 Good afternoon. You are with the Vermont house government operations committee. We are coming back to some testimony we weren't able to get to this morning and so I wanted to invite Jeff Briggs to share a few comments with us. And definitely please leave time for a few questions. Thank you madam chair can you hear me. Yes we can. Thank you madam chair and thank you to the house government operations committee for having me here this afternoon. My name is Jeff Briggs. I'm a current alternate member of the VPIC, which I've been on since 2014. And I was a member of the Vermont State Employees Retirement System Board of Trustees from 2009 to 2017 when I had to leave that board when I retired. I would like to kind of give you a little bit different view of the proposed government changes that you're considering from the perspective of somebody who spent a lot of time on both boards. A little bit more about my background. I'm an accredited pension fiduciary through the National Conference on Public Employee Retirement Systems, which was a course that I took over the period of a couple of years. Several times I attended in person trainings. A lot of online training and and and pass a test to get that. I also attended hundreds of hours of education and training over both on over my years of service on both boards. So I just wanted to add a little bit more about my background. The committee heard excellent testimony this morning on the governance, but I want to have a provide a few more comments on on governments from from my perspective. But before I do that, I would like to make a couple comments about the overall changes in the pension system that you're considering. I think all too often this conversation about pension pension reform pension funding is framed in terms of cost and I would like to ask the committee to look at this. I think our our pension system as an investment in the state of Vermont I think it's one of the very best investments that we make. Speaking about the visors which I'm most familiar. Last year, we had 150 million dollars was paid out and benefits to beneficiaries of visors, and that money is spent. It's recycled right back into the Vermont economy it's been in local stores local businesses. And we did a study. There was a study done back I would guess around 2012 that estimated that for every dollar and benefits spent by beneficiaries in the Vermont economy there was a multiplier effect of $1 or $2 more. And so I want to make the point that it's a great investment. We all too often think of it as a cost. It's a great investment and and furthermore, you know, 60 62% of that investment comes from pension fund investment return so I want to make that point. Let's go to the government's proposal. I'm opposed to the current proposal. And the question that I would like to pose for this committee is, is this proposal that you put out. To punish the VPIC for past performance or is it to improve future results and a couple caveats to that statement I'm not. I'm not accusing the committee or anybody on the committee of wanting to punish the VPIC but I based that on the 10% of the some of the testimony that I've heard which I think is very much looking to find a villain in all this and it seems like this proposal has landed here, you're proposing to throw out the VPIC and start all over again and I think that's the wrong approach. Having said that, I, I want to say the committee is absolutely right to ask the question about governance. I would do the same thing if I was in your shoes, but I think it's entirely the wrong approach to throw out what we have. You know, you heard some, you heard some testimony this morning about where, where the VPIC is at currently you heard from Eric Henry who's our chief investment officer doing an excellent job. You heard from our new consultant RVK. And, you know, I think I would hope the committee doesn't make the mistake of conflating how we got here which is a valid question with where we're at now because I think where the VPIC is at now is really in a good position, good position to move forward and address this pre-funding crisis that we're in. The VPIC has access to a lot of good professional advice, you know, RVK is our new consultant. I think we were led, we have good leadership. I had the pleasure of serving on the committee with Tom Galanca before when he was just a member before he became the chair. One of the very best members we've ever had. We, I think we really strengthened the committee when we hired him as a chair. We've been on the VPIC through a couple of different consultants, a couple of different actuaries. The point I want to make is we're always, it's an evolving process, we're always striving to improve. And I think you can make some minor adjustments but I think the current structure of the VPIC is the right one. I think I would urge you to support the government study that VPIC recently voted to pursue instead of your current proposal which throws the whole structure out. Well, I also want to say that, and I don't know if this has come up in your testimony but, you know, VPIC has an investment policy and as a fiduciary of the VPIC, it's a policy that I'm obligated to follow. Our policy, it's the three of the central elements of our policy are managing the portfolio with regard to risk. We always have to consider risk in any investment approach we take. And also a central tenant of the policy is to select investments that will give us lower volatility. Volatility is one of the things that makes it really challenging to meet rates of return. Risk, volatility, asset allocation and of course we always have to maintain liquidity. So there is an investment policy that we follow. It's one that we revise in the time that I've been there. But it's what guides us in making our investments and on a day to day and month to month basis. Yeah, I guess what I want to really address some of the specifics of the proposal. My understanding is that this proposal is modeled on the New Hampshire model. You know, in my view, the New Hampshire model is deeply flawed. It's a system that I think is probably in worse shape as far as funding than our system is. They're only 61% funded. They have over $6 billion in liabilities that, you know, and that's up from $5 billion only three years ago. And that's a, that's a system that a requirement of that system is that all of the trustees who serve on it are have to have financial expertise. And so my point isn't to disparage New Hampshire, disparage our trustees. My point is that even, you know, I think, I think if you're thinking that you're going to throw out the VPIC, establish a new system where everybody has financial expertise, I think if you're thinking that's going to solve the problem, I think all you got to do is look at New Hampshire to figure out that it isn't going to solve the problem. And I think we're going to face the same challenging market conditions that we have over the last decade. And they're not doing any better. So, I think New Hampshire is not the right model to follow. And the rest is, by my count this proposal gives the governor control over six appointees and the, the, the treasurer for and, and I think this is, you know, this is a crucial point for me I think it this shifts. It really takes away representation of them of the three member systems and and and gives that power to the governor and I think that's a not only is that not best practice but it's a it's it's a it's not going to help us move forward. Mr. Briggs I have a hand up right now Rob Claire has a question for you. Sure. Thank you. Thank you madam chair and good afternoon Mr Briggs how are you sir. Good how are you. I like probably most people on the committee had read the testimony that you had submitted. Thank you for that. One of the questions that I have of that actually was a question that I had asked earlier this morning or earlier today. You refer to the, the, I think was 0709 market issue that we had back then as being substantially responsible for where we are today. I guess, quantify, in your opinion, what that represents of the 5.8 billion that we're upside down in today. Well, here's, here's the way I can, the numbers that I can give you. So, 2007 we were over 100% fun I think the exact number was 100.8 or something and not not 108 but just over 100. And by 2010 2011 we were down to 78% funded so we took essentially a 22% hit and I'm talking about visas now I want to make that clear, we took a 22% hit in our funded status. And, you know, you, you don't make that up and a decade you know, you know that's, that's roughly in order to make up that 22%. Now you're got 22 divided by 78 it's nearly a quarter of what you had to overcome and I, you know, I think if you do the math. You've got to, you've got to make up 25 or 30%. You don't, you don't just make up 22% get back to 100% funded so you've got to, you've got to make up an extraordinary amount when you take a big dip like that and you're not going to do it in a short time the only way you're going to do it would be to take excessive risk and, and as a fiduciary of the system. I think I just explained to you that that's one of the central elements we look at with any investment is. We don't want to take undue risk. And the level of risk that you would have to take to make that up in a short period of time is just, you know, it's not something that we're, we are going to be able to do. You know, I think when I came on the VPIC in 2014. And I had started attending some meetings before then. I think the VPIC like almost every pension investment committee around the country was still reeling from that event and you know, risk was paramount in our consideration because one thing you can't do in a pension system is is, you know, you can't suffer these big downside events that they're just too hard to make up. So, you know, I think going forward. That one event took a lot out of our, our ability to pre fund the system and it's going to be a while before we make that up. Very good. Okay, thank you, Mr. Briggs. I appreciate your time. Thank you sir. Yeah. John Gannon. Thank you madam chair and thank you Mr Briggs for testifying this afternoon. You know, I like representative LaClara read your testimony and the one thing I'd like some more information is that in your final paragraph you say there are areas of improvement that could be made such as separating VPIC from the Treasurer's Office, giving VPIC its own budget and thoughtfully adding more legislative oversight. Could you explain that a little more please. Yeah, yeah, and I'm sorry I was going to get to that in my presentation but you know, of course I think we should look, we should use this opportunity, we should, we shouldn't even need this opportunity to improve VPIC. We should be continually looking to improve what, you know, so I'll, I talked a little bit about hiring Eric Henry I think as our CIO, which which we were finally able to do. But because because VPIC doesn't have his own budget, there were a number of years in the middle part of the last decade, where the state of Vermont, the budget was so tight, we didn't, we didn't have the ability to advocate for a CIO position and, and, you know, I don't know if we would have had a better ability if we had our own budget, but it took a couple years to get a position like that added to the VPIC and, you know, when I first got on the VPIC, we didn't have, we had some very fine people but we didn't have the robust staff that we've had today and, you know, we've had to really, really, really kind of fight to add all those positions So my point in that the VPIC ought to be separate from the Treasurer's Office I think really comes from a budgetary perspective as much as anything else. I also think it's, you know, it's appropriate to add more legislative oversight. I mean, you know, we're here, you're concerned with it. I think it's, it would be a win for the legislature, be a win for us to have a better tie for legislative oversight. And one thing I didn't have in that proposal but, you know, since since we're on it, and I'd like to just talk about it. You know, I view this as primarily an actuarial crisis in my opinion. The fund is sustainable. We've done a couple of liquidity and, you know, benefit payout tests and, and, you know, for the short term from the near term and, and really, I think well into the future we have the assets and we have the liquidity to cover benefit payments. But, you know, this whole, the whole, the whole thing with the assume rate of return, the issues that your committee's been discussing, the reason we're looking at making changes. This is an actuarial projection of what might happen in the future and, and, you know, one of the thoughts I had, and, and thinking about this is that perhaps it would be good for the legislature to hire its own actuary to to also have a check on our actuary. So actuaries are supposed to follow standard methodology. But, you know, it's just a suggestion that might, might be an improvement. So I, you know, I don't know if I've answered your question but the. I think given the size of the fund giving, given the need for a robust investment staff which we now have, but we may as we grow we might need more. I think it would be important for VPIC to have have its own budget. Thank you. And Briggs, we have just about 10 more minutes here with you and then we need to shift gears for our last segment of the day so if there's any highlights that you wanted to watch on from your written testimony that would be very helpful. Okay, I just wanted to get back to what I was what I think I was talking about the governor, having control over six appointees. And, you know, I just wanted to say a couple things. You know, I think just, I think for the governor to appoint someone has, you know, I think, first of all, I think they should have the current system where we have two governor appointees is entirely appropriate. But to move to six, I think it raises some problems and, and I just like to highlight a couple of the problems. One of the big ones is, you know, from my experience on the VPIC, the main things that you need are longevity. I mean, continuity, commitment and experience and certainly helps to have a financial background but I think it would be a mistake to require everyone on the committee to have a financial background I think you can acquire that knowledge like I have. If you are get on the stay and employees retirement board or you are you get on the VPIC, think you can acquire that knowledge. But, you know, we've had a couple. And in my view it's really been hit or miss with the governor's appointees we've had some very fine governors appointees. We've also had some others who frankly have not really had the time required to put into VPIC and and you know I'm, I'm not disparaging any of them. But, you know, VPIC, it's not a paid position. A lot of these folks have other jobs that pull them away from from VPIC. I'll give you one quick example we had a, we had an excellent trustee appointed by an excellent member appointed by the governor, who had experience and bonds. He was a bond trader added a lot of value to the VPIC. And, you know, great a great member but within probably a year year and a half of getting on the VPIC, his, his job changed and required a lot of time, and he was unable to make a lot of our meetings. Unable to really put the time in requiring and eventually, you know, resign. So it, I think that really illustrates how tough it is for some of our best members to put in the continuity to remain on the VPIC and, and I'll be honest with you I think it, no matter what your background is I think it takes a couple years just to get up to speed with trying to manage a pension fund of this size. And, you know, any governor's appointee is their subject to turn over every two years. And, you know, so that would be a problem with with the continuity and commitment and I think you heard this morning. Someone from RVK say that just because somebody has a financial background doesn't mean they always have the necessary skills that are in line alignment with trying to manage a fund of this size and you know it's financial world has a diverse array of jobs and, and I think this is a kind of a unique one that requires time put in on the committee to to understand what we're trying to do. And where we have our money and where we're going. And, and the one other thing I want to say is we had a very fine trustee von ultimas he was a governor's appointee. One of our best members always prepared at meetings understood what we were trying to do one had a great plan, you know a great financial background. And, and he wanted to continue on the committee. He wasn't reappointed. No explanation given. I'm, you know, I'm not going to disparage his successors but it was a great loss to the VP when we lost one. So, you know, I, I, I'm just saying this to highlight the fact that yeah I don't think you want to inject politics and the the the turnover that politics can bring into this system and and you know I think we're fine with the two current employees. But, you know, I really want to make sure that you understand that, you know, I think VP is a is a group that needs representation from the members of the system. That needs representation from the governor and, and I think we have a great mix now so. Thank you so much Mr breaks for your, for your written testimony and also for highlighting the, the most important parts of it. So make sure that we leave time in the next two minutes to give the committee members an opportunity to ask a question if they have any questions for you, or if there's any part that needed some clarification Mark Higley. Hi Mark. Yeah, good. Hey, hey, so in the governor's pick there. You think it would help is something as simple as just maybe a six year term and making sure that folks that don't serve their time well, encourage resignation. I mean, again you said it's just a two year appointment is that correct. You know, the my understanding of it is the appointment is up to the governor and they can. You know, I think it's a two year appointment. I think it would be a better than I could. But if, if the appointment is up. At a time when, when we have a new governor. And, you know, I think they can step in and just replace that person so I think we would make, you know, I, to be honest, I haven't taken a look at that on the enabling statute. I think the language is probably in there. But I think my main point is that we don't want a 15 member committee where six of them are appointed by the governor I think I think our current makeup is fine. Yeah, and I'm not saying it's been abused it hasn't. You know, I can give you a couple examples of where I think it was a bad decision but the potential is there going forward. Thank you Jeff. Well thank you so much for for coming very patiently waiting for the end of the day to come back and talk with us I apologize that we didn't get you in this morning. And for sharing your written reflections as well as talking with us here this afternoon about your reactions to the governance proposal and I. I can speak for rep Ganon and myself that we, we don't, we don't have any sort of need to own or, or drive the conversation that was put on the table with a with a governance proposal and. And so we're certainly open to folks making alternative proposals and that's what we will come back to in a future meeting. So thank you for being with us today and have a great afternoon and and and I just want to add one thing you know I didn't mean to shout at you with my written testimony. I didn't know if I was going to get to testify in person so I was trying to just maybe stand out make my highlighted point stand out from the crowd but you know. I have seen some bold and some caps in some written communication recently so rest assured no offense taken and and the emphasis is understood so thank you so much. Thank you for hearing me and if committee members want to reach out to me I'm always always willing to talk thank you. Thank you. So committee we're going to take just a three minute bio break and so please shut your camera off mute yourself and we'll be back in three.