Vermont Pension Investment Commission - Feb 8 , 2024

Tom Golonka (Chair, Vermont Pension Investment Commission) introduced himself to the House Appropriations Committee on Thursday and noted that the portfolio has done well when compared to pension plans in other similar states.  Vermont has always been in the top quartile when the market was both up and down. He highlighted S.42, which is a bill that was passed out of the Senate last year and is currently in the House. The bill proposes to require the Vermont Pension Investment Commission (VPIC) to review the assets of the three retirement systems to determine the extent to which they are invested in the fossil fuel industry and submit plans to divest from the fossil fuel industry by 2030.

Golonka reported that there is only 2.5% of funds in fossil fuel stocks. Most reside in index funds. He noted that one difficulty in divesting is because the State walks away from the table where they have a say in advocating for changes in a company’s carbon emissions strategy. In order to fully divest, they would have to abandon private equity and indexing strategy and change their contracts. 

Golonka clarified that the State does not buy individual stocks – all investments are in all funds. If we changed the current strategy (of managed funds) we would need to manage our portfolio in house and would need many more investment personnel.   

He then proceeded to make his budget presentation to the Committee which included a FY2025 budget summary. He noted that Act 75 required an independent analysis of VPIC’s staffing and compensation of its staff.  It concluded that the existing VPIC staff is significantly under compensated relative to similarly sized public pension funds and meaningly understaffed. He had serious concerns that VPIC’s low compensation leaves the fund at risk of turnover of its investment professionals that could be disruptive and costly and to the plan. He sought support to remedy this issue.

Managing the investment portfolios of the three statewide pension plans, he noted, is an exercise in balancing risk and liquidity with the need for maximizing returns while strategically aligning the portfolio with the pension funds demographic and financial characteristics. To that end, we have engaged best-in-class investment advisors to work with our professional staff to prudently oversee these important assets for the exclusive purpose of providing retirement benefits to Vermont teachers, state employees, and municipal employees, at best cost to VT taxpayers. Forty-seven percent of their budget is allocated to these advisors and vendors.

VPIC is seeking a 3% increase from FY2024 to FY2025 of $71,016. This maintains the 0.04% aggregate cost basis compared to the $6B in assets they control.

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