Vermont Legislature SmartTranscripts:

[Robin Scheu, Chair]: Good afternoon. This is the House Appropriations Committee. It is Tuesday. No, it's not Tuesday. It's Thursday. 01/08/2026. It is about 01:15PM, and we're delighted to have Chris Root here from the Joint Fiscal Office to talk to us about pensions and OPEB and an update, because things are happening, and Chris is our expert. And we have somebody from Caledonia's office here as well. Phone So a friend as needed.

[Chris Roop, Joint Fiscal Office]: Absolutely. Good afternoon, everybody. Chris Roop from the Joint Fiscal Office. It's nice to see everyone. Madam Chair, as you mentioned, I'm delighted to be joined by my colleague, Jim Duggan from the retirement office, who can jump in with any additional you know, any answers or add any color to to whatever responses I come up with, whatever you decide to ask me today. But I think one of the reasons why the chair asked me to come in today was just to give you all a little bit of background on what's happened in the last fiscal year with the state employee and state teacher retirement systems. You know, one of the fun things I realized last night when I was finishing my slides is that this might be the only committee in the building where everybody sitting here was here in 2022. Like, some of you might have taken a break, but I think all of you were here on some committee in 2022 when act one fourteen passed.

[Robin Scheu, Chair]: Which is when we took on pension. Right.

[Chris Roop, Joint Fiscal Office]: We actually remember act one fourteen. Yeah. That is the pension bill. Yes. I how could you forget, representative Stevens? It took like an entire year, and it was Nice. It was also It's in the Fish and Wildlife. Yeah. Exactly. And it was also an interesting bill to work on because, you know, I think it was the only bill that passed twice unanimously by everybody who voted for it. Think what I'll show you will give you all a sense that the bill you passed is working. It's showing positive signs. There's still a long way to go to get to where we need to be, but try to keep your foot on the gas to the best you can, and stay focused on trying to adhere to the funding policies that you all put in place. Before I go through my slide decks, are pretty short, I just want to show you something that sort of contextualizes why we're talking about this. This is the Capital Debt Affordability Advisory Committee report from this past year. And if you take a look at this graphic from page 40 of one twenty three, this compares long term debt obligations across the states using s and 50 states. From all 50 states using s and p's methodology. They standardize things to sort of have an apples to apples comparison of different states. And there's other graphics in here from other rating agencies that slice and dice this data in different ways, but they all show the same thing. That Vermont is on the high end when it comes to our long term obligations. When you look at the color components in that column, The red column at the top there represents OPEB, and the blue represents pension. And the green one, that little one at the bottom, represents your long term debt, your bonds and things like that. So what I want to the reason why I'm showing this to you is that our retirement obligations are a very significant component of our state's long term liabilities. And it really crowds out the state's ability to issue debt for other purposes, quite frankly. So no matter how you chop this up, whether you're looking at it as percentage of personal income or available revenues, we're at the high end of states in terms of our and what's driving a lot of it is our long term retirement liabilities, our long term bonded debt. So I just wanted to sort of frame this by showing you that, because this is why this conversation is important.

[Wayne Laroche, Member]: That green is is our bonds.

[Chris Roop, Joint Fiscal Office]: Yeah. That's your bonds and your other yeah. The the sort of nonretirement.

[Eileen “Lynn” Dickinson, Member]: But the number is us or not?

[Chris Roop, Joint Fiscal Office]: Yeah. It's

[Robin Scheu, Chair]: us. Point six. That's

[Eileen “Lynn” Dickinson, Member]: us. So

[Robin Scheu, Chair]: the mean is 6% and we're at 12.6%. So we're twice the average. We're not just the same as median or worse with the median. We're not Illinois.

[Chris Roop, Joint Fiscal Office]: We're not Connecticut. We're not Nebraska either.

[Eileen “Lynn” Dickinson, Member]: They might say it's a negative.

[Chris Roop, Joint Fiscal Office]: That's not us. The line that's below, that's Alabama, I think they're looking at.

[Wayne Laroche, Member]: That's really impacting that.

[Chris Roop, Joint Fiscal Office]: We are the seventh or eighth one. I don't want the 12.6 above it.

[Eileen “Lynn” Dickinson, Member]: So the OPEB is above the pension.

[Wayne Laroche, Member]: So the bottom line is that that it's really impacting our ability to have that bonding capacity

[David Yacovone, Member]: and general

[Eileen “Lynn” Dickinson, Member]: don't think any of this.

[Robin Scheu, Chair]: Do general fund anywhere else?

[Chris Roop, Joint Fiscal Office]: Yeah. And that's on the treasurer's website, and it's also if you look for CEDAC, c e a a c, you can pull that report right up. It's a really upper full report that they issue every year. But, anyway, I wanted to offer that to you all just to give you a sense of why this is important and something that you need to pay attention to. And I'm also you know, in the theme of looking around this room and realizing you all have been here in 2022, this is not a one zero one level presentation. I am assuming you have a foundational level understanding of what a pension is. If I am making a false assumption at any point, please raise your hand and interrupt me because there are no stupid questions when it comes to this. And if if I'm not making sense to you, I'm probably not making sense to other people. So I'm trying to figure out what the right level is here without getting too bogged down in the weeds. So I'm gonna start with pensions. And, again, I'm really just focusing on the two state systems that are funded out of the state budget. I'm not looking at VMERS, the muni system, which is funded by the municipal governments. Just looking at VCERS and VSTRS. And if those acronyms get confusing, way I keep them straight is the T for teachers, which distinguishes that one. Our amortization period is a closed thirty year period, so I like to look at data that's happening within that thirty year period because a lot of what happened before then is historic at this point. And these are just sort of the standard disclaimers that if you all want more information, almost all of this stuff, unless it's otherwise indicated, comes from the actuarial valuations. I emailed them to the committee a few minutes ago. You don't need to look at them now, but if you want to know how many members are in group c, like, that's what's in there. I'm happy to dive in. I love reading these things. It's like Christmas morning when they land in a fall.

[Robin Scheu, Chair]: Grateful you do.

[Chris Roop, Joint Fiscal Office]: But don't read them now. So I just want to refresh you before we go into the numbers about a few key points. You're going hear me talk about the ADAC a lot, the actuarially determined employer contribution. You all as appropriators, the ADAC is really what you think about, because that is the funding requirement that you have presented to you by the retirement boards every year that you then fund through the budget. And the AIDAC has two components. It's the normal cost and the admin expenses. So the normal cost is what you need to put into the system every year to fund the benefits that current employees are earning as they work every year.

[Robin Scheu, Chair]: So it's like the current cost.

[Chris Roop, Joint Fiscal Office]: Exactly. Exactly. You know, every time we're working, you know, every year, the system is shedding some liability by paying benefits to retirees, and it's also incurring liability by owing a benefit to today's employees when they retire in the future. So the normal cost is what you need to pay that sort of keep chugging along and make sure your future benefits are going to be funded over the course of your working life. The other piece is the amortization payment on the unfunded liability. The unfunded liability is a debt that needs to be made whole over time. We amortize that with interest over a a funding schedule. It runs through 2038, and payments are scheduled to increase by 3% annually in future years. And the thinking behind that is that the cost would roughly grow with active payroll and represent sort of a constant percentage of payroll over time. So what's really important about that is when you see, oh, the ADAC went up by x million over last year, that is not a very helpful thing to think about because you're expecting it to go up every year based on our funding system. What you really need to look at is how is it growing in relation to the active payroll? If it's growing a lot faster as a share of payroll, that means your costs are really going up. So, viewing things not just in dollar terms, but looking at the rate of growth and what does it mean as a percentage of active payroll helps control for all of that. When active employees I should have mentioned this, active employees, whenever we're working, we make contributions into the system. That goes toward the normal cost. It doesn't go to the unfunded liability. It doesn't fully fund the normal cost. So the employer, in most cases being state government, funds the rest of the normal cost plus those unfunded liability costs through the ADEC. Something really important that I wanted to remind you all, and this is going to come up when you see the big bill, is that part of Act 114 committed the state to making additional payments above the ADAC. And we call those colloquially the plus payments. Those began in FY24 at 9,000,000 per system, so 18 total. Then they went to 12,000,000 per system in f y twenty five. Then in the current year in '26, they went up to 15,000,000 per system. They're going to stay at 15,000,000 per system until each system hits 90% funded. So that's expected to be in 2033 for VCRVs, two years later for the teachers. It sounds really far away, it's not. You're looking at the '27 budget.

[Robin Scheu, Chair]: Talking twelve years.

[Chris Roop, Joint Fiscal Office]: Exactly. It's gonna if you

[Robin Scheu, Chair]: do the FY '27 budget.

[Chris Roop, Joint Fiscal Office]: It's all gonna be a year before we know it. The plus payments come out of the general fund. You appropriate them in in a discreet section, and the benefit of that is mathematically, it's kind of similar to making an extra mortgage payment, where you are accelerating the pay down of the principal and you're saving interest costs in the big picture, and you're lowering the growth rate on future ADEX. So the way I think about it is, like, if you pay more now, you're buying yourself some budget capacity in the future. And mathematically, the way this works, everything's on a two year lag. So any extra money you put in in, like, FY '26 would lower the ADEX beginning in FY '28 moving forward. So the benefits of the plus payments are immediately recognized in the math, but on a two year lag. It's not like your mortgage at home where if you, like, prepay it, you might just be done a month sooner or whatever. Here, you actually immediately recognize the benefit and having the payments go down a little bit below than what they otherwise would. I see there's a question.

[Trevor Squirrell, Clerk]: Go ahead. Hypothetically, if we use the $75,000,000 that's in the b you know, that's that's in the BAA, for a one time payment, what would that do?

[Chris Roop, Joint Fiscal Office]: I would want the actuaries to model it based on where we are in the the current system, but you actually in the current schedule, but you actually did this very thing as part of act one fourteen, and you put a $75,000,000 one time payment in vSERVs and a $125,000,000 payment into the teacher system, 200,000,000 total. I believe that happened in FY '22, and it started lowering the 8x beginning in FY twenty four. So those 8x and this is really back of the envelope, but it lowered those future payments by millions. In total, it might have been close to 14,000,000 or so below what they otherwise would have been. But it does have a positive impact on your going forward. Another caveat I want to mention though is that everything I'm saying here is based on all assumptions perfectly panning out in the future and everything being held back to school. You all know that that's not the way the world work. Every year, there's gains and losses. Assumptions get trued up. Assumptions get revised. The only way we can talk about this coherently is by sort of assuming that the assumptions you have in place are gonna be met moving forward. So I can say you put 75,000,000 in this year, and you're going to save x amount beginning in two years. But if the market tanks, you might not actually see the payment go down by that much due to other factors. So some of this is relative also. Last point on this slide is really wonky budget stuff. If you start looking through the big bill being like, Where's the vCERS payment? You're not going to find it, because we fund the vCERS systems through the personnel budgets of the underlying departments. So whenever you are approving a budget for a department, there's money in there for the pension benefits and the OPEB benefits of their employees. And we recover that through an assessment rate that's charged against the departments. So it works different than the teacher system, where the teacher system is directly appropriated in the B500s. And you'll see that the normal cost comes out of the ed fund, and the unfunded liability comes out of the general fund. There's like a whole little discrete section there.

[Robin Scheu, Chair]: You see five five fourteen and five fifteen.

[Chris Roop, Joint Fiscal Office]: I believe that's exactly right.

[Robin Scheu, Chair]: Can do that with everything, but I use it.

[Chris Roop, Joint Fiscal Office]: So what's happened in the last year? Every fall, the pension systems engage the actuaries to take a look back at what happened in the last fiscal year. We call this the actuarial valuation. Yeah, it happens every year. And this is really the opportunity to look back and see what was the experience that the plan had in the last fiscal year. Compare that against actuarial assumptions, quantify what were your gains and losses, and then these valuations are used to calculate the ADEC for the year two fiscal years hence. So we just finished the FY '25 valuations, and that's what's used to calculate the 8x for FY '27. There was some encouraging news on the pension front in FY '25. This is the third year in a row that investment performance exceeded the 7% assumed rate of return. And one of the things that's really interesting now, and I'll get into this in a later slide, is that we now have deferred market gains that we haven't yet recognized into the funding math, and that's going to be recognized in future years. So the funds sort of have a a wind at their backs right now, and that's going to sort of help prevent or help curtail loss experience from high inflation or other things. So it's good to have deferred gains as opposed to deferred losses. Up until this year, we had some deferred losses because a few years ago, we had a really rough investment here. So we are now at the point where those deferred losses have been fully sort of recognized and rolled off, and now we've got a wind in our backs. So investments have been great. There still have been some areas of actuarial losses that we've experienced, like everybody has experienced with higher than assumed inflation that has led to higher than assumed cost of living adjustments and salary growth. So that shows up in the pension system. For a long time, we had really low inflation, and COLAs were lower than assumed. So that was actually an area of gain. But in the last few years, inflation has been higher than the assumption. So we've taken a little bit of a loss from that. What I think you're really gonna care about is what's in this blue chart. What has happened with the pension aid act since last year? You've seen that VCRs grew by 2.6%, the teachers by a little bit more than that. Remember, if everything were to go absolutely perfectly, we would expect these numbers to grow by, like, around 3% a year. So this is on an inflation adjusted basis, and when you consider how payroll's been growing, this is pretty good. This is essentially flat. So, this is what passes for good news in the pension world. The absence of really bad things happening that cause hundreds of millions of dollars of losses, when you have a year that things pan out pretty close to where you thought they'd be, that passes for good news.

[Robin Scheu, Chair]: It's still a $12,000,000 increase. It is a

[Chris Roop, Joint Fiscal Office]: tremendously expensive line item. I don't want to sugarcoat the fact that the state of Vermont is pumping a large amount of money into shoring up the retirement systems. That is something you all deserve a tremendous amount of credit for doing.

[Robin Scheu, Chair]: We could use for

[Timothy Duggan, Office of the State Treasurer]: other I

[Wayne Laroche, Member]: looking at another one where we had year over year 11.99%

[Chris Roop, Joint Fiscal Office]: for the I'm going to get to that. That's less encouraging. That's the next slide deck. My question was,

[Wayne Laroche, Member]: you know, what's the difference between the teachers and the state employees? How is that different?

[Chris Roop, Joint Fiscal Office]: It's different. Yeah. You're talking about OPEB, and I'll ask you that question when we get to OPEB. When we write pensions, the benefit structures actually have a lot of similarities between the two systems. There are some notable differences. Most teachers are in a similar benefit system, whereas the state employees do have some other groups for different professions. The underlying formula and retirement eligibility are slightly different, but not massively different. One reason why you see the teacher system have a higher cost than the state employee system is because the state system was better funded and has a lower unfunded liability than the teacher system. So, the teacher system is a bigger hole that we're digging out of.

[Eileen “Lynn” Dickinson, Member]: Do those numbers on this chart include the plus payments?

[Chris Roop, Joint Fiscal Office]: You include the plus payments. Yeah. So the plus payment is flat at 15,000,000 year over year because we're at we've fully phased in the plus payment. Okay. Thank you. So, here's where we are right now. We often talk about this term, the funded ratio, which is, you know, take a look at what you owe, compare it against what you have on a present value basis, and convert that into a percentage. And, you know, this is one of many data points to look at when looking at pensions. And when I look at the funded ratio, what I specifically look at is what direction is it going over time and why? So we have a pretty encouraging story to tell that since things were really at their sort of worst in 2020, steady progress has been made every year at improving the funded ratio. Right now, B CERT has the highest ratio since 2016, and the teachers have the highest ratio since 2011. And the funding policy you currently have in statute calculates the ADAC payments to get you to a 100% funded by 2038. So every year, if everything works according to the way we hope the world's going to work, you'll see a couple percentage point gain, hopefully, in that ratio as we get closer and closer to 2038. Something else I wanted to point out too is that our systems are both cash flow positive right now, which means that the and this is in large part due to the fact that you all are pumping so much money into the systems to get them in a better status, that the contributions going in exceed the payments going out, which means the folks running the systems can make more efficient investment decisions. That means you're not necessarily selling investments in order to make benefit payments. You can be a little more strategic, and that's that's a good thing.

[Robin Scheu, Chair]: So, Chris, we chatted about this a little bit yesterday. The closer we get to 2038, the higher the volatility and the more risk we have. It's kind of like you're going to retire in five years. You're counting on your investments in the stock market. And if the stock market tanks three years before your retirement, you don't have a lot of time to make it up. And and maybe this is a question for you too. You know, how are we thinking about that?

[Chris Roop, Joint Fiscal Office]: Yeah. That's a great question and a great analogy, I think. You know, right now, we have everything amortized on a single closed layer that ends in 2038. If there were to be as we get closer to 2038, there are fewer years left in that schedule to spread out the impact of anything wacky happening. So, like, if we have a really weird investment situation happening in the early twenty thirties, that could cause a tremendous amount of volatility in the employer contribution because think about those timing lags I mentioned. You know, what happens in 2033 doesn't hit the ADAC till 2035, and then you would only have a few years to pay for it. So as you get closer to that end date, the risk factors driving the volatility in the employer contribution heighten. There is a bill that has been introduced in GovOps, h five sixty seven. It is going to be taken up tomorrow, I believe, that the treasurer's office has proposed. There is, I think, you will probably see some language to propose a working group that would take a look at working with the actuaries to model out some scenarios to come up with plans on what should life after 2038 look like, and what scenarios should you all possibly employ if we do have a weird situation happen between now and 2038 to help mitigate some of that contribution risk.

[Robin Scheu, Chair]: Right. So is there a way we can lay off the risk somewhere?

[Chris Roop, Joint Fiscal Office]: Yeah. So, like, there there's ways actually, the retirement systems did a risk assessment last year where they looked at this and modeled some situations. If you wanna look at the visuals of of those graphs, they're on the treasurer's website. But there's many options. Some of them could be have amortized each year's gains and losses on their own closed layer rather than sort of have everything in one layer that's all on the same time frame. That way you could still address most of sort of the legacy problem by under status quo, but then deal with anything sudden that comes up on a slightly longer extended runway. That's one of many options that can be looked at. So I think that's something that the treasurers other than the retirement boards and their actuaries have been thinking about. And I think you'll see some language come before you all as the session goes on to set up a process come up with some options.

[Eileen “Lynn” Dickinson, Member]: So I

[Robin Scheu, Chair]: see Tom and Dave.

[Trevor Squirrell, Clerk]: So you had said that people pay in employees to pay in, but they're not paying for the

[Chris Roop, Joint Fiscal Office]: accrued liability. They go to the normal cost.

[Trevor Squirrell, Clerk]: Right, so it doesn't matter from a state perspective or from this funds perspective whether or not if there's a thousand vacancies and big part of those are fully, if those are fully filled or not in terms of the paying off the accrued.

[Chris Roop, Joint Fiscal Office]: There's two things at play. I think if you have a ton of vacancies, a surprising amount of vacancies, it creates the need to make sure that finance and management's payroll rate is generating enough money to fully fund the ADEC for the year, and finance and management makes adjustments as the year goes on. They come up with an estimate thing, we need to raise x million dollars and we think the payroll is gonna be this, what percentage do we need to apply to get the money? If all of a sudden your payroll's really gone down, that rate might need to be tweaked and money that you'd be spending on salaries for vacant positions might go toward the payroll rate instead. But in the big picture, fewer people in the system also means lower liabilities are being accrued in the system.

[Trevor Squirrell, Clerk]: Which is my part two question, which is in 2038, speaking personally, I'll be at some point in 2038, I'll be 77. And towards the end of the day, I'll just assume anybody who's older than me will have, there's fewer baby boomers left at that point, which then the system would be paying for this huge drop compared to now of what people are using those

[Chris Roop, Joint Fiscal Office]: Yeah, it's really complicated because it's also like today's active employees are probably going to earn a more expensive pension benefit when they retire than today's retirees are currently drawing out of the system. Because by the time today's employees retire, they'll have a much higher ending salary and a higher benefit than people who might have retired ten years ago and are currently in pay status. So if the number of employees stayed the same, roughly, as you went along in the system, you would expect the liabilities to still kind of increase over time. Because even though you're shedding liability as you pay benefits to retirees, you're accruing a little bit more to pay the future benefits of today's workers. So it's a little bit of a knot to untangle. Thanks.

[Robin Scheu, Chair]: I've got Dave and then John.

[David Yacovone, Member]: So back to the issue that things get complicated before 2038 and everything's changing or not. Couldn't one just do a remortgage? Instead of 2038, let's push it

[Chris Roop, Joint Fiscal Office]: out to 2044. One Recalibrate. One could do that, but that would come at a higher total cost to the taxpayer over time because you would be paying high it's just like sort of refinancing a home mortgage or extending a a line of credit or whatever. You might trade a lower payment in the near term for higher total interest cost paid over the life of the obligation.

[David Yacovone, Member]: So many opportunity cost, though. If Childhood poverty matters to me. Yep. The quality of our schools that are falling apart matter to me. The quality and stability of our hospitals matter to our taxpayers. Many of those things, because if you don't remortgage in that case, you can't address. So, while you might be looking good on one particular line item of the budget, you're falling apart on the others. And that's kind of nothing wrong with having that kind of a values conversation.

[Chris Roop, Joint Fiscal Office]: Well, I think what you what you're getting at is the trade off between the short term and the long term. And there is a long term cost associated with a short term decision that might save money in the near term. And I would challenge all of you as legislators to think also about you want to talk about opportunity costs, leaving the potential to pay for benefits using investment gains. You want to take advantage of that opportunity. You want to be able to invest the money and maximize Wall Street earning the money to pay for benefits as opposed to taxpayers having to pay for it. So there's a real trade off, and it can be I think a lot of states have gotten themselves into some pretty problematic fiscal situations by under paying their long term liabilities to free up money in the short term because it can create a problem that can take decades afterwards to get back in front of. Yeah. Appreciate it. Well, I appreciate that question.

[Eileen “Lynn” Dickinson, Member]: It's been sort of what we've done to get ourselves into this hole.

[Chris Roop, Joint Fiscal Office]: I would say, I'm really trying to talk about the current amortization period. Before that started, from 1979 through 2007, The teacher ADAC was underfunded, I think, in all but four years, and that is a big reason why the teacher retirement system has a lower funded ratio than the state system, why that orange line is below the blue line. And we have been making up for that underfunding ever since. Like, if you underfund an ADAC in one year, it doesn't make the obligation go away. Like, the obligation's still there. It just means all your future payments are gonna be recalculated at a higher rate to pay off that shortfall. So the former treasurer, Beth Pierce, often likened this to paying cash for something or putting it on the state's credit card. You know, if you short the ADEC, you might save money closing this year's budget, but that doesn't go away. Like, that it's It's just going to pop back up in future years' ADEC.

[Robin Scheu, Chair]: No, I have John first and then I'm

[John Kascenska, Member]: So, I'm not sure how this affects any of what we're talking about here, but there's a point in time people retire, whatever it might be here, and some folks take advantage of that and they retire, take their benefits here with them, others decide to stay longer, maybe just a little bit longer, perhaps just a couple of years, or significantly longer if they were able to just do not get started working here.

[Wayne Laroche, Member]: Where does that Hold that thought.

[John Kascenska, Member]: Thinking about this, it's probably the next

[David Yacovone, Member]: slide.

[Chris Roop, Joint Fiscal Office]: Yeah, it's in a couple of slides, but yes.

[John Kascenska, Member]: So the reason why I'm asking the question here is I remember, in Vermont State College, when the economy kind of like tanked, people were just about ready to retire. Least some of the group were perhaps even beyond the point where they thought, they're probably going to do it, but they just decided to stay a little bit longer to kind of make up for what their losses were, because they may have had some of their retirement stuff placed in some higher risk things, mind that wasn't the best thing to be doing at a particular age, you just don't want to really go that way, being more conservative investment kinds of things. And they stay longer. And some of them might have been longer, it was okay here, the dean of administration come ask me every year, so who do you know is gonna retire because we're trying to figure out the budget stuff.

[Chris Roop, Joint Fiscal Office]: I'm going get to that in my two slides. Great. Glad you mentioned it because that it's going help me. Wayne has a question.

[David Yacovone, Member]: As

[Wayne Laroche, Member]: I recall, the Garcia decision was made in 1971 And that changed everything. I know I mapped it out for fish and wildlife in those states because I had to look at our revenue, of course, with special funds coming in from license sales, and how how your that revenue curves go with your expense curves, need to increase in salaries. When that happened, because Fish and Wildlife were pretty much parallel for many years back in the 50s, When the decision happened, it was an inflection point and never will the revenues ever make up for it again. And it looks to me like the Garcia decision is the reason impacted that poor pension.

[David Yacovone, Member]: I'm not familiar with the Garcia decision. I'm not a lawyer, nor do I pretend to be one.

[Wayne Laroche, Member]: The Garcia decision was where all of a sudden you had all the overtime issues, the fairness and pay, things came into play. And it changed that whole trajectory at that time.

[Robin Scheu, Chair]: What you could count to go to your pension, or

[Wayne Laroche, Member]: your last years? The flexibility of how much I pay you versus you and it changed that whole formula. Let me look

[Chris Roop, Joint Fiscal Office]: it up. I'll give you

[Robin Scheu, Chair]: all right get back to you offline. All right,

[Eileen “Lynn” Dickinson, Member]: Lynn. Yeah, I'm going to say that I was involved with the school board and involved with a lot of people with school boards in our area. And the thing that happened in the Dean administration is one year we decided not to go and fund the It was like $6,000 or $6,000,000 was like $6,000,000

[Robin Scheu, Chair]: It was a small When

[Eileen “Lynn” Dickinson, Member]: the stock market had gone crazy, was Once you don't put it in, not only do you miss that money, but you miss the money that that money grows for the next thirty years. That's part of the reason why the treaters are so under the liability. I think 60% is the benchmark. Know, things start

[Chris Roop, Joint Fiscal Office]: getting really worrisome when you get below. When you start getting below 60 and into the fifties and things are getting really, really worrisome.

[Robin Scheu, Chair]: The other thing at 1%. Is

[Eileen “Lynn” Dickinson, Member]: that OCAD was not funded. Right. Was back in the middle. Their pension, whereas the state employees had pension and they had OPEB. And the OPEB

[Chris Roop, Joint Fiscal Office]: has grown ridiculously. We're gonna get to that in a couple of minutes.

[David Yacovone, Member]: It's a double whammy. Yeah. Mhmm.

[Robin Scheu, Chair]: So here's where we are. So,

[Chris Roop, Joint Fiscal Office]: yeah, I've got two pictures here to show you where we are right now. The blue bars show the liabilities. So that is what the systems owe to people for service that's been rendered. The green bar is the actuarial value of assets. So that's the money that we have on the present value or the money we have once you adjust for the smoothing of investment gains and losses. Then the red line, the unfunded liability is essentially the gap between those bars. That's the shortfall. So you'll see that the state employees of some has an unfunded liability of just over a billion dollars right now. The way our amortization is structured with the 3% growth in payments means that most of the progress on paying down that unfunded liability happens at the tail end of the amortization period. So the first half of the amortization period, you're not even really treading water. The payments then catch up to the point where you rapidly pay down the principal of that unfunded liability in the back end. So we're now at that point where we're seeing that positive amortization and we're chipping away at it.

[Robin Scheu, Chair]: So this is like if you have a home mortgage, people should understand that. If you have a twenty year mortgage or whatever, you spend a whole lot of the first few years paying interest, and eventually you get to the principal, and at the end, you're pretty much all playing principal. And, you know, people also may remember that if you make one extra principal payment a year, you can cut your payments down significantly. And so our plus payments are a little

[Chris Roop, Joint Fiscal Office]: bit different. It's excellent. Same picture for the teachers. You see the numbers are a little bit bigger. The unfunded liability is 1,750,000,000.00 for the teacher system. But, again, progress since, you know, 2020 and 2021. This this has been chipped away at by over $200,000,000. So going to representative Kascenska's question, this chart shows the gains and losses that happened in the pension systems in the over the last year. If it's a positive value above the line, that means that thing increased the unfunded liability, which is not what we wanna see. If you see a negative value below the line, that means it chipped away at the unfunded liability, and that's what we want to see. So in this picture, the negatives are positive, positives are negative. And what the valuations do is they take a look at what's happened in the system over the last year, compare that to your actuarial assumptions, and then put a price tag on the deviation. You'll see here that that first column about the amortization, that just shows the net of the payments in being bigger than the accruing normal cost and interest. So, you're chipping away at that principal. Had really strong investment gains, so we saw positivity there. Those numbers reflect the dollar impact of the performance that we had relative to the 7% assumption. It's not relative to zero. Everything about this is about how things compare to the assumptions we have in place. Salary experience, COLA, mortality, retirements, net turnover. Representative Kascenska, you are asking about people's retirement behavior. The actuaries have an entire set of assumptions that look at different employee groups and at what probability rates they expect people to retire at different ages and years of service.

[Robin Scheu, Chair]: Depending upon which department they work for too.

[Chris Roop, Joint Fiscal Office]: Right? There's yeah. There's different you know, the general employees are very different than the state police. They have very different very different structures.

[Timothy Duggan, Office of the State Treasurer]: Yeah.

[Chris Roop, Joint Fiscal Office]: Yeah. And, you know, the state employees or the you know, a lot of them do work in group f. A lot of them do work past the point at which you're first eligible to retire. The actuaries build in an assumption of a certain percentage of people are gonna continue working. The it's a little different with the state troopers because for a long time, they had a mandatory retirement age at 55. It's still at 57, but the vast majority of their members retired once they were eligible at age 50 with twenty years of service. So there were not very many members that continued to work long past the point they were eligible. Part of act one fourteen actually created an incentive to encourage people to to retire a little bit later, and it enhanced the benefit formula a little bit for each extra year you had worked beyond the point at which you were first eligible to retire. So net turnover is also sort of the other side of that coin that shows, you know, what are the patterns of people who are leaving service for reasons other than retirement. So if, you know, I got hired at age 30 and left at age 35 and did not leave to retire, I went to go do something else for the next thirty years, that's going to have a very different impact on the pension system than if I were hired at age 30 and I worked for thirty five years and then left to retire. Other gains and losses, you see there's always miscellaneous true ups. But when you roll everything together across all of the factors, you'll see on the far right that the state employee system, the unfunded liability principal was chipped away by about $22,000,000 and the teachers by about $36,000,000 They don't sound like big numbers in big picture, but remember where we are in the amortization schedule. As we get closer to 2,038, you're gonna see that impact accelerate.

[Robin Scheu, Chair]: It's in the right spot being negative. Yeah.

[David Yacovone, Member]: For once. Right? Like that.

[Chris Roop, Joint Fiscal Office]: So this slide just shows investment performance. And as I mentioned, systems had exceeded the 7% rate of return for the third year in a row on a market basis. But we don't fund pensions based on the market value, because the market value can be so volatile. If you look at the bars on that figure, that shows what the market value investment return is, and you can see how wildly it jumps around. If you were calculating the ADEC based on that, you would have a crazy amount of budget volatility in your contribution requirements. So the way systems try to make the budgeting less volatile and smoother and more predictable is they recognize market gains and losses over a five year period. And we say that it's smoothed out. And the actuarial value of assets reflects that smoothing. And that's what that line is on the chart. Just like I said, it looks much smoother than the volatile bars. But you can see that when you look in the rearview mirror, again, past performance is not a predictor of future results. Our assumption is 7%, and our long term average results are slightly above that in many cases, depending on what time frame you look at. So assumption and our investment performance have not been wildly out of whack. Except for that one bad year. Yeah, that was a bad year for everyone. 2022? Yeah. That was a rough year. The markets were bad that year.

[Robin Scheu, Chair]: It was the year. Maybe it was previous year. Anyway, we we should have done a lot better at

[Timothy Duggan, Office of the State Treasurer]: one particular.

[Chris Roop, Joint Fiscal Office]: These these were also these were also on a fiscal year basis, not a calendar year basis. So they're very endpoint sensitive. Yes. So how you measure that time period can give you a very different result too. But investments over time have not been other than the Great Recession happening, that's not really why the systems are in the situation they're in. It's other factors. A lot of it, honestly, has been the assumptions have been changed to be more realistic. Yes.

[Eileen “Lynn” Dickinson, Member]: I know. We need more.

[Robin Scheu, Chair]: It's like making the math one, even though reality isn't anything. Weren't we having, like, eight and a half percent returns that we're assuming?

[Chris Roop, Joint Fiscal Office]: It was up there, and it was up there in a lot. We're not an outlier with this. Nationwide, most pension systems in the last fifteen years have been gradually lowering their assumed rate of return. And we're pretty close to the median and the average at 7%. But, you know, if you go back to, you know, the nineties, you didn't have to take on any risk to earn 7%. You could put money in, like, a CD and a money market account and and earn that return. So, you know, the world has changed over the last few decades, and the ability to earn money within acceptable levels of risk and volatility has changed. So that's why a lot of systems have gotten a little more conservative in their assumption.

[Robin Scheu, Chair]: And this is why part of what we did when we redid the whole pension thing was with VPIC and changing the people who did that. And it matters so much who those people are and their experience, so we don't end up with junk bonds.

[Chris Roop, Joint Fiscal Office]: Yeah, and you don't want to have unrealistic assumptions, because that means you're not putting enough money in on the front end.

[David Yacovone, Member]: And

[Robin Scheu, Chair]: that means

[Chris Roop, Joint Fiscal Office]: that And that shortfall gets added to the credit in the unfunded liability. So having realistic assumptions is really important to make sure you're putting in the right amount of money at the right time.

[David Yacovone, Member]: Thank you.

[Robin Scheu, Chair]: Just like your retirement account. Exactly. Somebody else is retiring. Yes.

[Chris Roop, Joint Fiscal Office]: I think I basically talked about all this at this point. This just talks about the fact that we now have deferred gains in the math. So we had such a strong investment year in FY '25 that the deferred losses that we had been carrying have now flipped the other way. So now VCSERs has a $55,000,000 deferred gain, and the teachers have an $88,000,000 gain. And, you know, that's gonna that's that's encouraging moving forward. A couple bad investment years can reverse that, but generally, it's optimistic when you see the market value of assets being higher than the actuarial value of assets, because that means you've got some gains that you haven't taken credit for yet in your funding math. So, again, what you guys really care about, the ADEC, the amount of money that comes out of the budget into the retirement systems to fund them appropriately. This shows you over time, over the course of the amortization period for VCRS, what the ADEC has been and what has actually been contributed. So, you'll see that costs have gone up steadily since the beginning of the amortization period. That really big spike in 2022 represents the one time payments from Act 114. And then you'll see, as you start moving closer to the present, that the amount of money being contributed is higher than the ADEC, and that reflects the impact of the plus thing. When I mentioned that these costs under a blue sky are expected to increase in dollar value, it helps to control for the percentage of active payroll to really get a sense of what's growing. I put this line in here to try to do that, and you'll see that, yes, pre Act 114, these costs were steadily increasing as a percentage of pay. The impact of that one time payment really distorted things a bit. But in the last three years that we have full data for, ADAC as a percentage of active payroll has started to stabilize a bit. So, that's encouraging. That's what you would want to see. I have the same chart now for the teachers. And you'll see that the ADEX actually going down slightly as a percentage of active payroll. But another thing I wanted to mention, just to remind anybody watching this on both of these slides, is that the actual amount contributed in has exceeded the actuarial recommendation. So the state in during the amortization period we're in, not talking about decades ago, but in the amortization period we're in, the state has overfunded it's actuarially determined funding requirement. So it is more than adhered to its end of the bargain. So that's it for pensions. If anybody else has any questions on that, we

[David Yacovone, Member]: can pivot over to OPEB. Well, may I just?

[Robin Scheu, Chair]: Yes, go ahead, Dave.

[David Yacovone, Member]: We're going through hard times. We need to find money wherever we can. If we're overfunding our obligations, what bad thing would happen if we dropped what we're committing to just funding it, but not overfunding it?

[Chris Roop, Joint Fiscal Office]: So I would say that if you are the commitment the legislature made when you all passed act one fourteen was to intentionally overfund it for a period of time. To make the the 2,038 work? Yeah. In order to accelerate the pay down until the systems are 90% funded. I would also say that as part of that commitment, the active employees also agreed to pay higher contributions amount out of their paychecks. I think a lot of people outside this room are going to be watching the state of Vermont to see if we remain committed to our commitments long term.

[David Yacovone, Member]: And I think the rating agencies would also wanna make sure that we're adequately funded. That's all well and nice. But if some of your kids aren't being fed because you're meeting an obligation that's important, but not one that's got you're not gonna renege on, isn't that a conversation to have?

[Chris Roop, Joint Fiscal Office]: It goes back to the trade off between short term and long term.

[Robin Scheu, Chair]: And the promises we made.

[Chris Roop, Joint Fiscal Office]: Well

[David Yacovone, Member]: No. It's what our contractually obligated obligations. Which we haven't violated. Well Have we?

[Eileen “Lynn” Dickinson, Member]: There was at one point, the former treasurer talked about freezing the return of funds. I mean, we had meetings in our district, and the people who were livid about the situation.

[David Yacovone, Member]: Oh, sure. I remember that. I

[Eileen “Lynn” Dickinson, Member]: mean, was during Zoom time, so But yeah, we have legally obligated, you know, obligations to these pension funds. You can't just walk away

[David Yacovone, Member]: And I'm not suggesting

[Eileen “Lynn” Dickinson, Member]: without consequences that are dire to the state's economy and to the state's ability to function.

[David Yacovone, Member]: Some of the other Oh, choices could be absolutely not. I don't mean to minimize it, nor am I suggesting walking away from it. I'm just saying, are there ways to make modifications that help other people who are in a dire situation without reneging on the legal obligation. I appreciate short term, long term. Thank you. Yeah.

[Chris Roop, Joint Fiscal Office]: And I know I just I mean, it's it's a great point, representative, and and I appreciate you bringing it up. I I would also just sort of say that if you were to make a move in the short term to free up money now, it will cause larger budgetary pressures in future years. So it's sort of like, you pay for something with cash now or do you put it on the credit card and pay it with interest in the future? The cost doesn't go away, gets bigger over time and it gets deferred.

[John Kascenska, Member]: Just a comment. He's on the

[Chris Roop, Joint Fiscal Office]: house government operations when we dug into this, and lots of people worked hard to get this train back on the tracks, and Chris was one of those people, we brought him back in the size of How's going?

[John Kascenska, Member]: Typically, rep John Gan was the other one.

[Chris Roop, Joint Fiscal Office]: Yeah. I

[David Yacovone, Member]: mean, he

[Robin Scheu, Chair]: He was amazing.

[Chris Roop, Joint Fiscal Office]: Used his twenty years experience at Securities and Exchange Commission to really inform us as to what was going on. But Chris was even younger then. Felt younger then. As, right, age

[Eileen “Lynn” Dickinson, Member]: is a lot.

[Robin Scheu, Chair]: Just experienced

[Chris Roop, Joint Fiscal Office]: and knowledgeable. I just want to recognize his point. Yeah,

[David Yacovone, Member]: thank you. And Peter Fagan did a lot of work.

[Eileen “Lynn” Dickinson, Member]: Oh, did a lot too.

[David Yacovone, Member]: Yep. Yeah.

[Robin Scheu, Chair]: It's It a real good, strong effort by a lot of people.

[Chris Roop, Joint Fiscal Office]: Was a thing. Senator Janet White was involved, representative Sarah Copeland, senator Kitchell, I think all senator parent, I think everybody who was involved on that task force was was inspired to do something else with the rest of their life after it was over.

[David Yacovone, Member]: What a

[Robin Scheu, Chair]: nice way to put that.

[Eileen “Lynn” Dickinson, Member]: Deal. Fix that, Robin. There we go.

[Robin Scheu, Chair]: Alright. When we

[Chris Roop, Joint Fiscal Office]: heard what was happening in states like Illinois, it

[Wayne Laroche, Member]: was like, woah. Yeah. Let's not go there.

[Robin Scheu, Chair]: No. Yes. It was a tough thing to do, but we did

[John Kascenska, Member]: the right thing at the end.

[Robin Scheu, Chair]: So explain what OPEB means.

[Chris Roop, Joint Fiscal Office]: Yeah. So we just talked about pensions. The other big ticket retirement obligation is OPEB, other post employment benefits, which is a really fancy way of saying subsidized health care benefits for retirees retiree health care. Before we really dig into this, just a little bit of a history lesson that and representative Dickinson mentioned this in the other slides that before relatively recently, we were funding OPEB on a pay as you go basis with really no prefunding. And actually before that, the the teacher OPEB was being paid out of the corpus of the pension fund, which has the same actuarial effect as shorting the ADAC. You know, you're taking money out that you're not accounting for on the funding end of it. In the past, we'd only been budgeting and paying the cost of, like, the actual premiums for today's retirees. There was no setting aside money over the course of somebody's career and investing that money. So there's money there when they retire to pay their benefits. And as a result, we were losing a tremendous opportunity to actually take advantage of investment gains to pay for these future costs, these known future costs. So part of the grand bargain in act one fourteen was that, the state established a prefunding policy for OPEC that is actually very similar to, the one in place for pensions, where there's an ADAC that's calculated to fund a normal cost and an amortization payment. But instead of being done by 2038, OPEB is on schedule to be done by 2048 because it didn't get it started until a couple years ago. Active employees do not contribute to OPEB, but once you're retired and you're enrolled in benefits, you pay a share of the premium. And the amount you pay is based on your years of service. So, the longer you serve, the higher the more generous of a of a subsidy you get on the premium. So, you don't make a contribution out of your paycheck while you're working. You pay for it when you're participating in retirement. Very similar to pensions, when all else is equal, you would expect these costs to roughly increase with payroll at about 3% a year. Spoiler alert, we are not seeing that happen this year. And for your budgeting purposes, just like with pensions, the OPEB for the state employees funded out of the underlying personnel budgets. For the teachers, it's primarily funded out of a direct appropriation in the big bill with, the normal costs coming out of the Ed Fund, unfunded liability coming out of the general fund, and a small portion of these costs actually get picked up from the LEAs through what's called the new teacher assessment on teachers hired after 2015. And some of that money, that offsets what would otherwise fall to the Ed Fund and the General Fund. So, just like with pensions, the OPEB systems continued to improve last year. The assets are steadily growing, but we've got a long way to go on OPEB. We're at the very beginning of pre funding. The good news is that the investment performance, just like with pensions, exceeded the 7%. The not as good news is that health care cost trends I don't know if you've heard this before, but apparently health care is kind of expensive. And OPEB is not immune to that. And the long term healthcare cost trend rates that the actuaries use in calculating these funding requirements and everything were revised upward this year. So as a result of that, you see some pretty substantial increases year over year in the funding requirements for doing that.

[Robin Scheu, Chair]: 31,000,000.

[Chris Roop, Joint Fiscal Office]: Yeah. And I wanna say I want to put a pin in this and maybe divert the spotlight to my colleague in the corner. But the teacher OPEB system I mean, that that's a substantial increase. The increase could have been significantly higher than that had the treasurer's office not renegotiated the health care provider. I think they were facing a proposed increase of 50% and were able to find a provider that had a much, much lower increase year over year. It was still double digits, but it wasn't bad. And as a result of those shifts, the ADAC is about $20,000,000 lower than it would have been had they stayed with their prior provider. So I don't know if Tim has anything he would like to add to that very high level description, but as high as that increase is, it could have been significantly worse had the treasurer's office not taken some actions.

[Robin Scheu, Chair]: Would you like to talk about that at all?

[Timothy Duggan, Office of the State Treasurer]: I appreciate the note to Doug and the director of the cabinet's office, and it was a very challenging summer. We I remember July 3, we received our renewal. We had a 10% cap negotiated in our contract for a rate increase this calendar year, and we received a 50% kill. And at that point it was late. We didn't really usually would plan to go out the bidding here in advance if something like that was happening. Treasury project challenges, fines. So we ran a bid process and we found a new vendor, HealthSpring, that they were Cigna HealthSpring and they already provide coverage to the retirees from Cigna. So we do see the positive reference there and we're able to bring in what was a 50% increase of 16%. And so a lot of credit has been changed

[John Kascenska, Member]: in the retirement provision.

[Timothy Duggan, Office of the State Treasurer]: It's kind of crazy world where we're congratulating ourselves on a 16% increase. Yeah. Our team's done a fabulous job talking to our members. It's a very challenging thing. It's a positive story from a financial perspective, but as I'm sure most can imagine, it's a very nerve wracking story. It's kind of our ways of changing health insurance providers. And so our vendor has been excellent, our consultant has been excellent, and most importantly, our team has been excellent to make sure that this helps to do it. Other questions?

[Eileen “Lynn” Dickinson, Member]: Yeah, just want to ask you, Tim, is this for both the teachers and the state employees?

[Timothy Duggan, Office of the State Treasurer]: No, it's not. So the treasurer's office manages the contract for the teachers and that's because the employers or teachers are all over the state. For the state employees, DHR manages the contract, and so they a health insurance for the ESBAC, the state employee, and for our retirement.

[Eileen “Lynn” Dickinson, Member]: So my understanding is the state employees are self insured. Yes. But once state colleges are self insured. Well, they are. UVM is self insured, Fletcher Allen is self insured. The teachers, from what I understand, are not. And so, my understanding, you can correct me on this, but my understanding, and it's been, they've had other structures like this bid and be high that work with them. But the healthcare thing, chances are good that if they had a self report statewide policy, which is a whole other issue, comparably, everybody was under the same policy, that it would be easier to go on self insurance and save money. And when you talk about Cigna coming in, that's often the administrator of the self insured people. It's all self insured groups. So how does that work? Am I correct the necessary?

[Timothy Duggan, Office of the State Treasurer]: So to me previously, I'm not

[David Yacovone, Member]: sure I follow all of

[Timothy Duggan, Office of the State Treasurer]: it, maybe I I can follow-up. Prior to 2021, we were insured from FTI as a self insured traditional Medicare coverage. When we moved to Vermont with Advantage, got moved to a fully insured Medicare Advantage product and we've been in that space ever since on the teacher side. And one of the things we did this summer was look and say, well, what if we went back to that self insured traditional Medicare model? A woman doing a retirement one on one go out to me some things together like that, the costs were not terrible. So don't know if your question is more about combining all of the

[Eileen “Lynn” Dickinson, Member]: public employees with one large No, it's just that the teachers have been more fragmented because of their contracts around the state in different districts. And the whole point of it is that if they had a statewide contract for health, I mean, that was an issue a couple of years ago because they had to get out of the Cadillac plan. I'm just trying to figure out where are we now and how does that impact on this 50% increase? How can we reduce it?

[Timothy Duggan, Office of the State Treasurer]: Yeah, you make a really good point that the teachers are on sort of the change plans in their active careers. And then for our pre Medicare population, they go to a traditional health insurance plan. So not the exchange type, it's like your traditional health insurance plan. And then when they age into Medicare eligibility they go to a Medicare Advantage plan. That is challenging and confusing and it moves through. So I take your point that some amount of cohesion from career to retirement may produce some value. It's challenging given the management culture structure. Perhaps there's value in it, but I found something that I wouldn't be able to tell totally.

[Robin Scheu, Chair]: So I'm looking at the time and this is so interesting that we're already way past time and Evan is here also. So, if we can wrap this up in five minutes and take a five minute break, then we can have Emily and get to that. Sounds great.

[Chris Roop, Joint Fiscal Office]: All right. Well, this picture is not quite as exciting as the one on the other slide deck, but this shows you the funded ratios for OPEB. My takeaway here is, you know, we're so early in this process that, you know, we're showing some encouraging results, you know, 16% funded already in the state system, 13% in the teacher system. But we've only been pre funding for a couple years. So we got a long way to go. And just like with the pension systems, a lot of the progress on paying down the principal is gonna happen in the final, you know, ten to fifteen years. So you've seen a variation of this with the pensions. This just shows you where we are right now with the visors OPEB with, you know, assets, liabilities, and the unfunded net OPEB liability. That's like the unfunded liability. Again, you're we're still the prefunding is so minimal at this point because we're so early in this process that, the unfunded liabilities are substantial. They're actually bigger on the OPEB side than they are on the pension side for the state employees. Buckle up, 2048 is a long way away compared to February. So we're going to keep on

[Robin Scheu, Chair]: So being good, Chris. I

[Chris Roop, Joint Fiscal Office]: Only if you lower retirement eligibility, which would represent an actuarial loss, I think.

[David Yacovone, Member]: Yeah. Okay. Same deal

[Chris Roop, Joint Fiscal Office]: for the teachers here. You'll see that on the teacher front, the unfunded OPEB liability is much lower for OPEB than for the pensions, but it's still over $1,000,000,000 of unfunded liability.

[Robin Scheu, Chair]: And $7,000,000,000 for both combined.

[Chris Roop, Joint Fiscal Office]: We got a ways to go, and OPEB is big. That's a big hit on the state's balance sheet. So here's another version of what the of the gains and losses over the last year. You know, I just wanted to point out something that was kind of interesting that, you know, even though you've only been prefunding for a few years, prefunding generated over $37,000,000 of income from investments for the two OPEB systems last year. So, you know, it's showing meaningful results fiscally. That's only gonna get bigger as there's a larger balance of assets invested in the systems. But it's already showing a a pretty notable impact and benefit just for prefunding and investing the money and and not just doing it on a pay go basis. Great. Thank you. Again, here's a chart with the investment performance. I'm not gonna go deep into it, but you could see that we're so early in the system that investment gains gains and losses and experience aren't hugely meaningful factor when you're dealing with billions of dollars, but they're rapidly becoming meaningful. Here's your OPEB ADEC for vCERs. It's a similar chart here that you'll notice that before 2023, we were not funding the ADEC. We were funding the PAYGO cost, the amount that you needed to pay. It's a lower amount because you don't need to build up ahead of assets to invest. But when prefunding started, we started funding at that actuarially determined level in 2023 and moving forward. But you'll also see that that cost as a percentage of active payroll is increasing at a rate steeper than what you're seeing on the pension side. That's because of those health care cost trends we were talking about. Same deal on the teacher system here, And that's it.

[Robin Scheu, Chair]: Hey, Chris. You make me interesting.

[Chris Roop, Joint Fiscal Office]: I try.

[Robin Scheu, Chair]: I appreciate that after lunch. I

[Chris Roop, Joint Fiscal Office]: it makes me look forward to my future retirement.

[Robin Scheu, Chair]: There you go. Updated. Alright.