Lawmakers want oversight commission for pension system, against the advice of the state treasurer

State Treasurer Beth Pearce and some lawmakers from the Senate Government Operations Committee were at odds Wednesday over the proposed creation of an oversight commission to make recommendations on the state’s ongoing public worker pension crisis.

The pension bill being considered by the Senate committee is H.449, an act relating to the membership and duties of the Vermont Pension Investment Commission and the creation of the Pension Benefits, Design, and Funding Task Force.

“I think the language here goes too far, and it puts them in a position … where you are now creating another role for the General Assembly. And that division of labor between investments, the pension board, the board of trustees, the retirement division, and the legislature I think needs to stay,” Pearce said.

Vote for Vermont/Pat McDonald

Vermont Treasurer Beth Pearce

Under consideration is a proposed 10-member independent commission comprised of various financial and public sector representatives. According to the text of the bill, the Vermont Pension Investment Commission is “responsible for the investment of the assets of the Vermont Vermont State Teachers’ Retirement System, the Vermont State Employees’ Retirement System, and the Vermont Municipal Employees’ Retirement System pursuant to section 472 of this title, 16 V.S.A. § 1943, and 24 V.S.A. § 5063.”

Pearce said if lawmakers get too involved in managing the public benefits policy, that may violate IRS rules.

“You are now putting politics into what the pension boards are doing,” she said. ” … You are now getting into the issue of the exclusive benefit rule.”

Pearce explained that the “exclusive benefit rule” is an IRS rule that means that the managers of these state pension funds must make each policy decision based solely on the outcome for the beneficiaries — no other factors should apply.

Pearce ultimately said she could support such a commission for advisory purposes only, but her caution remained strong.

Some lawmakers in the committee meeting said they support a new commission, arguing generally that as long as this body is relegated to a strict advisory-only role, then it should not be problematic.

“I wish we had this 15 years ago,” Sen. Alison Clarkson, D-Windsor, said. “I wish we had a group of people who really were dedicated to paying more attention.”

Sen. Jeanette White, D-Windham, shared that she felt the commission will just be helpful.

“This committee has no authority to do anything,” she said. “The only thing they have authority to do is to make recommendations.”

She added that she expects members of the House and Senate Government Operations and Appropriations committees may comprise much of the commission.

Also concerned about this proposal was Steve Howard, executive director for the Vermont State Employees Association. He suggested that oversight committees have a history in Vermont of gaining too much power.

“My concern is that the full legislature has that responsibility, and what I’m worried about — as this is a politically volatile issue as you can see, it’s something that people care deeply about — is that the legislature will frequently allow oversight committees to defer those decisions to a much smaller group of legislators,” he said.

Pearce, a Democrat, has been an outspoken critic of politics mixing with state retirement systems, even when it puts her at odds with top Democrat party leadership. In January 2016, when Vermont Democrats were pushing strongly for “divestment” strategies that get pension funds out of oil/gas-related stocks, she opposed the movement.

“From our end, legislating investments is bad practice,” she said. “My first priority is to protect the 49,000 active, vested, and retired members of the system, the beneficiaries, and the taxpayers who put dollars into that system.”

White said the bill may advance to the Senate floor by the start of next week. It could possibly be passed out the Senate and go back to the House chamber. However, she expressed doubt that the bill will make it to the finish line this legislative session.

“We are quickly running out of time,” White said. “Hopefully we will have something we can agree on.”

Taxes impacting pension fund performance?

Pearce believes there one misconception regarding a substantial portion of the massive debts accumulated recently in the retirement system — namely it’s not all underfunding to blame for its shortfall. She said there have been major shifts in workforce demographics and taxes could be a factor.

“Primarily teacher turnover and teacher retirement had a major impact and if I’m looking at this from an oversight committee, I want to know why?” she said. “And I think that’s very important, and we talked about other decisions in there, but the reality is the biggest mover in the teachers’ system was that, and I think it has some relationship, frankly, to property tax.

” … What I’ve said on many occasions is if you squish the balloon on one side, it pops the balloon on the other, and the committee may want to take a look at what is the full impact of that.”

She emphasized that officially the Treasure’s Office is neutral on the politics of the property tax.

Click here to watch the entire committee discussion from Wednesday.

Michael Bielawski is a reporter for True North. Send him news tips at and follow him on Twitter @TrueNorthMikeB.

Image courtesy of Vote for Vermont/Pat McDonald

4 thoughts on “Lawmakers want oversight commission for pension system, against the advice of the state treasurer

  1. The legislature to exercise oversight, not re-invent the wheel.
    Part of the pension problem is lower than expected returns compared to the market.
    The legislature could demand a report every quarter and an annual summary comparing the VPIC returns to other state pension funds and or other institutional investments (comparing to benchmarks). Apparently, this was done under Jim Douglas when he was state treasurer.
    The other part of the pension problem is structure. The legislature should enact some quick wins right away, such as requiring retired state teachers to join Medicare at 65 and pay more for the healthcare benefit until 65, and others. Then address the big restructuring when they have more information and real numbers to look at, but have a plan before December.
    Simply dumping more money into this without a plan is crazy, but if there is no one to guide this that’s what will happen.

  2. Another ‘commission’? Who’s kidding who?

    Our State legislators have no business managing pension funds. Period! The State should, instead, be making contributions (matching or otherwise) to each employee’s self-managed pension account. Every investment advisor and fund out there consistently provide the standard disclaimer – ‘past performance is no guaranty of future results’.

    Why are Vermont voters and taxpayers so stupid as to elect legislators who pretend to be able to predict the future by appointing one commission after another?

  3. The same body of elected folks, who have abdicated their responsibility in the pension programs now want to further that by creating another layer of “talkaround”. These people that are promoting that nonsense should be shown the door. It is obvious that these idiots who have been kicking the can all these years just want to keep it moving and hoping that someone else will come up with a solution that they can say NO to. They need to be voted out before the state is in so far it cannot get out, which I happen to believe is rather soon. $4.5 billion and climbing???? And this does not have their attention??
    Unbelievable!!! and Unacceptable!!!

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