, but our folks that are no longer serving on the retirement boards and theoretically, as I said, two out of the three, the three total have significant finance experience. So it's not necessary that they pick one of their own members. And I think that's a good idea. They may look out and say, this person who works with the employee boards, testifies or what familiar with him or her from our, I usually say her or him through our employee groups would have the qualifications to serve on the board and would be a good member. Thank you. So can we jump to, I'm gonna jump to Jeff Fanon. If he is there, I see his name and I see his little microphone off. So Jeff. Thank you, Madam Chair. Jeff Fanon, for the record, Jeff Fanon, Vermont and EA. Thank you for giving me a few minutes to talk about the VPIC governance structure. So as the Treasurer just pointed out, this is an improvement over the 15 person board, VPIC board that was originally contemplated. However, I think there's some refinements that can be made that would improve the structure. So, you know, both Representative Gannon and the Treasurer spoke about the Boston College Report. It, I would have, and I did testify in the House that the Boston College Report, I would suggest supports the current structure of VPIC. We have seven members, three of whom are employee members or planned participants, if you will, and four are non-planned participants and fewer rather than more elected officials. The Boston College Report also talked about not having too many elected officials on it. And we've added to that. So actually, Madam Treasurer, the Governor now has three appointees, whereas before he only had two. So the Governor's picked up an appointee. His appointee is the Department of Financial Regulation Commissioner. So that's picked up. So I think, you know, that's one, and I testified about that in the House, so I didn't think that was right. We thought that that pick should be removed. I also still, you know, again, in the House, I testified as to, I'm not sure why the VPIC chair should have a 20-year term limit. Seems awfully long. And one of the criticisms of any board is that people who stay too long on any board get too cozy with their investment advisors, the staff, whomever. And that cozy relationship often gets in the way of anybody asking the tough and critical questions that a board member needs to ask of staff and of consultants. And so by lengthening the term or giving them a 20-year term limit, we just think it's too long and actually could work to the, there's been much about independence and financial expertise and being distant, if you will. I think this goes in the absolute wrong direction and the chair should have the same term limit as all the other members of the board. I, let's see. And, you know, this is just an overall comment. We think that there needs to be balance in the VPIC board. And that would be balanced between planned participants and non-planned participants. And that's how we see it, is not necessarily an employer or employee. Who's in the plan and who's not in the plan. So that's the balance that we're seeking to obtain and think is important for VPIC. Many boards in the ERISA world, in fact, all boards in a multi-employer arrangement are equal number of employee and employer representatives. I think that has bode well for them in large measure. I used to work in that arena. And you get decisions that are hard fought sometimes, but eventually people get around to agreeing with the other side, if you will. Because you have to make decisions that everybody knows it and it's tough. So I think that's why there's great value in having that struggle and then getting to a consensus where people agree with the direction. So I think that's why we're seeking balance in planned participant and non-planned participant. So, you know, I think that's the sum of the testimony. Oh, I'm sorry, I don't want to give you a page number because that will be wrong, I'm sure. But in section five to three, which on mine is page 11 of the bill of 449, section D, subsection D policies. And I said this in the house and I think it's later written, but it wasn't caught where I was thinking it should go. The commission shall formulate written policies and procedures deemed necessary to appropriate and appropriate to carry out its functions, et cetera. I thought it was necessary to put in written, so it was clear. Where are you again, Jeff? Yeah, I knew you were here. On page 11 of 449, it's page 11, top of the page D, line three, under policies. Assuming you're on the page, it's an imagination the same way, that's right, Senator Clarkson. Yeah, yeah, well that's anyway where you are, whether it's page 11 of 449. Catch up. Where it says the commission shall formulate and Jeff is saying written policies as opposed to just formulate policies. I worry about people having policies that are not written down and it's hard for anybody, you know. God forbid the Pickle Truck takes somebody out. We want policies to be written to make sure that we know what they are. Yeah, what about the ice cream truck? The Pickle Truck sounds pretty sour. It's from a former colleague of mine who's called the Pickle Truck. You never know when the Pickle Truck's coming. So, and that's why you want policies to be written down so that we all know what they are. I think it's just important. Call me a lawyer, but sometimes that's important. And with that, I'll cede the remainder of my time to my colleagues, Mike O'Neill and Steve Howard. I'm sure they have some other additions that I missed. You don't have to cede time. We have time. Okay. But I'm just gonna ask you how you would change the makeup. So we have three members from the retirement boards and we have two employers of them. Do you consider DFR an employer or to represent the employer? Again, I see them as plan participant and non-plan participant. So in this case, the commissioner of DFR, Mike Pichek, who I think is listed as a possible witness later on, is appointed to his job by the governor. Right. So that's where I get to three. The governor now has three appointments to VPIC, whereas before or in the current law, the governor has two. And I see that the governor's appointments, whether it's the two upfront in section, subsection four or seven, the commissioner of DFR, they're non-plan participants. So the balance I'm striving for is a balance between plan participant and non-plan participant. So I guess my question around that would be just what the treasurer was talking about is that, for example, the VEASTERS board could appoint somebody to VPIC that was not a member and was not a plan participant. So then that would skew the balance there. Again, I mean, I don't know how you would do that so that you say all those three people have to be plan participants. And my understanding is that Mike Pichek might be a plan participant. So. Right, right. I guess if the VEASTERS or VEASTERS employees on that board saw fit to appoint somebody who was not a participant for whatever reason, I think they should be afforded that opportunity to do so. But that's the plan participant, if you will, making that appointment, not somebody making it for them, if you will. Got it, okay. So you would knock out DFR or one of the governors of other appointees? You don't care. Yeah, I just, yes, that's correct. I don't, and I testified earlier, I didn't care how you got there. It's just trying to strive for the balance. Yep, okay, great. I got that. Any questions for Jeff? All right, so Steve, no, I'm gonna go to Mike because Mike was last, last time. So Mike. Thank you, Madam Chair. Good afternoon. My name's Mike O'Neill. I'm the executive director of the Vermont Troopers Association. I don't think I'll take a lot of time up today. Jeff, I think has covered a lot of this stuff very well. We're in agreement with the proposals that will bring professionalism and expertise or improvements that would be brought to VPIC. Anything that's going to improve the performance of these funds obviously is our interest. One of the problems we've seen over the years, obviously, with the unfunded liability is coming from the performance of these funds. So we support any changes that are going to accomplish that. Our concern is exactly what Jeff just talked about is the balance on VPIC. And I think he phrased it well in planned participants and non-planned participants. How these people are appointed to be on the committee is what is important to us. So there is representation equally from both sides, both the employer and the employees. I would agree. The other governor having three picks is too many because it leaves just three coming from the employee side. The governor has got three and then the other employer representatives are there. So I don't know the best way to accomplish this and what the right number should be. Maybe 10 total isn't the right number to get to where we have the balance there should be, but that's the concern that we have. Other than that, we're pretty comfortable with the rest of this. Great. Thanks. Any questions for Mike? Steve? Good morning, Madam Chair. Good afternoon, Matt. Am I freezing or is Steve? Members of the committee, thank you for the opportunity, Jeff. We're freezing. Is it me again, or is it Steve? It was Steve. It's not you. It's Steve. It's Steve. Okay, so I'm frozen. Steve, you keep freezing up. Still frozen. Yeah. Let's see. Let's try this. Hold on one second. You're okay now. There. Am I there? Yeah. Oh, good. Thank you. I don't want to be frozen for a long. That's for sure. Thank you for the opportunity to testify and I'm gonna limit my comments, obviously, to the governing portion of the governance portion of the bill. We're not that far off from what you heard from the NEA and from the VTA. For us, you're gonna hear a room. Oops. Heated theme on this section, on the next section about equity and balance on these committees. So what the VSEA would prefer is that there be an equal number of appointees from the plans to the folks who are not appointed by the plans. However, you configure the folks who are not appointed by the plans. Really, we don't have a strong opinion about, but we think it should always be equal and balanced. And the reason for that is because as the Boston College study did say, skin in the game does matter. I believe that study also said that the more, it may not be that study, but I certainly have heard Jeff testify to this, that the more women you put on investment boards, the better the performance. So that skin in the game does really matter. And I think that's something that's very, it's an important value. What we proposed in the house and our testimony in the house is that there'd be a six employee group appointments plus alternates and then six managers. And just to go to the chair's question, from the perspective of the state employees, anytime the governor appoints somebody, from our perspective, that is management appointing someone who they control. So whoever the governor may be, whoever she may be, if she appoints someone, that person is working for the manager and is there to represent the manager. And from our member's perspective, that is our member's boss. Regardless of what department you work in, ultimately all state employees work for the governor. So I think that's just a concern. Right now, VPIC is pretty balanced. It's three folks from the plan and three folks who are not on any of the boards of any of the plans with the independent chair. We think that's fine. We don't really think that that, governance I'm sure had some influence on how the investment returns came out. It really, I think a lot of it, and I've heard the treasurer say this and I hope I'm not saying anything that she wouldn't confirm. A lot of the investment return results were things that were not in control of VPIC. And so it's a little bit of moving the chairs in the Titanic to say we have to reconfigure the whole thing. And as the chair has said, as the chair of VPIC has said, we're doing quite well with the reforms that they have made. So we're not against making those changes, but we wanna make sure that there's fairness and balance. That's the biggest thing. A couple of other small things. We respect the members of the General Assembly. We think they have expertise. We think they, as long as we have a citizen legislature, we shouldn't be blocking out people who are either in the legislature and serving on VPIC or who are elected to the legislature while they're serving on VPIC. Certainly the folks who have the kind of skills that are associated with members of VPIC we could use in state government, in the state legislature. So we don't think that's a real change that needs to be made. We're okay with the independent VPICs, the study about the independence of VPIC. And there was some language in there about a residency requirement, which I don't know if it survived in this bill. I'd have to check on that. But we did know in our original testimony that if members of the VSEA serve on any of these, serve on the visas board or are chosen to serve on VPIC, we have a number of state employees who live out of state, some who live in Canada. And so we don't wanna disqualify anybody. I'm not sure how important that is, but I just thought I would point that out. We're okay with the more frequent experience study. And then I don't know if you wanna talk about well, I think that goes into the next section. It says in my notes VPIC, but I think it's really about the task force. So I think I'll just leave it there, leave it there that the really important thing for us is fairness and balance. And while I enjoy all of the references to the Boston College study, I would just say to you that that institution gave me a degree. So I don't know if it says anything about their credibility, but you might- Oh, forget them. You know, you might wanna just factor that in. So I do have a question for all of you. You've talked about employees and employers. Where do you put the treasure? The treasure is neither. Well, for our members, she's an employer. We have members who work in the treasurer's office who work, who report to the treasurer. So she would be counted much as we love her. She would be counted as a manager from our member's perspective. Okay. So when you talk about six employee representatives and six managers, you're including the treasure in there and you're talking about 12 people and the chair. Yes, however you configure it. I mean, that's just how we testified in the house. That's what we thought made sense. But however you configure it as long in our view, what's important is that the number of folks with skin in the game who are actually dependent on the outcome of these investments for their livelihood or their survival once they retire, that that number should be equal to the folks who are not, the folks chosen by the boards should be equal to the folks who are chosen by somebody else or appointed to buy the statue. Okay. Even if the person chosen by the board does not have skin in the game. Even if the person doesn't have skin in the game. Yes, we think the boards should, there should be a balance there. Okay. All right. Any questions for Steve at this point, Senator Calamore? Thank you, Madam Chair. It's not actually for Steve. I feel a little bit like we're moving chess pieces around the table here. I'm curious as to how similar the proposed VPIC composition of the board is when you compare it to similar states in terms of the number of folks on the workforce and all that sort of stuff. Not that that's the super answer because we don't always have to do what all the other states do. But I just want to try to get a general sense of how this compares to maybe other states with sort of similar sized workforces. Maybe Tom can answer that better than anybody. I don't know. I can probably at least try. No states do it exactly the same way, but there are a number of states that do it similarly to Vermont where you have a separate investment committee that focuses just on investments. And then you have underlying pension boards that handle the benefits and other more pointy positions. In most states, it's really, particularly the ones that have investments focus, they try to emphasize the financial expertise versus employee versus employer group. So I think if you look at a lot of investment committees or commit commissions or whatever you call it, it's more geared towards the investment side. And you also have to understand that we're fiduciaries for this trust. So no one comes to this board and tries and says, well, I'm wearing my hat as an employee or an employer. And we actually give our members fiduciary training, which we did this past December. And that's one of the principles of being a fiduciary. You leave that outside the door. Your sole purpose as being a commissioner of this new entity will be to serve the beneficiaries of the plan. And sometimes you come up with difficult decisions and one of those would be the rate of return assumption. And that's why we've left it in this body because political influence could make that decision go either way. And we've tried to insulate it here at VPIC. I don't think you're gonna get one right answer. I think when you get more than 10 people, it gets more difficult. And so I think that's why Beth and I recommended keeping it nine to 10 members, at least nine to 10 voting members. In regards to the governor's appointee, I know I heard that come up. The governor has two appointees right now out of a voting body of six. So that's 33%. He's getting three voting members if you count that the commissioner had a nine. So that's 30%. So it's about the same slightly less. So I think you really have to look at the voting members versus alternates and how this new structure is. So we tried to maintain equity in all of these interest groups. It's hard. But I think we've achieved pretty close balance to what the current VPIC is as our starting point. So I don't know if that answers your question. No, it does. Thank you very much. Madam chair and Senator Collomer, would it be all right if I add into that? Sure. So I think that when I looked at structures that other states, Maryland, for instance, did a very extensive study a few years back, 2018, I believe. What we see is what I think generally what Thomas said, where you have a board that also has an investment committee, that you have that two tiered structure, a little bit like what I saw in New Hampshire. And where you see the investment committee, you have a little bit more emphasis on professionals. I can't speak to the New Hampshire model because I have not looked at that in any length. But I remember seeing that organizational chart in the original piece that you folks, the House looked at. So I think that that makes some sense. I would agree also that now we're talking about, I think 12 members. Is that where we ended up with this, with Steve's proposal, 12 plus one? Or is it something in that range? Well, it's just 12. 12, okay. And I think you're starting to get a little large. The problem I have, the governor does have two plus one, as we said, it has two director plaintees and then the staff position. And it does say DFR, I don't know how Mike feels about that. I think there are no offense to Mike because I think he's exceptional and I wanna compliment what he's been doing also when during the COVID crisis. We had originally written that as a department of financial commission of finance and management, but that's up to you folks and that's up to the administration and how they feel there and both are extraordinarily qualified. But I have a hard time figuring out how you would get a state employer representative without that. And I know that Steve just characterized me as a state employer. I think that the Treasury is much more independent than someone that might be an employer member that's appointed, I'm gonna backtrack on that, appointed by the governor as a staff position. But I think that the intent was to have the treasure as an independent financial person who's looking at the state finances as a whole. But those points can be seen in different ways. And I respect that, but I do think there's balance here and the committees that I've seen that are structured with that board, they do take an emphasis on the investments with their investment committees. And there are several boards, as Tom said, that totally separate investments from the board activities as we have. Prim comes to mind, Massachusetts plan and SWIB. I like the names of state of Wisconsin Investment Board. And I think that spin-off is extraordinarily important there that, and having that independence. I know I'm kind of going off track to Senator Collomer's question, so I'll stop there. So I do have a, I want to jump right now and then go back to this issue, but I want to jump to Mike Pichek to the commissioner being, of course, a superb commissioner here, being a Brattleboro boy and all. But so commissioner Pichek, if you could just tell us when I read this and I said, why would the commissioner of DFR be on here? And maybe you can enlighten me about that. Well, it's a good question. I maybe had some other questions myself when the most recent version of the bill came out, but I can't speak to the specific reason that we were included on the outside. So I can't give you that answer. I can sort of make some points as to why DFR certainly has the general capabilities and traditionally the DFR commissioner would have the capabilities of serving well on this committee. You know, our department regulates the securities industry, we regulate the investment advisor, broker-dealer communities. We often work with the SEC and FINRA on policy development, whether that's the fiduciary duty standard, whether it's other lesser important policies. So we have great familiarity with the regulation and with the industry generally. And I think that background and knowledge certainly would be there regardless if it's me or a different commissioner in the future. So I think that's probably why we were selected, would be my guess. Okay, I guess that helps me. Senator Clarkson. I think that the commissioner of DFR has the most, other than the pressure, but I mean, within the administration is the commissioner with the most expertise of both regulating and securities. It makes, I think it makes actually great sense to have the commissioner, the DFR commissioner as a member of this board. If we're looking to actually further instill financial expertise in this board, which is so important to managing our pensions. Okay, any other questions or Karen, we have not heard from you yet. And thank you commissioner. I don't mean to dismiss you already because you're welcome to stay, but you answered my question and I think it's just a matter of where we go. Great, well, thank you for inviting me and I hope everybody has a great afternoon. Thanks, bye. Karen. Thank you Senator and thank you for inviting us. We had a couple of questions around this. We did, we're not going to weigh in on the issue of what the relative balance needs to be on the board. We do have, as it's written, one member from FEMA's and one employer rep from the LCT as part of the board. Just a couple of comments because a lot of these issues have been addressed already, but we were struck as was Jeff by the chair serving not more than 20 years. That does sound extremely long and all the comments that he made regarding that kind of tenure resonate with us. We've actually had that situation in the past on the VLCT board and had to change our bylaws to address that. And then on page 13, I think, and this may be a question borne out of lack of familiarity with FEMA's even though I'm going to be using it sooner rather than later is what is, what's the actual relationship of this commission to the governing board? So Beamer's has the five member governing board with the treasurer, two employee reps and two employer reps. And they've done quite a good job for municipal employees over the years. So that may be a question for the treasurer just to edify us a little bit. Madam Chair, is that, would you like me to respond? So when you look at this, again, back in 2000 and prior to 2003, the boards, the Municipal, State and Teachers Board were doing both investments and the benefit structures and administering the benefits of the plan. And what it resulted in was some inconsistencies from board to board. As I said, different investment consultants, different asset allocations, although some of that would be appropriate when you look at the funded status, different investment managers doing the same thing. And by combining the board and pooling and then we eventually got to, one investment manager in the appropriate space representing all three, that resulted in a reduction in fees because when you pool the assets, you get breakpoints, you get, let's say it's 20 basis points cost for the first 50 million, it's 15 basis points for the next 100 million and so on. We took advantage of those and as I say, yet a million dollars of fee reduction the first year. So I think that separating the two as long as the boards get to appoint somebody and have a voice in that makes some sense. And we see that those specialties are very, very different. And different sections of our office support that. Benefits are supported by the retirement division and the investments are supported by the investment staff working with Eric Henry and then you get my time and Michael Klossin's time, my deputy and others proportioned across all of those depending on what we do. So they're supported by different groups in the office because of the expertise and again, as long as these boards have the ability to appoint a member. And although people talk a lot about the report on attendance and the reason that that is there is so that in the training is so that the boards can keep an eye on their investment representative to make sure they are in fact attending the meetings and taking the requisite training. So they get that report once a year. It's not intended to be the investment report. We got a multitude of reports. We have performance reports. We have actuary reports. We have experienced study reports. We're adding fee reports on those things. But we think that that particular report just lets them know, gives them a, are they attending the meetings? Are they doing their job? If somebody's been attending four out of 12 meetings you might want the board to have a conversation about that. And if they've done no training over the last five years that would be a problem that the board might want to rectify in its next appointment. And thank you, Treasurer. And one other sort of, I guess similar question regarding the reports on every year after 2022. This is on page 13. The commission submits the House and Senate committees on government operations report on performance of each plan. What does the House and Senate government operations committee do with those reports? What are they gonna do with those reports? Like would they have the capacity to override the decision making of the other governing boards? In terms of the investments or the benefits, I mean, what do you mean override? Take different action than the governing boards might have proposed or wanted to take. Senator Polina, did you have it? Yeah, well, it seems like the report would be of decisions already made. So we couldn't go back in time and change those decisions anyway. I had thought that could be wrong, but I had thought that the purpose of that was so that we could keep on top of what's going on. So we don't all of a sudden find out 10 years from now that we've been falling behind for 10 years and nobody told us sort of the situation we're in. So I thought it was just to keep an eye on where things are going and maybe voice our opinion from time to time, but it would be too late to change those decisions. It might give us an indication of what decisions we've made in the future, but it would be more to kind of keep tabs on how things are going. All right, well, thank you. Thank you for that. That's helpful. So those were really all the comments that we had on the bill right now. Thank you. Thank you. So I, in looking at this, I see that there, I think there are a couple things that we, I'm going to try and pull us to some kind of action here on some things if there are. We need to add some language around the qualifications of the chair, around financial expertise, leadership ability, whatever we think should be in there. And we can, we can work on that. Then we need to look at the 20 year term, which does seem to me pretty long also. Yeah. And I know it's 20 years and both. So you could be 12 years as a member of VPIC and then eight years the way it looks as a, as the chair. So that's the 20 years, but 20 years is anyway. So that's another area that we need to look at. Yeah. And clarify that the chair is not, is not a voting member. And then we have the, the issue of the balance. All right. Is that, have I captured where we are, Senator Clarkson? No. I have other. Oh, no, those, those are all the points I have. We also, there was a question about the language of intent from the treasurer and the written policies. Or written policies. Yeah. Written policies. And then we have the proposals that are in a memo. There are additional proposed amendments that the treasurer and the chair have suggested to us, which is a fairly longish memo that we should take a peek at. But I don't think they've included all their recommendations for amendments in this testimony so far. Have you, have you? But that was a, let me give some clarifying if I may. Okay. Cause I, I, I was a memo. We gave it a house cover up. That doesn't sound. Oh, oh, I'm sorry. I thought that was. I think they incorporated most, if not all of those. Oh, okay. Okay. That wasn't, I wasn't, I didn't read that. I just thought that was for us. No. All right. Okay. Comment on that. I think the one big issue that would remain was the, the definition of independence and whether that created some exclusion of folks. So we, we, we would recommend taking a look at that. There's one other thing that I wanted to point out that I think is very helpful. Getting to your point, Senator Polina, the investment reports are available on our webpage back to 2005. And the actuarial reports back to 2001 on a quarterly basis. So you do get to see that. And I think that it's great to, to send that to you folks. But I think it's more important to send it to all the members. And one of the things we had in the, in the, in the, the proposal was that we would send some type of, not necessarily a document, but maybe a link to a dashboard with all the relevant information for, for our, for our members. So that, no, I would say that not everybody that's a member is probably an expert on investments or an expert on actuarial science. As I'm not an expert on engineering, you would not want me building a bridge, for instance. But I think that it's helpful for them to see that they already get an annual benefit statement. So they, they understand that. And we just went live a few months back. I want to thank our retirement division with a, an online product that lets you go on and take a look at your benefits. So maybe that's a place where we could put that dashboard. But I think that that would be very helpful. And one more question, getting to the point of, what would you do with that data? I think it's informative and you can ask questions, but I wouldn't think it would be a very, very dangerous thing for, for someone to suggest that, that the legislature should dictate investments. That's why you have a committee. Why you'd be in trouble. We'd all be in trouble. Yeah. You can't, we're a citizen legislature. Ask my banker about my financial acumen. I'm not going to Madam Chair. Okay. Jeff. Oh, I'm sorry. Senator Plena, you had a. Well, that's okay. Well, okay. I'll just be brief. I just think the dashboard idea of giving information to all the members is a good idea. I would just really plead that if we do that in plain English so that people can actually understand it and not be like annual reports we get from companies that we own stock in or you don't understand it and you can't read the writing because the font's too small and whatnot. And you might also want to look at providing it in more than just English in other languages as well. That's all great suggestions, sir. And we will bring those back to our staff because we would agree that it's just good suggestions. Thank you, sir. Did you have a. Yeah, just to, you know, I appreciate the conversation. And sometimes that sparks thoughts and it goes back to what Senator Rahm said early on, which is, you know, there was some conversation earlier about how the current structure of VPIC is three employees, if you will, and four others. So it's seven, if you will, and three and three in the chair is Tom Galanke, as we know. And so that, we heard a lot of discussion earlier with Representative Gannon who's not here now but about how they changed course recently and have been doing better and better and appreciated all that good work and adjustments they've made. We send gets back to Senator Rahm's question, which is, I'm not sure what problem we genuinely are trying to fix here. And I get it, we want more experts and we want better independence and we want to share the reports with planned participants. And a lot of that can be done right now without statutory fix. And so I just, I'm left with a feeling here, I'm not sure what problem we are genuinely trying to fix by adjusting the current structure of VPIC and the good work that we all have said is happening. So I'm left with that thought and I don't have an answer to Representative Rahm's question either. Senator Rahm, I'm sorry. I saw Tom raise his hand. Thanks Madam Chair. Originally when they made the initial proposal, I thought the same thing, why change what's working? But I think you got to compare this, VPIC has changed so much over the past couple of years and my goal really when I took over as chair was to basically make us more professional and make us more not just independent for the treasure but work in collaboration with the treasurer's office. And so I view this as an opportunity to basically get us to the next step. I don't really view it as a negative, these changes. The numbers aside, whether it's three here or two there, I think they're generally the same. I know you can argue one or the other but I think these changes will allow for internal staff to own the investment choices better and to provide better advice for the ultimate board. And I think the person to hear from really would be Eric Henry in this regard. And because I think he's brought in a level of institutional investment knowledge that I'd like to sort of become standard going forward. You look at how much we spend out of state for investment management fees for the $5.4 billion that we invest in. It's $20 plus million a year and we're paying only $360,000 on our internal staff. What I would like to see is just this internal staff maybe taking more control, becoming more professional and utilizing our dollars that we are spending in a better way to increase performance. And so I guess Eric can talk to the staffing and how that can benefit VPIC but Beth's been tremendously supportive. Our fear is that without Beth, it could go either way. You could get a treasurer in there that doesn't believe in DB plans that wants to scrap the whole thing. And we'd have a very difficult time managing these funds. Conversely, you could have the other side of the equation that could be advocating for use of these funds that wouldn't be appropriate, that could harm investment returns. And so the issue of independence to me is the most critical. It's not necessarily the staffing or the numbers in equity. I think it's the idea that we've grown up enough that we can work more collaboratively with Beth. I think Eric would be great to sort of expand on these ideas. Okay, Eric, may I make a comment? Yes, please do. For the record Eric Henry, I'm chief investment officer and technically I report to the treasurer on her staff but I spend the bulk of my time working with the committee. At the beginning of this hearing you asked me whom I was representing and I paused because I don't really distinguish between my role working with the committee and working with the treasurer. So seamless right now, we've been able to collaborate to achieve a lot of good over the last two and a half years. We've lowered fees, we've avoided some major losses, we've streamlined the portfolio, we've made it easier for the small staff to oversee. And our concern is not how it's working now, the concern is what happens after a treasurer appears. Tom mentioned a few things that the next treasurer might not be supportive of funding the DB plan, might not be supportive of preserving the DB plan. Not be as beholden to her fiduciary duty as the current treasurer is. And beyond that, longer term having the staff report to an independent committee, much like we have in Massachusetts or Wisconsin or Montana or a number of other states with this structure. Having the staff report to an independent committee makes it easier to attract and retain talent from an investment standpoint. The reason for that is that the talent that you're attracting, whether it's a CIO or a deputy CIO or analysts or entry level investment people, they're not subject to the whims of a political nominee. Those political offices turn over, those personalities change. And the concern is that when you're trying to attract and retain talent, you want to keep them around for a long time, longer than one treasurer, longer than two treasurers because these investment programs, they take a long time to implement and a long time to build. And if you're changing direction from an investment standpoint every couple of years, it's very disruptive, it's very inefficient, it costs a lot of money and fees and lost returns. So our view is that this, having a separate committee to oversee it, to attract and retain the staff is the best practice, not only for participants of the plan because they get more continuity in who's overseeing their portfolio, but for the taxpayers because there's a more consistent, long-term plan to the portfolio. Madam Chair, I just want to point out that I'm not leaving, not planning on leaving anytime soon, but just thought I'd point that out. But in addition to that, I agree that politics could get involved, depending on who's the governor, who's the treasurer. Tom pointed out a really good issue, which is that some treasurers have said we need to do more local investment and in the process. And those are good things. We do local investments in our office. We've got a great local investment committee that said in the pension fund, if you start to do some of that without looking at the investment criteria that we use to select managers, you can get yourself in a whole lot of trouble and I could go down a list of sole trustees and investment committees that have made those mistakes and it's not good to be able to have report those losses to the taxpayers. And again, professionalizing the staff, they need to be independent. We're at that point now. A few years back, the cost probably was prohibitive. We did not have the staff. When I first started as a deputy treasurer, we had one investment CIO. We actually didn't call the person that, we called the person the director of investments in debt. And in that case, he managed the debt for the state, the debt issuance, he managed the investments and because he was supposed to have so much spare time, he also managed the bond bank, okay? Which so one third of his time, presumably was related to the investments of three different boards at the time. You know, we spun off the bond bank back to being an independent group that was a good move. So now it's time as half between debt and investments. And by the way, I keep saying he because we have a lot of he's in there. I'd love to see a lot of she's in this group as well. But then now we've moved to a director that is entirely in investments. Although Eric would tell you that he does some work on our deferred comp and some of our other accounts and we would look to move that to other staff so they can concentrate solely on the VPIC moving forward. So it's been an evolution. This is the next step in evolution as all of us have said many times and I'll stop saying it again. It takes politics or the potential for politics down the road. And you know, I've been doing this for 40 years but you don't see too many treasures that have 40 years of cash management and investment and finance experience. Hopefully the next one many, many years down the road again will have those same experiences. Senator Clarkson. Thank you, Beth. We feel the same way. Don't go anywhere fast except maybe to Springfield to get those... The canolis. The canolis. Yeah, we're still waiting for this. I'll get those for you. Yeah, yeah. I guess, you know, I've been thinking about balance and I think how I view what you called Jeff, the participants, non-participants. The third leg of this stool is of course the taxpayers of Vermont. Mm-hmm. The taxpayers are participating in helping finance this. Yes. And so I would say I view the other, the non-union members as being the other balance which is the taxpayer. And I think it's completely fair for us to be considered. I have, you know, I'm very independent of all this, all the things that we've talked about and sadly independent of a lot of financial expertise as well. But I am a taxpayer and I have a vested interest in how these pensions do and how sustainable they are. So I think as we look at balance, we also need to remember the taxpayer as a key piece of this balance. Senator, I would absolutely agree with that. If you take a look at the employer representatives that we're looking at, one from the School Board Association and one from the Vermont League of Cities, they're representing their constituencies that are part of this. And whether it's a DFR or finance and management, I think that they are as well. And again, I'm having a hard time figuring out how you would appoint a member to be the employer representative for the state that would be other than an employee of the state because we don't, that's the plan itself. But that said, I think that you're absolutely right, employers now, this plan is for the benefit of the members of the system. And under IRS code, that's very clear that we make decisions for the benefit of the members of the system. But I think they go hand in glove on this and the reality is that maximizing your investment return is in the best interest of the members. And it happens to be in the best interest of the taxpayer as well. But if I'm looking at this, if someone's asking that we should do some action that we would think contrary to good investments without naming any in the past, what I would say there is that we would not wanna be compelled to do that with a lot of pressure or members that are, again, more political. So that would be the balance. I'm having a hard time and I'm certainly willing to talk about how that two plus one, that ex-official state employee would work. I think that that's something you should probably have some more discussion on. But I think it's important to have a balanced three, essentially having that third member somehow representing the employers. And maybe there's a few workarounds on that. I'm thinking of one, and I'm doing this off the cuff, but maybe the employer members of the board, the state board elect an employer representative, which could be a member of the board, or like in the other cases, someone with investment expertise that they would want to select. So maybe that's a way it's not a gubernatorial appointment. This is off the cuff. So as I'm saying this, I know that I'm gonna have some folks say, but you forgot about this, but you forgot about this and all that along the way. But maybe the employer members, which would include the commissioner of finance, it would include the commissioner of human resources. Those are two, and perhaps, I don't know whether you would want the treasurer because again, I bristle at the idea of, that I'm representing an employer or employer. I think I'm both. And I think I'm non-partisan, but that might be a solution to this is that if the employee members are selecting the employee, maybe the employer representative is, that would be a thought in this. And again, this is off the cuff and I'm sure that Tom, Eric's representative, Gannon, maybe the three employee representatives that we have today are all gonna say, but you forgot about this, but there are solutions. Okay, so what I'd like to do is I'd like to, there are some things that I think we can decide right now. We want a written, we want written policies. Yes. We want some to write in some qualifications for the chair. Okay, have we? Yeah. And we think that 20 years might be too long. Yes. And I don't know what the answer to that is, but it seems to me, I don't want us to keep, at some point we have to start making some decisions. And I believe, and I think that the issue of the balance is probably the one that's gonna take the most discussion. So I'd like us to leave that alone for right now and see if we can make decisions on the other issues. Well, Madam Chair, yes. I hesitate to say this, but the bill is not actually formally voted out of the house yet. So I have some concerns about our making final decisions before we see the final bill. I don't know that we will ever see a final bill. And I'm trying to figure out here the timing of what we're gonna do, because the suggestion is that we may want to come to some decisions and put it in the budget bill. If we do that, we have to have it done. We can't wait. They're not even gonna vote it out of the house until a week from Friday. That's right. And we have to have this done by Friday. We have to have this done by next week, regardless of what the house does. And I hate to say that, but that's just the reality of where we are, I think. If anybody disagrees with that, let me know. But we don't have time to have a house bill come to us, then make changes, then send it back to the house. Right, no, it won't happen this year. I realized that, I just, yeah, I was, okay. So that's why I'm, if they get a bill out to us to borrow, then we can change whatever decisions we've made. But I'd like us to try and get rid of some of the issues that we've been talking about so that we can focus on the other issues without constantly kind of going off on tangents. So. Madam Chair. Yes. So just a couple of things I wanted to say. One, I'm not sure if you're talking about setting aside balance on both VPIC and- We're only talking about governance right now. We're still just talking about governance. Okay. Just governance. We're not talking about the task force at all today. Okay, so I didn't know if you meant this week or what we're talking about. So for today, we'd like to try and make some decisions about governance. Yes, and the things, I think we could all agree that Jeff's suggestion about having written policy is good. If I have to say before we move on, I don't mean for this to sound like some kind of principle stance in opposition to Senator Clarkson, but I just want to say, educators and state employees are taxpayers. They're paying into this plan. And they are working for decades to have some retirement at the end. So they're investing in a lot of different ways in the outcome of this fund. And so I just, I don't think we can move on without that being said. Yeah, I agree. But I don't want to talk about balance now. Okay, please. I don't mean to get excited here, but can we please come to some decisions about some of the things that we seem to agree on and then go back and talk about the balance issue and where we might be with that? Because if we keep on kind of going off, we're never going to get anywhere and we have to be done with this by Friday. Okay, that I mean, that's the bottom line or we won't happen this year. You're keeping us very focused. I don't think we've actually gone off on any tangent. Do you've kept- Well, I just want us to focus now. Written policy, okay? Are we okay with that? Yes. Okay. Okay, good. 20 years, is that too much? Yeah. Too much. Okay, what should it be? 12. What are the others? The others are 12. Tom? Since I'm probably the only one with experience being both an alternate, a member and now chair, I think I'm uniquely qualified to answer this question. I think the role of the chair is significantly different from a member or an alternate. So I think if you're going to have alternate or if you're going to have chair limits, you should decouple service from either of the other roles. And the reason I say that is because an alternate is like sort of training. So I also think you should decouple alternate roles from the other term limit, but that's a different issue. I think that's where you're running into problems because it takes a while to go from alternate to member to chair. And then if you limit them, you may have, if 12 years had been in place when you first started, I'd be off next year, two years from now. So I think that's one comment. And the second comment on this you should think about is this position already has a out clause for all existing members. It's not a set term you have. It's an at-will employee basically of the nine other members. So they already have an out clause. And by limiting a future board from being able to make a decision on who they want to represent them, take me out of the picture. I think it's very limiting from a board as they get closer and closer to that term limit. So that's an argument for not having term limits for the chair and just striking it completely. I do like term limits because I think it does offer transition. But I also have served on boards where you don't want to limit board options, particularly if they get someone say 10 years from now or whatever, say you get Warren Buffett or you get somebody else that you want to have able to represent you. You always have the ability to get rid of them from with a six person vote. So I'll leave it at that. So did I understand you to say that you could, you should also decouple members and alternates. So the members have a three term limit. That's how the house bill has it now. No, they have members and alternates have three term limits, which means that if you're an alternate you couldn't have your three terms and then become a member. So you're saying decouple it and have- I first don't think members should be limited by the service they had as an alternate. First of all, they don't get a- Right, right. That's so that we need to change that then. So that members have a three term limit. Alternates have a three term limit as an alternate but then they can become a member. And then they would have another three term limit. No, but then they'd be serving for 24 years. I'm sorry, that's just way too long for anybody. If you're an alternate, you're not voting, you're in training. Okay. I would argue that the alternate role makes sense to limit it or count against the, don't count against one of their terms against a regular voting member. So if you're an alternate for more than one term, you're only, you're not, and then you become a voting member because that's that natural pattern. You're an alternate for a year or two or three and then you start to become a voting member as a regular member. So if you exclude one term from an alternate being as counted in their years of service, I think that would accomplish, it would limit an alternate for being to serve to 16 years instead of what you're saying 24 years in that scenario. Yeah, just limit the first term because that's really the practice that I'm seeing. An alternate serves for a couple of years and then they become a voting member. So that I think would address that in terms of, I wouldn't count service as a member or an alternate in terms of chair because I think you're really gonna let it limit yourself for future chair service. So you would just take out the term limit for the chair completely and just leave it? I would, I would recommend that but if you need it, if you wanna have a chair, a limit exclude past service as alternate member. So, and then set your year number off of that. So I do one of the two. If you leave a term limit, make sure it's not coupled with the service as an alternate or a regular member and then set that year number that you see fit or get rid of it altogether because it really is a position that can be eliminated tomorrow by six votes. Committee. I'd have to think about it. I mean, I don't, I mean, this has just been proposed. So I'd really like to think about it. Yep. Senator Rom. Okay, so you can just tell me we can't introduce new fact patterns here but what I still have, I've asked about in the past I'm not quite sure about is Tom, it sounded like you received very little compensation and I'm wondering how many hours you put in and how feasible it is for someone to serve as chair if they're not kind of retired or affluent or like how does this work where someone could serve for 20 years and not really even get paid? Well, they do pay me some a third of the salary of the treasurer, so it does help in that. You know how many hours I've spent on it over the past three weeks, I'd say it's been a full-time job. I anticipate this transition period away from the treasurer's office is gonna make this job even more important. And so that's why I wouldn't limit it. I'd err on the side of caution and not limit it right out the start. You can always add some term limitation for a chair I would imagine but if I envision this position to become like an executive director position. Okay. And it sort of guides it. Some models have states where the executive director controls both investments and then benefits. So you theoretically could spin off the benefits side and some states do that, but not now. I'm not suggesting that, but that could be the role this becomes. Madam chair. Yes, I didn't, I guess I just missed it in this bill. I didn't see that we had specific compensation identified the chair. And I would assume that the chair would be paid as a full-time professional. We're asking for, you know. The chair has paid a third of the salary of the treasurer. It's in here. And, but I think that I think that when we look at the independent consultant that is being hired, one of the things they're going to be looking at is the compensation of the commission chair and commission employees. I don't think we have to make that decision now. I think that's going to come in the report from the consultant. Right. We're going to come up with a report on that. Yes. Good. That needs to be reviewed. Big test. Well, it will be because it's in here as what they have to look at. Okay. So committee, I'm happy just taking out the term limit entirely for the commissioner, for the chair. Senator Colomor. Thank you Madam chair. So I agree with Tom. If you serve one year and forgive my mixing metaphors here but if you serve one term as a junior varsity member it counts against your varsity status when you get there so that you could only serve two. I think that's basically what you said, correct? That's correct. Yeah. Okay. And I agree with the chair that we'll just take the term limits off the chair. Senator Clarkson. I think if we're, I am a big supporter of limits, term limits and so I would be happy to rethink, I think 20 years is too long and I'm happy to take Tom's thoughts into consideration but if we're doing term limits for the rest of the board I absolutely think that we should be looking at a term limit. I really think that it's too long to serve at the head of any organization is, I just think that's too long to serve as the head of an organization and it needs to be, I just think it needs to be shaken up a bit. I just don't see that. So I'd have to, I need to think about that too. Okay. All right. Yes, Senator Rom. I mean, I think as long as there's a one to three year review of the chair and there's really strict protocols for conflict of interest or misconduct of some sort, I think that's what counts more than the length of time overall. We currently have an annual review and Beth can attest to that. We handle it every December. And our issues of misconduct, et cetera, in the bylaws or those all in statute? We have our ethics policy that we agree to. That's part of the new policies that we're looking to add in or strengthen under a new VPIC that's separate from the treasurer staff. So I anticipate that that would be a priority that we'll work on. And we're talking a lot about ethics in this committee. If there's some kind of ethical violation that's currently found, does that give the other board members the ability to review the service of the chair or what happens if there's an ethical violation? Senator, Tom leaves the room when we evaluate him and then he gets the feedback, but we would look at that. It hasn't happened and I can't recall a member, but every year we review our policies as well. We have a conflict of interest policy. We have an ethics policy, training policy on what type of training it can have and who pays for it. And last, we have a disclosure that we do each year to certify we have no conflict of interest. If something were to happen, the board has Tom just pointed out the committee, excuse me, would have the ability to say, see ya, you know, that this is, and they could do that at any time because the chair serves at the pleasure of the committee. If a staff person had that problem, we would deal with that immediately. And members are required to disclose any conflicts as well. And I think that that's so, and there are repercussions for the members in terms of their ability to vote for a particular investment manager or something like that. But I think that that's something we would wanna take a little further look at as we go forward in terms of what recourse you have as we develop that policy. But that review is seriously considered as part of our annual review of investment managers. I mean, excuse me, investment consultants are custodian and Tom is a key member and essentially an employee of the group. Not well paid, but an employee. So, Anthony has a... Oh, I'm sorry, Senator Plena. I just wanted to say that I feel uncertain about this question of term limits. So I'm sort of in the Senator Clarkson field right now. I mean, I just wanna think on it a little bit. I see both sides and I've been listening, but I don't have a firm opinion right now. Fair enough, fair enough. So I don't, I think I have to leave in 15 minutes for a chair's meeting. We have 12 minutes. But you can keep on if you want. And I think that I didn't quite understand Beth's comment about redefining the independent. I don't know if you meant the independence of the... Or if you were saying that they did it in the house, they redefined, I don't want us to deal with the way the bill was as it was introduced. And then go from there. I want us only to look at what is in front of us now because it gets confusing here about what changed in the house. Cause we don't really care. I shouldn't say we don't really care, but we don't because we have in front of us what we have in front of us. And so like Senator Clarkson's confusion with all the amendments, she thought they were for us, but they weren't, they were for the house. So I don't know if you meant Beth that we had to redefine independent person or the independence of the council or if you were talking about how they changed it from the way it was introduced to the way we have it. And you're muted. Sorry about that. I think we'd like to look at the independence of the members, the employee members for instance and the experts that whether they have a conflict, whether a relative is in- That is in the definitions. Are you saying we need to re-look at the definitions? I think we wanna make sure, I think I'd like to have an opportunity with Tom and Eric to take one more look at that and make sure there aren't any unintended consequences. We have, I'm not trying to be, we have legislators who are also retirees and we have different folks that have, you folks go through a process of looking to see if you have any conflicts or independence. So I think it would be helpful for us to take one more look at that, we'll do that in the next day. We won't hold you up. Yeah, if you have changes in the definition of independent person, then we need to know what those are. I think they changed it for our biggest concern which was excluding members, spouses from working for a school district and it would exclude them from participating. So I think that's out of the current bill, but it is helpful that a language is a little legalese and it's sometimes hard to follow, but we can take one more pass at it. Yeah, take one more look at it and then get back to us and whatever changes they made before, we don't care about. And then we need to look at the balance and I'm going to suggest that if you all want to keep talking about that, you can do it as long as you want. I have to leave at whatever time that is, 3.30. 3.30 for a chairs meeting, which I don't really want to go to but because I think I'd rather stay here and have this discussion, but I'm going to throw in my one comment about balance. I understand the need to make sure that this is a balancing but the term negotiation was used and on the VPIC board that deals with investments, I don't think it's an issue of negotiation. The employee representatives should have the same goal as the employer representatives to do the make the best investments possible for the beneficiaries. And I don't think that if you can't start having sides on an investment board, as I see it, you need to all be devoted. I was the president of United Way for a while and one of my favorite members of the board was David Dean and there were right wing Republicans, left wing Democrats and everything in between on that board. And what he used to say was when we come into this United Way board meeting, we check our political hats at the door. We do not bring them in with us. We're looking at the best thing for United Way of Wyndham County and for our residents. So I don't see the issue of balance here as a negotiation. It might be a little bit different on the task force, but here I don't see that. But anyway, that's my parting thought, Senator Clarkson. So my parting question for Tom is, do you actually have a value of consensus decisions on the VPIC, but do you agree to consensus on the VPIC? Most definitely. I guess to my answer that I've never had a point where I had to break a tie in the five years. You really take advice from our hired experts, whether it's our investment staff, and that's where we've been moving more towards, where we take more advice from our staff to counterbalance the investment advice we get from our consultant. And so we have discussions and disagreements over certain investments, but at the end of the day, it becomes a consensus decision. I need time. That's a value you employ. That's right. That's important, I think, as we think about this. So, committee, yes, Senator Plena. I don't think it makes sense for the committee to stick around if you and Senator Clarkson are both gonna leave. It just seems like we could use our time otherwise. Oh, well, you might make some really good decisions with us. Yeah, then we'd have to change them, right? No. Just kidding. So, we have this on again tomorrow from 1.30 to whenever we end. Okay? Okay. Tomorrow, what I like to do, I think, is start with the task force conversation. That'll give us time for Beth and Tom to relook at the definition of independence. It'll give us time to look at the issue of term limits for the chair and kind of cogitate on it for a little while. And then at the end of the discussion on the task force, then we can come back to this issue, because then maybe we'll have some language from Tom. I'll get to Ameron and have her come up with some language around the qualifications for the chair. And I guess, Tom, if you would like to help her with some language around qualifications for the chair, just to put something in here. Sure, I'll be happy to. Okay. And then we'll add Jeff's little written word in there. Thank you, Jeff, for something that was somewhat simple to make a decision on. You're welcome. And it's small. And just so you know, I've heard rumors that the House appropriations committees, to the point that was discussed earlier, maybe considering two or three amendments to this bill, as you were. My point is like, let's see what they include too. Yeah, well, and we'll take that up. But we know what their amendments are tomorrow. So and we're listening to our appropriations committee. So we're going to we're going to do what they tell us to do. So does that make sense, everybody, to do it that way? Sure, sure. And then if there are other issues that come up between now and then I guess it would be good maybe for us to to get those listed so that we can then have some answers, both on the task force question and on the governance question. OK, OK, thank you.