Vermont Legislature SmartTranscripts:

[Robin Scheu (Chair, House Appropriations Committee)]: Good afternoon. This is the House Appropriations Committee. It is Thursday, 02/05/1926. It's just after 01:00, and we're continuing to go through the FY27 budget. And we're delighted to have the Office of the Defender General with us. So welcome, Matt and friends. If you would like to introduce yourselves and take it away, that would be great. Thanks.

[Matthew Valerio (Defender General of Vermont)]: I'm Matt Valerio. I'm the Defender General. With me is Katrina Lundberg, and she is our financial director. Great. And she's now been with us for a couple of years with just a little lingering assistance from Laura Evans, who's now apparently in her fifth and sixth year. She is She is the assistant.

[Robin Scheu (Chair, House Appropriations Committee)]: Well retired.

[Matthew Valerio (Defender General of Vermont)]: Well, yeah, I hope she's enjoying it, although we do call her every now and then. So this is the twenty seventh budget that I'm managing. And so done this before. Just to remind everybody, this would also be the twenty seventh budget that we will go forward with and will operate within budget without budget adjustment during the entirety of that time. I just want to remind people, because now that committees have changed over so many times, they don't even remember that. They don't remember when it wasn't that way. But thirty years before that, it wasn't that way. In many events, I always throw this in so that people will have the opportunity to understand what we do. You do, I think, understand what we do. We run a public defense system, prisoners' rights office, the appellate division. I provide advice to the legislature and to the governor on policy matters and obviously manage the budget. 120, more or less, contracts across the state that provide the service, as well as 80 or so state employees. This is our basic structure. This, for whatever reason, no matter how many times you go over it, does get confusing for people. I don't know why. On the one hand, we have our primary public defense system, which is part of the budget, public defense. And the other side is the assigned counsel conflict side of the budget. We manage both sides of that budget. The conflict side of the budget, aside from some staff administration, is almost all contracts. And it has to be that way to comply with the rules of professional responsibility that govern attorneys.

[Robin Scheu (Chair, House Appropriations Committee)]: Of those blue green positions are contracted out on the right there, assigned counsel?

[Matthew Valerio (Defender General of Vermont)]: Right. Right. Those are all contracts except for, there is, we have a portion of one of our people who is a staff person who does only administration. And basically, it has to do with statistics. It doesn't have to do with any of the provision of service. But any of the service provision is done contractors. And what tends to get confused is that people put people, you guys, either doesn't matter which side, house, senate, the governor's office. They put money in the wrong side when I needed it on the other side, and then I have to deal with that. Actually, Katrina's deals with that later to try to fix it so that we don't run a a file. Gotta get

[Robin Scheu (Chair, House Appropriations Committee)]: in the right spots because

[Matthew Valerio (Defender General of Vermont)]: Yeah. So I think it bears going over the governor's recommended budget, what it does, and what it doesn't do. The what it effectively does right now is continues to provide the current service level. It's and we have built in, as you know, lot of it lot of the budget kinda writes itself. Your union contracts and your steps and the like. And it provides for that funding. Year, any time we get to the year where we are negotiating our primary public defense contracts. If you remember, on the primary public defense side, we have staff offices, and we have contract offices as well that provide primary public defense services. So for example, in Washington County, it's a private law firm. Even kidney, whatever they are now, has that. And they've had it for decades. And in Rowan, it's a staff office in Chittenden County. It's a staff office with state employees. Every four years, when I started this, I wanted stability in the budget that we could predict, and so I negotiated four year contracts. And this past year, I had been reappointed, and I negotiated four year contracts to go with that. And so does provide the year this one provides the year two increase that was negotiated as well. We have, over a period of time and I'd love to go into the history of it, I can't do it in half an hour. But when I very first started, I established these serious felony unit contracts that only did murder cases. And they were originally budgeted in fiscal year two thousand and two for $150,000 I convinced that the money was held at the time. We were in a bit of a fiscal crunch, very, like, right after I started, immediately after I started. And I convinced governor Dean at the time to release that money so that because we'd end up saving a ton of money compared to the system that had been in place. And I I said I could make them work for a $100,000 instead of a $150,000 each. Right now, as of today, those serious phone units are getting paid a $150,000. The bottom line is twenty six years later or twenty five years later, I still implemented those things that the original 2002 fiscal year amount of $150,000 and so on. And they've gone up a bit over time. But literally, twenty five years later, they've reached the funding level per unit that they had in fiscal year 2000. So I said, I want more money for them because they need The to get paid governor's recommend does provide for that. And we have serious felonies in public defense and in assigned counsel. And it's more of an accounting thing because they cross over. All that means is serious felonies can take both conflict cases and cases out of the staff boxes. We have had, and I've discussed this year after year, and really it started in earnest in COVID with third the our other personal services in I don't know why it's in in the assigned counsel side. This is one of the things where I said, you know, it provides an increase for other personal services in assigned counsel, But it doesn't do it in public defense, I can't explain. My guess is somebody was just trying to make something valid somewhere. But the money didn't go in on both sides. But that's been an upward pressure that is out of my control that's been going on ever since COVID, particularly with regard to mental health screeners, private investigation, and expert services that are related to defending cases, they've not gone up like 20%, thirty percent. They've doubled and tripled two hundred percent, three hundred percent. And I can tell you why in some areas and in other areas, I can't tell you why. For the mental health screeners and the like, As you probably know, when the state hospital went away, a lot of people who were working there as psychiatrists and psychologists went elsewhere. We have many less of those people here. So the private people who were left doing these screenings, they raised their rates, but it wasn't crazy. When the state negotiated to do these teledoc evaluations for competency, we are paying rates from other states as much as $600 an hour. When our local folks caught wind of the fact they were getting $600 an hour, now the local folks are getting $600 an hour. So it makes business sense, but it really causes a bit of a hassle in the budget. Investigators for a long period of time, private investigators, we have to use in a bunch of different ways, but almost always in the conflict cases and cases where we have contract offices. A couple of years ago, I raised them from over time, when I first started, they were like $25 an hour, and then they ended up over the years, they're at $50 an hour now. Surrounding states and the like, and the federal public defenders are paying anywhere from $100 to $125 an hour. And I was deluged with letters over the last couple of years saying, raise our rates. There was some threat that they were just gonna stop working for us, but then there was a whole bunch of us, a whole bunch of individuals who kinda came in and said, don't listen to them. We'll keep working for you, but can you get us some more money? But it's a tension area, and the governor's recommended budget does provide for, increases for that. I will note that, however, if we don't I'm I'm gonna have to I I I was gonna I was trying to get them up to $100 an hour, which is kind of in between, like, the $90 an hour that New Hampshire does and $125 an hour that the feds do, and Massachusetts is higher than $100 In any event, was trying to kind of get them in the middle ground. But we're one part of this program, like assigned counsel gets the money, but the public defense side doesn't get the money. It means I'm gonna probably have if if it goes through the governor's right wing goes through on that without kind of equal on both sides. I'm gonna have to, like, cut the baby in half and do something.

[Robin Scheu (Chair, House Appropriations Committee)]: Recommend different I mean, you may end up with the same total that the governor recommended. Did you recommend dividing it differently? So it wasn't all to assign counsel like

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: No, there's No,

[Matthew Valerio (Defender General of Vermont)]: I I recommended it so that it would go on both sides. I don't know why they chose to I don't know why we don't I don't really get a why under but one side got basically said, yes, we're gonna fund the private investigation on the account side, but not on the public defenses.

[Robin Scheu (Chair, House Appropriations Committee)]: So you requested it for both sides. You got it for one. You didn't get twice as much in 110% on the other. You just got it for one.

[Matthew Valerio (Defender General of Vermont)]: Right. It's like you got half

[Unidentified committee/staff member]: of I

[Robin Scheu (Chair, House Appropriations Committee)]: gave you half your request. So my question is, could we take that half a request, whatever that number is? Say you've got $100 Can we put $50 in one and $50 in the other, or does it all have to be in one?

[Matthew Valerio (Defender General of Vermont)]: No, it doesn't. I mean, that's actually what I just said is that if I if it if it ended up in one, I would I would do something, like, at the end of the year when we reconcile these things. And instead of giving them a $100 an hour, I'd pay them $75 an hour and split the money. Like, I I manage these things based on what

[Robin Scheu (Chair, House Appropriations Committee)]: that need to be done in the budget itself, or can you have the do you just have the authority to do that without us getting involved?

[Matthew Valerio (Defender General of Vermont)]: I can do that without you getting involved. I ideally, I'd like to have the money on both sides. But that's the decision you'll have to make. And I outlined this at the end of this presentation. There's another bullet here that says that they've provided us with some amount of money for rent increases. I always find it interesting, though, when I'm dealing with rents and new office space and that sort of thing, that and I've asked this question very directly, And I end up getting in the battle with BGS about this. They'll come in and say, oh, we've got a good deal for you. And you've got some rent, it's going to go up 20%. And I'm like, do you know that the budget thing we have to do says 3%? We don't pay any attention to that. And so I said, well, I'm not doing 20%. And then I get involved with negotiating directly with the landlord and I cut DDS out. We end up getting somewhere 7%, eight percent, or way less. The bottom line is I get involved too much in like I don't mind, actually.

[Unidentified committee/staff member]: That doesn't

[Robin Scheu (Chair, House Appropriations Committee)]: happen unless you get involved as well.

[Matthew Valerio (Defender General of Vermont)]: Right. That's the bottom line. It's a whole other issue. And we can talk about it some other time. The thing that I wanted to talk about has to do with caseload and pay for the contract side particularly and the struggles that we have hiring. I think it's like any profession, maybe any business at all. We have incredible difficulty hiring people. Twenty five years ago, when I started this job, if I had an opening in Chittenden County, for example, for a staff public defender, I'd get 100 applications. Now I wait three months. I get four applications. None of them are licensed in Vermont, none of them have practiced criminal law. So we've done some things to get around that. I actively recruit out of state to try to bring public defenders in from other states. And we've been reasonably successful, but on a case by case basis. As you might expect with people coming from out of state to Vermont, they don't really know Vermont. So the only place they want to be is Burlington and Montpelier. They don't really want to go to Lamoille County or Franklin or, God forbid, Essex or I've had people come up and say, Nice spot for you right here in Rutland. And they visit, and they're like, I only want to go to Burlington. Or you and everybody else and actually, it's not everybody, but the other three who might be interested would go. But it becomes a big issue. And so it is difficult to hire. And you're seeing we've had some fortunate luck, because the New Hampshire public defense system is in absolute turmoil right now. And I've been able to hire five people away from there in the last year because they're leading public defenders, and they're trying to escape. So our Board of Public Defenders have done all right on that side. Nevertheless, it becomes problem. The biggest place it hits is in the contract system. So I want to show you a couple of things. I only give you this for a background. If you remember I gave you this you probably don't remember, but I gave you this slide last year. Fiscal year 'twenty four, we saw modest increases across the board as far as felony cases and misdemeanor cases. Provision violations went up 60%, which is enormous. This, by the way, presentation, I am so hot off the presses, you're probably getting ink on your hands because I literally we haven't been able to hire our data manager personally. I've got people doing multiple jobs to do this, but they just got me. I got the full fiscal year '25, and I got some stats for 'twenty six. Wanted to show you, though.

[Robin Scheu (Chair, House Appropriations Committee)]: Okay. And we don't have all these pages in the report that we have.

[Matthew Valerio (Defender General of Vermont)]: No, because this is brand new like Addison.

[Unidentified committee/staff member]: Could you

[Robin Scheu (Chair, House Appropriations Committee)]: send it to Autumn and we can post the updated ones? Absolutely. Yeah, that'd be great.

[Matthew Valerio (Defender General of Vermont)]: But if you can see this, in 'twenty five, across the board, we had an 11 increase in cases which are actually clients of the people overall. Particular counties saw significant increases, and I've highlighted those. You can look to your own county and see how you're doing. Again, probation violations are a big issue. But since we've come out of COVID, we have seen increases every year on top of increases. This is the juvenile side of the program. Interestingly enough, last year or fiscal year twenty five, which ended July, was basically flat. And I noted the TPR. See how it says it's down 11%? If you remember, it was down 11%, but the prior year, it was up, like, 80%. So, yes, it's down 11% compared to the year before, but that doesn't mean that it is, healthy. It just means that we couldn't I can't even imagine sustaining, like, that kind of growth. Bottom line is we're basically flat from in fiscal year twenty five. Right? You notice particular counties that I pointed out, usually so you see, like, in Orange County had a big increase, one hundred and eighty eight percent increase in juvenile cases. What that tends to happen is, particularly in, like, the smaller offices, the district DCF offices, have turnover or something to do with staff. So, like, the year before, they're really low and they don't file a lot of cases, then they get restaffed, rehired, and then you see an increase of cases that have been pending. Orange County is not particularly a large county. I I don't have a big worry about that. Usually, where I get worried is when I see some of the bigger counties, obviously, like Chittenden County, Bennington County, Rutland, Windsor, Washington. Those are the ones, if I see big increases there, then I know we've got a problem. And I'll show you the problem in a second. These are the I just wanted to let you know, this was a part of the stuff that was hot off the press, like, literally, through the December. The '26, showed a and this is compared to the '25, showed an increase in about 6.7% overall. And if you remember, I showed you '24, 25, now '26. It's always increase, increase, increase on top of what was going on before. Part that was worrisome, which made me and then made me feel a little better as it went by. The beginning of fiscal year twenty six, that first quarter, I was in here testifying at something, joint justice oversight. And I know the press was talking to me about it. But we saw a massive increase in caseload in Chittenden County. It was, like, 39% in a quarter. But as we closed out the first half of that year, that fiscal year, the second quarter was way down compared to the first, and so we were basically flat compared to in Chittenden County, compared to fiscal year twenty five, the first half. That made me feel a lot better because it was scaring me to death to see 39% increase in a quarter in the biggest county we have. It was and Chittenden County got 40% of the state caseload. So that's troubling.

[Robin Scheu (Chair, House Appropriations Committee)]: That's a lot. Wayne has a question for you here.

[Wayne Laroche (Member, House Appropriations Committee)]: Yes. A couple. What's the nature of the crimes driving the increase? And secondly, what's going on down in Burlington?

[Matthew Valerio (Defender General of Vermont)]: Think that has had a bad character? Well, is it really I mean, remember, there isn't an increase, number one. And if you actually look at the first couple of columns and look at cases, because those are actual clients, the it's like 0.3% increase, 4.1% for misdemeanors. And then the biggest thing that's pushing everything is probation violation. This is probably way into the week for you folks. But But we've gone through Justice Reinvestment II, Justice Reinvestment I. The thing that drives incarceration and the thing that drives caseload tends to be two things. Probation violation is number one and, furlough violation is number two. And so while this is not driving massive caseload increases for the '26, You have to take it in we're talking about 6.7%, which isn't insignificant, by the way, but it's not double digit. But you have to think of it in terms of what was 'twenty four, what was 'twenty five, what was '26. And none of those years do we see a decrease. So, you know, that's what we're that's kind of what we're dealing. I don't you know, you look at, like, Addison County at 73% increase. Addison's really small, so I don't get too crazy about that.

[Robin Scheu (Chair, House Appropriations Committee)]: Just let you know that Addison County's population is 1,000 people less than Bennington County,

[Unidentified committee/staff member]: just for what it's worth.

[Matthew Valerio (Defender General of Vermont)]: Bennington County does tend to be like they're down, but their numbers are always numbers are

[Unidentified committee/staff member]: Yeah. Yeah.

[Matthew Valerio (Defender General of Vermont)]: It's Oh. It's The ones that I always look at for, like, what's the non Chittenden County, like, throw Chittenden County out of the thing. Think about Windham, Bennington, Washington, Brooklyn. And Right. You know, those are those are the one Windsor lately has been up significantly. I blame representative completely for that. It's all his fault. He hopped the fence, now it's the front. He used to work for us, by the way. That's why said he hopped the front. Anyway, so this is sort of a graphic way of looking at this. During that first in the '5 compared to the '6, the one thing that is remarkable is that in both years, the other cases, are probation violations that would drive everything, we are up this year. And last year, we were down during the first half of that year, for misdemeanors and for felonies. And felonies were down significantly for the '25, but they caught up kind of by the end because they ended up beating up at the end of the year. I want to talk about the ever this discussion of backlog. These are gross numbers, and I highlighted at the bottom the kind of points that I I think are interesting to talk about. We started in fiscal year twenty five, and I'll show you a little bit graphically how this all works. So, we're over 14,000 cases in the backlog. They declined, declined. They were kind of even for whatever reason. I don't know why every single year that I've been following this pretty closely. I love statistics and how they work. In August and September, the backlog always goes up. And immediately thereafter, the next three months, it drops. And it drops a lot relative to the total amount. As of January 1, we're down to 9,200, 9,276 compared to over 14,000. So there was a huge change in the number of backlog cases in the last year. I throw this in there. This is a one month snapshot of how many pending cases are included in the backlog overall. You can see the and this is has to do with criminal in in all the counties legislators like this because they always want to look at how their own county is doing. And overall, it doesn't mean too much to me But it is for your information, you may be interested in that.

[Robin Scheu (Chair, House Appropriations Committee)]: So you have lots of really interesting numbers. And we're starting to run out of time. But I'm wondering what sort of top level what should we take away from all of this?

[Matthew Valerio (Defender General of Vermont)]: I'm getting right there.

[Robin Scheu (Chair, House Appropriations Committee)]: Okay. Great minds.

[Matthew Valerio (Defender General of Vermont)]: So if you look at June '25, that little dotted line was kind of the trend. And we were basically paying off this backlog, like, by making the minimum payment on your credit card sort of thing. If you look at this past year, it was kind of flat, and then this is what happened. So we're making significant progress. And over the last year or so, I think a lot of it has to do with the fact that the judiciary now has all of its dredges. They were down as many as five, six dredges at a time. It's like you'd get one or two every now and then. But we had all of them kind of came at once, which is sort of a pain in the butt for those of us in the field because it was difficult to respond to that. I wanted to show you something. This is remarkable. Alright? So I always put this slide in, and I come and I tell you what are the parts of the program and what does it cost per lawyer equivalent caseload. An LEC is like a full time employee, right? So it's a lawyer equivalent caseload. It's how many cases the average public defender is supposed to be able handle in a year. These are all of our various ways we produce the dealing with these cases. As usual, ad hoc is the most expensive. The conflict contracts are the least expensive. The public defender contracts are the next, and the staff offices, are the next most expensive. And this is this sort of proportion has always been the case. Now the interesting thing is and this is you'll see it in the next slide. But over the years, I've always kind of leaned into the areas that were the most efficient to get the business done. And one of the things about so you what you'll see in the next slide is a comparison. We compared this is kind of on a lactic test, how our efficiencies are working. Right? The cost per order equivalent face up has declined because of the things we've been doing when you come from '23 to '25. And this is why. Staff, public defenders, they're handling more cases per attorney and we have newer attorneys in the office as people have retired. So their cost has gone down. Assigned counsel contracts, fewer attorneys are handling more cases even though they're being paid more. This is a problem. This is not sustainable. I used to have five primary conflict attorneys in Chittenden County. I had two backups and one backup behind that, and I had five caseload relief contracts. Right now, I have four primary conflict attorneys in Chittenden County and nothing else that I talk about. I have nobody behind them. I have statewide caseload relief contractors where I need to. I will push cases out to them, but they're not taking the contract. And I'll tell you directly, they aren't getting paid enough, for the caseload that they're doing. And for whatever reason and there was a period of time we went eight, nine years with no increases for those people. And the governor's recommended budget this year also puts no increases for those people. That is the most efficient way to do business, so it's assigned counsel conflict contractors. That's where you should be leaning into. That's what I do. I will scrape money out of any place I can find to make sure I can pay them as much as they deserve to keep them on. But as of I warned about this year after year, and it is it started incrementally where we lose one. Well, in the last two years, we've lost six. Alright? That's just Chittenden County. I can go around and say, but you don't have time.

[Unidentified committee member]: No. We really need to

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: wrap up.

[Matthew Valerio (Defender General of Vermont)]: So, public defender contracts began a cycle, and so the fact that they're a little higher compared to two years ago reflects the increase. But it is much lower if you go back a period of five years than the inflation rate. Ad hoc is interesting because the payment per ad hoc has gone down. Why? Because the program we put up is doing exactly as it should do, which is only misdemeanors are getting to ad hoc, and they are way cheaper. And that's why they are number one down. So this is just to try to show you where ad hoc has gone compared to the twenty five year period. But the whole goal is to keep us out of the most expensive way we do business. This is in your packet, your ups and downs, so to speak. You all know what that's about. And this is the last thing. Did not I don't know where that one's in there. See, this is what I'm working on. This is the one I want you to pay attention to.

[Unidentified committee/staff member]: Okay.

[Matthew Valerio (Defender General of Vermont)]: This will be your '27 budget, not '26.

[Robin Scheu (Chair, House Appropriations Committee)]: Yeah.

[Matthew Valerio (Defender General of Vermont)]: I talked about the fact that the other personal services investigators was on one side, on the assigned counsel side, but not on the public defense side. That's the first one. The second one, there's no increase for assigned counsel contractors. I just talked about that. This last one has become a quest. This is my white whale.

[Robin Scheu (Chair, House Appropriations Committee)]: I have seen this one a few times. Yes.

[Unidentified committee/staff member]: Yeah.

[Matthew Valerio (Defender General of Vermont)]: This is I think you tried last year. Whatever happened, I got the money in the budget. But for whatever reason, it ended up in a one time item, not in the base. I think it was an oversight or a mistake, but it was four years in a row I've been trying to get this go. Please put the $80,000 in the base where it belongs because I gotta train people. That's, you know, it's not like I didn't have it last year because I did, but Yes, we hear you. Okay. Thank you so much.

[Robin Scheu (Chair, House Appropriations Committee)]: Doesn't mean we promised you anything.

[Matthew Valerio (Defender General of Vermont)]: No, no, no. I never The other two things I always bring up is public defender special fund never has not approached what our spending authority is for years. All that you need to know about that is what you really like that being the case and not replacing it with general fund dollars, I'm always starting with whatever the difference is as a whole. I'm not gonna spend the money that's not there. And that's the $2.90. Vacancy savings, I think, is in our budget right now at, like, $610,000. That's not happening. And so that's money I've got to make up somewhere else. So, you know, the last two are those theoretical kind of things you deal The third one on the on the first line is money. It's already appropriate to me year after year, but not in the right place. The two big issues are the first two. And honestly, in a $30,000,000 budget, if $500,000 is the difference, We're doing pretty well.

[Robin Scheu (Chair, House Appropriations Committee)]: Thank you very much. We appreciate it. There we go. It's all.

[Unidentified committee/staff member]: It's like our bread.

[Matthew Valerio (Defender General of Vermont)]: And given that I started a little late, I think that was great.

[Robin Scheu (Chair, House Appropriations Committee)]: I think you did a great job. Thank you, Trevor, as your contact, as you know, as it continues to be, and we'll follow questions through him. And we're keeping track of all the requests that people are making. So thank you very much.

[Matthew Valerio (Defender General of Vermont)]: Thank you.

[Robin Scheu (Chair, House Appropriations Committee)]: We will see you again sometime.

[Matthew Valerio (Defender General of Vermont)]: Probably next year.

[Robin Scheu (Chair, House Appropriations Committee)]: Okay so committee we have who is Beatfic next? Hi there. Do you guys want to change seats? Did you hear me anything for that? Oh, got a picture back. That's pretty much sweet.

[Unidentified committee/staff member]: Oh, okay. It's still fine. Great.

[Robin Scheu (Chair, House Appropriations Committee)]: Great. Welcome, gentlemen. Nice to see you. If you'd like to introduce yourselves, and then we have your presentation.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Thank you very much, and thank you, Madam Chair, thank you members of the committee. My name is Tom Galanca. I'm chair of EPIC. I've been chair of EPIC for ten years. So this is my ten year Congratulations. Whether that's or bad present for ten years.

[Unidentified committee/staff member]: I don't think they'd

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: give me anything other than the satisfaction.

[Robin Scheu (Chair, House Appropriations Committee)]: I will

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: note in that ten year tenure, our ten year return is 8.3% annualized. And so we've met in that ten year period our actuarial assumptions that exceeded it in every year in that time. So I just want to start our presentation. Thank you. Well, ten years ago, we had about $3,000,000,000 in assets in the pension funds, which make up the state teachers, state employees, the municipal side. Right now, we have about $8,000,000,000 And so you can see the growth in assets. One thing about pensions, though, it's like a moving train. So your liabilities are increasing as well. I see Chris here as well, so he can address that. But we're in charge of investing the funds. And we have a staff of four. Eric Henry, is, the chief investment officer, and he's with us today. And he's self put together the specifics of the budget. Now let him talk after me. We've been very lean through the years. I think we charge, I think, on average about four basis points. And in comparison, most state pension funds charge about 12 basis points. So we're like onethree the cost of what most states run their pension investment team. I think we've done it. Our pension private equity performance has been rated number one in the country for two years in a row for ten year performance. I think that goes a long way in helping us meet the pension obligations of the state of Vermont. So I want to thank you for your support through the years. We submitted a budget that was in line with the governor's request, which was up 3%. And so I'm not really here to talk about that. I think it's self explanatory. The one issue I do wanna bring up is we are listed in house bill five sixty seven to potentially take over investment of the OPEB funds from the state treasurer's office. Oh, yes. And so if that occurs or if that passes, we respectfully ask for one more position to help us with the administration of that role. OPEB

[Robin Scheu (Chair, House Appropriations Committee)]: that is in the in the bill itself to to add this?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: It is.

[Wayne Laroche (Member, House Appropriations Committee)]: Our position is not in the bill.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Oh, yeah. It would need it to be added. We would need to be added. There is support from the treasurer's office to add it, but it wasn't added into the bill. We requested it be added, but it wasn't.

[Robin Scheu (Chair, House Appropriations Committee)]: That's in government operations. That's correct.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Yeah. We feel the increase in it's two different investment plans we're gonna have to merge. There's a lot more issues that we'll have to address. We will need one more financial staff person to assist us with this.

[Robin Scheu (Chair, House Appropriations Committee)]: Does that come out of the pension?

[Unidentified committee/staff member]: It all comes out

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: of yeah.

[Robin Scheu (Chair, House Appropriations Committee)]: So it's not general fund money.

[Unidentified committee/staff member]: It's not

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: general fund money. It's all special fund money. We would respectfully ask you to add that position back in. The governor's office didn't put it in, so we want to make sure that it gets placed into that bill.

[Wayne Laroche (Member, House Appropriations Committee)]: And we've provided you with a copy of our request to House GovOps on that very issue and spelling out specifically the enhanced level of rigor and risk management that would go along with management of those assets.

[Robin Scheu (Chair, House Appropriations Committee)]: What's your feeling about taking that off?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: We're excited about it. I think it will help in terms of economies of scale. We'll be able to offer for the OPEB funds access to the private markets, which they don't have, and that would get them access to some of our top tier performing investment managers. We'll eliminate one. We have investment consultants that manage both and represent treasurer's office as well as measurers. We'll merge that. We'll have just one. There's a lot of economies of scale with it. We're already doing it. We'll have to come up with different asset allocation strategies to meet the state liabilities versus the pension funds. But that's what Eric does and staff does really well. So, I think we are well equipped to handle it. I worry as the funds approach $10,000,000,000 which is fairly likely in the next couple of years, we're operating on a four person staff with very and we emphasized this last year very top heavy risk. Like, if we lose one or two people, we would have significant issues running this pension fund the way we're running it right now. And so we're not trying to overload staff, but we do feel that we would need the assistance of one more staff individual.

[Robin Scheu (Chair, House Appropriations Committee)]: I see some questions. Did you have a question, John, or not?

[Eric Henry (Chief Investment Officer, VPIC)]: Just real quick. Okay. Just take someone not being part of your team relatively soon as things grow for you.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Well, that's a question I was there right now. But we did have one of our staff Not gonna expect you to like Well, I think I testified last year, we had one staff person who was offered a position in Maine for a salary that was twice as much. She stayed here for personal reasons, but that could always happen very easily. We're training our people very well. And they're having now records that are top in the country. And so I would not be surprised if recruiters would be going after our two the people right below Eric. And you can ask Eric,

[Unidentified committee/staff member]: Eric, are you gonna leave?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: I think we're hopeful that it won't occur. I think we've set an environment that they really feel valued, and they're offered a great training opportunity. I worry that that is one of our key risk. It will be very, very hard to recruit at the salary levels they're currently at. Will just say that. That would be my next question. Yes. We're working through the governor's office to do market factor adjustments on We those are. We tried to make them exempt positions and go that route last year. That was rejected. Now we're working this market factor adjustment route. But it's been another year, and that still hasn't occurred. And so it takes time.

[Robin Scheu (Chair, House Appropriations Committee)]: Are they actually working on it now?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: They are working on it.

[Robin Scheu (Chair, House Appropriations Committee)]: Okay. Yes. Stuff is happening.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Okay. Stuff is happening in that arena. We've classified the two employees the way we need to classify them. And now they have to work through the market factor adjustment. But we are making progress there. It's slow, but we are

[Unidentified committee/staff member]: making progress.

[Robin Scheu (Chair, House Appropriations Committee)]: Well, I'm glad to hear this one, actually. Wayne, let's get

[Eric Henry (Chief Investment Officer, VPIC)]: the question. So the open plan is, for sure, is it gonna forward you?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: That's what the proposal is in the House bill.

[Eric Henry (Chief Investment Officer, VPIC)]: That's in bill. So that's in that age of five sixty seven.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Yeah. Yes.

[Robin Scheu (Chair, House Appropriations Committee)]: And that's the proposal, to do this. I haven't read the whole bill, but that's why, since they're here, I want to ask whether you're okay with that, because kind of important, you know, legislators dream things up and then

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: We would We'd be happy with it. We just need a little bit more help with staff. Sure. That makes sense.

[Eric Henry (Chief Investment Officer, VPIC)]: So the sponsored ability or the people in charge of bill, if we talk to

[Matthew Valerio (Defender General of Vermont)]: them about the physician need.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: They haven't asked us to testify yet, but we will.

[Eric Henry (Chief Investment Officer, VPIC)]: So you might be able to address that problem.

[Robin Scheu (Chair, House Appropriations Committee)]: It'll come over. It will still come to us.

[Eric Henry (Chief Investment Officer, VPIC)]: It will still come to us. We have asked house government operations to add that position. That's the purpose of the memo that we've supplied you with. You did We

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: did testify. That's right. Wasn't here to add.

[Eric Henry (Chief Investment Officer, VPIC)]: Eric has expressed the need for position. We've laid out all of the level of rigor analysis that need to happen on these assets that hasn't happened yet. We're working through that process now.

[Unidentified committee/staff member]: So we have requested that.

[Robin Scheu (Chair, House Appropriations Committee)]: Okay. Yeah, I'm looking at it. It's a 36 page bill. This isn't the only thing in the bill, but that's

[Wayne Laroche (Member, House Appropriations Committee)]: your It's part of what we're

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: interested in.

[Robin Scheu (Chair, House Appropriations Committee)]: Yeah, of course. Okay.

[Wayne Laroche (Member, House Appropriations Committee)]: If they put it in there, it would make life easier on us. If we had to add it, maybe

[Robin Scheu (Chair, House Appropriations Committee)]: Yeah, well, we'll be looking at it one way or the other way.

[Unidentified committee member]: Yeah, just want to clarify here. So you need one more position for the OPAP when you take this over and they merge, if that's what happens. Most likely, think that's going to happen? That would be logistically and financially the best thing to do anyway. Yes. Okay. Then you said you would eliminate one position. Is that something that you can transfer over? Is that correct? Did I hear that right?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: We don't plan on eliminating any positions. That's up to the treasurer's office. They

[Unidentified committee member]: eliminate the position they're using right now.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Yeah, that's not our prerogative. We would not be eliminating position. We would need the position.

[Unidentified committee/staff member]: We would want to hire them.

[Wayne Laroche (Member, House Appropriations Committee)]: It would go away as the treasurer's contract for consulting services. So there are two consulting service contracts now with the same firm. One is with BPIC, one is with the treasurer's office. The treasurer's office likely goes away, hours gets expanded, there's some kind of fees of scale in that process and likely some fee savings.

[Unidentified committee member]: So that would be a reduction on that expense from the treasurer, and then you'd pick up the person, part of the consulting contract, whatever it is.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Yes, correct.

[Wayne Laroche (Member, House Appropriations Committee)]: Now our consulting fees would go up but by less than the amount that the treasury's contract

[Unidentified committee member]: is So working it says it sounds like what you're saying is that there's a very specific need in looking at these OPEB funds as opposed to the pension funds. And it's going to get bigger over time?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: That's the idea. There's probably about 300,000,000 or $400,000,000 in them at this point. So you're funding them every year to try to get up to full funding. It's about 16% funded right now. So there's and then Chris could probably answer that question of what is the underfunded level? Probably a couple billion dollars. So over time, that $300,000,000 will grow to $2,000,000,000 hopefully, to cover your other post employment benefit obligations. The need is that it's a different set of assets that we'll have to look at differently. BIVIC will have to look at this from a different liability stream. And from there, we'll have to invest it slightly differently. And so that's the need for the extra person.

[Robin Scheu (Chair, House Appropriations Committee)]: It's a whole different side. You were at Vanguard and you're doing the international stuff and somebody else is doing the small cap and different markets, making that up. Chris, did you want to add anything to this?

[Chris Rupe (Joint Fiscal Office analyst)]: Chris, I was on the the committee to know that I'm staffing the bill in Govah, so I'll

[Wayne Laroche (Member, House Appropriations Committee)]: be writing up a fiscal note that

[Chris Rupe (Joint Fiscal Office analyst)]: I could see you all. Depending on what you want to do with that bill and this request, it's put a kid in the FY27 depict and treasurer appropriations. Right,

[Robin Scheu (Chair, House Appropriations Committee)]: okay do we know when GOMOPS is taking this up?

[Chris Rupe (Joint Fiscal Office analyst)]: They took some kind some money this afternoon on it. I don't know if they've voted it out yet but they've

[Robin Scheu (Chair, House Appropriations Committee)]: been working on it?

[Chris Rupe (Joint Fiscal Office analyst)]: And I've been planning attention, this weekend reached out, and the return results have been very responsive to my efforts.

[Robin Scheu (Chair, House Appropriations Committee)]: Great. Okay, thank you.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: That's all we got. But I'd be happy to we included a copy of our annual report, so you can have all that at your leisure. But I think Deepika has made we've come a long way in ten years. I'm really proud of what we put together.

[Robin Scheu (Chair, House Appropriations Committee)]: Well, and we made some big changes in 2022 and our intent on keeping our promises. So it's great. But we appreciate the work that you all have done. Mean, hope that all of the state employees and the teachers would appreciate it too, because we're helping them out tremendously, which is great.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Just great. Didn't quite make a billion dollars last year, but they were close. Excellent. Imagine

[Robin Scheu (Chair, House Appropriations Committee)]: that. Any other questions for these folks from anybody? Okay, thank you once again. Great to see you as always.

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: Seeing you. Keep up

[Robin Scheu (Chair, House Appropriations Committee)]: the great work. We appreciate it.

[Unidentified committee/staff member]: Thank you. Okay. So,

[Robin Scheu (Chair, House Appropriations Committee)]: think we have a break. Be on the floor later, madam. Oh, you've got to fill, don't you?

[Tom Golonka (Chair, Vermont Pension Investment Committee, VPIC)]: That's at

[Robin Scheu (Chair, House Appropriations Committee)]: 03:30, I think. Yes. We are on break until 02:15, Secretary of State's office