Vermont Legislature SmartTranscripts:

[Robin Scheu]: Morning, this is the House Appropriations Committee. We're back at 10:15 on Wednesday, 02/18/2026. And we are going to talk about the Higher Education Endowment Trust Fund, as the governor's made a proposal budget, and it's not something we've ever dealt with in this committee that I'm aware of. So, thought it would be a good idea to learn from it. So today we'll start with John Kray from Legislative Council, David Sherrin, the Deputy Treasurer will join us in a few minutes. Then tomorrow we've asked Adam to come in to understand the administration's interest in this. So we're trying to get a well rounded perspective. So welcome, John.

[Trevor Squirrell]: If you wanna introduce yourself over here.

[John Gray]: Good. Good morning, everyone. John Gray, officer of legislative council. Happy to be back here. I haven't been here in a little bit, so nice to be back in this room. I think the the simplest way is just for me to do an overview of the statute so you guys know what we're talking about, and then you can hear from the treasurer's office as to the actual mechanics.

[Eileen “Lynn” Dickinson]: We we have something from you

[David Yacovone]: or something?

[John Gray]: I'm gonna share screen just the actual statute Great. Okay. On the website. So nothing that you need to Okay, and then

[Robin Scheu]: we can just post that on our committee page at this point. So

[John Gray]: I'm just going to walk through this section. It's quite simple, as you can imagine. But given the amount of focus on this, I'll just give a quick overview of what you're gonna see in the sections. Like I said, it's gonna make sense as we walk through it. But just to overview, you're gonna have an account of the composition of the Vermont Higher Education Endowment Trust Fund, gonna have authority for the treasurer to invest those monies. That's kind of like a trust like attribute. You can think of it as a while we don't use these terms in this space, kind of like a trustee managing property on behalf of their beneficiaries. Subsection c will be kind of the heart of this, which is about a mandatory 5% allocation of assets within the fund for the purposes of non loan financial aid. Subsection d is gonna speak to a permissive, not a mandatory authority to use a certain percentage of assets for increasing or creating endowments. And then there are some reporting pieces as well. So just to hop in, subsection A is the fund composition. So a Vermont Higher Education Endowment Trust Fund is established in the office of the state treasurer to comprise the following appropriations and then subdivision two in any fiscal year in which a general fund surplus exists. The general fund stabilization reserve is funded to its required level, and then funds raised by the estate tax levied under title 32 that are more than a 125% of those forecasted by the e board in July. Those would go into this fund. So anything in excess of 125% of those e board estimates for the estate tax would flow into this accounting for the general fund being at appropriate levels, basically.

[Robin Scheu]: And so what do we Do you know what we've been sort of assuming in the revenue forecast for estate taxes? Is it around 16,000,000 a year?

[John Gray]: I frankly don't know that off the top of my head. I just know that there's been a recent don't know, kerpluffle is the right word, but there's been As you can imagine, the ceramic assortment can be quite volatile. So you've seen

[Robin Scheu]: Oh, we know it's volatile. I think last year we had one or two very wealthy people passed away.

[John Gray]: Exactly. And I Well, we could get into a bigger discussion about that, but maybe it's better not to.

[Robin Scheu]: With our aging population. Okay. Okay, boomer. I

[John Gray]: mean, one of the things I think about this is if people treat this particular provision as something that can just be moved around to different places, you would expect that the e board forecast would have to account for that volatility in its forecasting. So I don't know what you can say about the predictions that we want to come. But I don't know the dollar figure.

[Robin Scheu]: Yeah. Okay. Thank you.

[John Gray]: So the last element for the competition of the trust fund is contributions from other sources. So just fairly generic appropriations and contributions, and then this one specific set of funding for the trust fund, which is those funds raised by the Essex in excess of about 125% figure.

[Robin Scheu]: Do you know when this was created?

[John Gray]: 1999. And if at the end of this, you guys are interested, I can talk about the history of the amendments to this section. I will just say it has largely been in the form that it is currently in since its inception, except we'll come to this, there's a subsection related to a trust fund council that makes decisions about that permanent endowment allocation. At different points in times, there have been different entities that have been that decision maker within the space. But the actual structure in terms of the sets of funds have always been the same in this trust fund. The purposes for which it's been designated have always been the same. There have been some clarifications about equal allocations of assets, but largely the trust fund statute is in the form it's been since the 90s.

[Thomas Stevens]: So 1999 was a pretty key year or thereabouts for back '60. I'm just curious to know whether this had any relationship to when they were structuring the public the I

[David Sharon]: don't want to say lower education in Downtown

[Thomas Stevens]: Charleston, but the K-twelve. And if this was done at the time, and I know someone's here that might be able to answer this partly, but the idea of it strike you as in your research as being connected to that.

[John Gray]: So that I don't know, but the piece that I maybe can offer that's helpful is I had mentioned that it's not always been the council which will come to who has been that decision maker in terms of allocating the pieces for permanent endowments. One of the entities at one point that was that decision maker was a pre k through 16 council that was created. So it's interesting. There have been a higher education piece that was a decision maker. At one point, there's a pre k through 16 council that was the piece. So there have been different folks looking at this, but I think you're right to identify that there was lots of thoughts about reforms within the education space around this time. And you can see that in the initial creation of the act, the initial decision maker in the space, which was a commission, which stood up in that act as well. So it wasn't a preexisting body. It was something that accompanied the creation of the trust fund.

[Eileen “Lynn” Dickinson]: Okay, let's continue.

[John Gray]: So subsection A is your sets of funds. Subsection B, very straightforward. The state treasurer may invest the monies in the fund. So you can think of that as managing the property. Subsection C, I think this is the core of the section. I'll call it the core. Of course, the political call, what you think of is the heart of this, but this is your mandatory allocation for non loan financial aid. So in August of each fiscal year, beginning in 2000, the state treasurer shall withdraw and divide an amount equal to 5% of the assets equally among the University of Vermont, the Vermont State Colleges, and Vermont Student Assistance Corporation. I'll come back to the 5% of assets because you're gonna see that this is actually capped or it's subject to a constraint. It may not always be five percent. So allocate 5% of those assets among these three entities. Then we have a technical definition for what assets means. Because you're dealing with invested funds, you need to capture an actual value rate. So this is just the technical definition that's used. Assets means the average of the fund's market values, the end of each quarter for the most recent twelve quarters, or all quarters of operation. We don't really need that call out anymore. So whichever is

[Robin Scheu]: The twelve months. The rolling twelve

[John Gray]: months or all quarters, whichever is less. So the lower asset value based on full life versus that rolling three years.

[Eileen “Lynn” Dickinson]: I have a quick question.

[Robin Scheu]: I'm assuming that CCB is not included since they're not named, or they fall under Vermont State Colleges?

[John Gray]: That I don't know, but I can look in a

[Robin Scheu]: They're part of the state colleges.

[Eileen “Lynn” Dickinson]: Would suspect they're under the Vermont State College. By 1999, they were part of the Vermont State College.

[John Kascenska]: I actually talked to Scott Giles about it.

[David Yacovone]: Oh, thanks. Alright. Yeah. No problem.

[Trevor Squirrell]: Just wanted to make sure.

[John Gray]: Glad that others have the answer.

[Eileen “Lynn” Dickinson]: So

[John Gray]: 5% divided among these three MCs equally, definition of assets. And then here's the constraint on that 5%. Therefore, up to 5% of the fund assets are hereby annually allocated pursuant to the section provided that the amount allocated shall not exceed an amount that would bring the fund balance below the initial funding made in fiscal year 2000, plus any additional contributions to the principal. So there's a constraint. It's not meant to bring you below all the contributions to principal, including the initial contribution in FY 2000. And you can think of it as just taking funds above. You're never giving below. Right?

[Robin Scheu]: And when the treasurer's office comes, they can probably tell us what those numbers are with capital charts. Perfect. Okay.

[David Sharon]: Thank you. And then

[John Gray]: here's the purposes for which that 5% is dealt with. The University of Vermont and the Vermont State Colleges shall use the funds to provide non loan financial aid for Vermont students attending their institutions. And the Vermont Students Assistance Corporation shall use the funds to provide non loan financial aid Vermont students attending a Vermont post secondary institution. So same purposes for each, but you need the more generic call out Vermont Student Assistance Corporation.

[David Yacovone]: So we translate that to mean scholarships?

[David Sharon]: Yes. Grants and the like. So

[John Gray]: that's your subsection C. Again, that is a mandatory and as you can see it's the state treasurer withdrawing and dividing that amount. There's no other entity making that determination at least within statute. Subsection D is differently structured. I mentioned before, subsection C is August, that's an August determination, and you can see that the timeline for this is the first quarter of each fiscal year. Just to call out, that would be your July, August, September, so it's around the same time. So during the first quarter of each fiscal year, the secretary of administration or designee and the council created in subsection H of the section may authorize the treasurer to make an amount equal to not more than 2% of the assets available, and I'll talk about why available is the term used there in a second, in equal amounts to the University of Vermont and the Vermont State Colleges for the purpose of creating or increasing a permanent endowment. So this is a permissive. If these entities, the secretary of administration and the council authorize the treasurer, the treasurer can make available not more than 2% of the assets available in equal amounts to those entities for the purposes of permanent endowments.

[Robin Scheu]: And it's not it's not more than 2% each, it's total, then we'll divide it in equal Yep. Okay.

[John Gray]: We have the same definition for assets, but you may result with a different figure depending on when the determination is made, I suppose. I would expect them to be the same, but I think you'll hear about that. Up to 2% of the fund assets are hereby annually allocated pursuant to this section. And, again, we have a proviso, the same proviso provided that the amount allocated shall not exceed an amount that would bring the fund balance below the initial funding made in fiscal year two thousand plus any additional contributions to the principal. One half, and this is the point that you were making, one half the amount allocated shall be made available to the University of Vermont, and one half shall be made available to the Vermont State Colleges. And then here's the reason why the term available is used. The final line of this subdivision too, the University of Vermont and the Vermont State Colleges may withdraw funds upon certification by the withdrawing institution to the commissioner of finance and management, but it has received private donations that are double the amount it plans to withdraw. So you need a two to one match. If you have that, you can then withdraw funds.

[Robin Scheu]: Creating an endowment or an increasing an endowment. It's different than scholarships. $1,000,000 to increase your endowment, you better have fundraised for 2,000,000.

[David Sharon]: Exactly. Okay. Okay.

[Robin Scheu]: That makes sense.

[David Sharon]: Those are your core

[John Gray]: pieces of the bill. You have the piece related to non loan financial aid, and then you have the piece related to endowments. Again, just to distinguish the non loan financial aid piece, the 5% is mandatory, subject to that constraint about not dipping below principal. And then the determination for the boosting endowments is permissive, and it requires determination from secretary of administration and the council that will come to you shortly.

[Eileen “Lynn” Dickinson]: Well, you're talking about twelve quarters. You're not talking about twelve months. You're talking about four years. Quarters. Back.

[John Gray]: Three years. Yeah. Three

[David Sharon]: years. Exactly.

[John Gray]: Subsection e is a financial report. So annually on or before September 30, which would be the end of that first quarter of your fiscal year. Right? So annually on or before September 30, treasurer shall render a financial report on the receipts, disbursements, and earnings of the fund for the preceding fiscal year, and that goes to the decision makers for authorizing that permanent endowment piece. Right? It goes to the secretary administration and the council. That's a financial report to those decision makers, and as you can imagine, that would help inform how to approach the 2% piece. Subsection f, technical piece, all balances in the fund at the end of any fiscal year shall be carried forward and used only for the purposes set forth in this section. Earnings that are not withdrawn shall remain in the fund. Subsection g is a set of reports to the legislature. So the I'm just gonna call them the beneficiaries. It's not the term to use in the statute, but you can think of them as beneficiaries like the University of Vermont, the Vermont State Colleges, and the Vermont Student Assistance Corporation shall review expenditures made from the fund and evaluate the impact of the expenditures on higher education in Vermont, report this information to the House and Senate Committees on Education each year in January. So we have financial report that goes to the decision makers for that 2% piece, and then you have an impact report that comes from the beneficiaries. I'm just gonna keep calling them that, but it's just globally, and that comes to the legislature. The last piece is the nonsecretary of administration decision maker for that 2% piece. This is the Vermont Higher Education Endowment Trust Fund Council. This is subsection h. There's created this council to perform the duties set forth in subsections d and e. The council shall be attached to the office of treasurer for administration purposes and shall be composed of following members, the president of the University of Vermont, the chancellor of the Vermont State Colleges, the president of the Vermont Student Assistance Corporation, president of the Association of Vermont Independent Colleges, a representative from the business and industry community selected by the Vermont Business Roundtable, member of the House of Representatives, and a member of the senate.

[Robin Scheu]: Do we know who the

[John Gray]: folks are.

[Robin Scheu]: Lynn, first, Lynn, is it still a chancellor that you

[Eileen “Lynn” Dickinson]: have in front us? Yes. A I chancellor. That's correct. Do we know

[Robin Scheu]: who the House and Senate reps are to this? I guess that the assistant treasurer might have that information when he comes up. Know that that's a question. We'll find out. Haven't heard about anybody being on this. Is anybody else?

[Thomas Stevens]: I would have thought when, but that's

[John Kascenska]: just

[Eileen “Lynn” Dickinson]: No. I think that we've had a series of high income people over the years that have died, three or four of them over the past twenty years, and they have resulted in large endowments, state tax for the state that has gone into it. But normally, I don't think there's all that much of a revenue source. It's just

[Robin Scheu]: normal people that are not

[Eileen “Lynn” Dickinson]: wealthy or anything, and that goes in as part of the estate tax for the state. But when you have a large amount of money go in, it

[Robin Scheu]: changes things. That's why I have the assistant treasurer here to talk to us.

[Eileen “Lynn” Dickinson]: So I don't know that most of us would pay attention to it if it weren't for the fact.

[Robin Scheu]: We have never had to pay attention to this. And when I was on Ways and Means, we didn't talk about it other than, oh yeah, it's that thing where we do that thing. That's about it, right? I mean, you didn't talk about it probably

[Eileen “Lynn” Dickinson]: last time. I remember when I was

[Robin Scheu]: first here, we did do,

[Eileen “Lynn” Dickinson]: I think it was the pre K to 16 council that was done. On the floor of the House was an amendment to it. I'm not sure where it may have come and gone. But I remember being discussed because that was one of the times when there was sizable interest in the money. And then shortly after that, it just disappeared. Don't know who the representatives are. I'd like to know who the business rep is.

[Robin Scheu]: We're going to have the assistant treasurer up, and I bet you'll be able to answer a bunch of our questions. I have Wayne and then Tom.

[David Yacovone]: So there's restrictions on use of 5%. It'd have to be for grants and scholarships. No restrictions on how the endowment fund money is spent. It's co mingled with other money, there's no restrictions there.

[John Gray]: Yeah, the restriction is on the funds being used to increase the endowment, but it doesn't speak to what the endowment itself would be used to.

[Thomas Stevens]: And you may have mentioned it, but I just may have missed it. It's the 5% is split equally between the systems. But

[David Yacovone]: if

[Thomas Stevens]: a particular system does not raise enough money to withdraw money, are other systems allowed to take some of those funds or is it just carry forward?

[John Gray]: So so I I for the 5%, it's just going out to the to the each of the three, but 2% is the piece that you're talking about, the endowments. I don't see anything in statute that says if someone doesn't receive a match, the other couldn't access its funds because it did have a match. I think of it as making available the 2% in equal amounts to each, and then it's incumbent upon the beneficiaries themselves to make the match, but they have that amount of funding available to them, and they can either claim it or not based on

[David Sharon]: And it gets carried forward.

[Thomas Stevens]: So it's a very small point. Don't mean

[John Gray]: The assets would remain in the fund, and they would carry forward. But each year, your determination of the 2% would be based on whatever that definition of assets is in that given year based on the lesser of the three year rolling balance or

[Robin Scheu]: 50% may not be accessed for years unless somebody wants to That's right. Wants to do it and they've raised enough funds that they can access half, 50% of what they've raised.

[Thomas Stevens]: But if somebody, I mean,

[John Gray]: I'll think

[Thomas Stevens]: of UVM because that's one institution that I see the large numbers for, but if they receive if someone donates $50,000,000

[John Kascenska]: for the purpose of

[David Sharon]: their endowment,

[Thomas Stevens]: they can apply for theoretically if there's no cap on them, then they can apply up to $25,000,000 if that's in the 2%,

[Robin Scheu]: I don't think two which percent is the cap, right?

[Thomas Stevens]: Right, but if they apply and they take all the money, that's in the 2% cap, or is their money protected just in case somebody, the other institutions

[John Gray]: What's made available is made available equally. So let me just scroll to this.

[David Yacovone]: The 2% has

[John Gray]: to be divided. Exactly. Right.

[Thomas Stevens]: If the other institutions can't use it, that does not give the other people the right

[John Gray]: They don't get their money.

[Thomas Stevens]: That's right. Just the mental stacking I needed to do. It's not first come first.

[David Yacovone]: The question will be, they getting, every time it's available, are they taking the portion that they take? So I think it's time to get treasurer up

[Robin Scheu]: to the table, if he's ready. And John, you can sit there or

[John Gray]: stay or go, whatever you'd like We're to here. Okay. Whatever the answers that I don't have.

[Robin Scheu]: Okay. There is a presentation that David has in the website, if you don't have it.

[David Sharon]: Good morning, madam chair. Good morning, committee. Thank you for having me. Steve, for the record, David Sharon, deputy treasurer.

[Robin Scheu]: So, Dave, before you get started, I don't think you've actually been into our committee room.

[David Sharon]: I don't believe so.

[Robin Scheu]: Okay. So we will introduce ourselves. Thank you. Okay?

[David Yacovone]: Good morning. I'm David Yacovone from Morrisville. Good morning. Represent the Lamoille Washington District. Welcome. Thank you.

[John Kascenska]: Good morning. Thank you again. John Kascenska from Burke. I represent the Essex Caledonia district 10 towns.

[Michael Nigro]: Mike Nigro, I represent Bennington and Calvin.

[Thomas Stevens]: I'm Stevens from Waterford. Chittenden.

[Robin Scheu]: I'm Thomas Stevens

[Eileen “Lynn” Dickinson]: It's Julie from Burroughton, Utah.

[David Yacovone]: Trevor Squirrell, Caracovone, Underhill. Michael Mrowicki, Berkshire, and Richard. Michael Mrowicki, Linden Ford, Patty Adams.

[Eileen “Lynn” Dickinson]: Hi, David Lynn Dickinson, I represent St. Aldag's Town, and I, for full disclosure, am the chair of the Vermont State College Board legislative trustee. The treasurer's office is in your portfolio. But I'm not sure that this is

[Robin Scheu]: in the portfolio, but the treasurer's office is. Great.

[David Sharon]: All right. So I'm just going to get this up on the screen here. And apologies if this takes me a second. This

[Thomas Stevens]: there

[David Sharon]: we go. So as I understand, the committee is interested in learning a little bit more about the current status of the Higher Ed Trust Fund. You obviously heard from the State of Council about how it operates, so I will not dwell too much on that part of it. And I understand the committee was also interested in learning a little bit about a proposal that the treasurer's office has with respect to using some of the the funding pathway that currently goes into higher trust fund to also support the VTSAYS program. But if that is not, if you would like Also, talk about

[Robin Scheu]: governor has recommended taking $15,000,000 out for a gym or something, I can't remember, AVM. Conventions. So anyway, we're going to hear more from Adam about that, but

[Eileen “Lynn” Dickinson]: what we

[Robin Scheu]: want to hear is how it works and balances and what you've done over the years, and if you have any opinion on this request, because I believe it's also going to require a statutory change.

[David Sharon]: Yes, I would certainly Yes, it would. Okay. So as the legislative council mentioned, this fund has been in existence since 1999, and it has been largely unchanged in its structure since then. The summary, we have here a summary of the contributions to the fund. There was an initial appropriation of 6,000,000. I think that actually would have come through in FY 2000.

[Robin Scheu]: Right.

[David Sharon]: And then there was one additional appropriation of 1,000,000 a couple of years later. That was the initial ceding of the fund. There is the occasional windfall from the estate tax. In a minute, I'll show you a graph that demonstrates that income from the estate tax. I would describe it as occasional and uncertain, but it is significant when it happens. Yes. There is also an annual transfer from unclaimed property, which is lives within the treasurer's office. All that that same chart that I'll show you in a minute shows that that transfer is quite small compared to the body of the fund and the amount that comes in from the estate tax. And, of course, you have the interest from the fund's investments. The fund is managed within the treasurer's office as part of a larger fund called the trust investment account, that manages a number of different funds, and, it is all within it is used as a vehicle to invest and to gain returns. And as legislative council mentioned, it is those returns that allow for these distributions to be made. No distributions can be made from the principal, And the principal is made up of these bullet points that you see here. And the total amount of the fund balance at the end of FY twenty five was 65,700,000.0.

[Robin Scheu]: Do we know how much of that is considered principal?

[David Sharon]: I believe it was just about 60,000,000 at the end of FY twenty five. I can get you that exact number. Okay, that's close enough for that.

[Robin Scheu]: So about 60,000,000 is principal, which by statute can't be touched.

[David Sharon]: That's right.

[Robin Scheu]: Was certainly 25,000,000, Tom. Okay.

[David Sharon]: Yeah, there was an amount to distribute. The And I will also note, I sent the committee assistant, Autumn, the treasurer's annual report on this fund and that does have that number in it.

[Robin Scheu]: Okay, great.

[Eileen “Lynn” Dickinson]: So you

[David Sharon]: can find it there as well.

[David Yacovone]: I was looking at it, the principal, so not the original principal, not the 7,000,000.

[Robin Scheu]: But additional, in the part that John talked to us about in section two, D2, it says, provided the amount allocation will not exceed an amount that would bring the fund balance below the initial funding made in fiscal year 2000, that's the 6,000,000, plus any additional contributions to the principal.

[David Yacovone]: So any of the money flowing in there except for interest is considered principal? That's correct. So I figured it was about $60,000,000 That's

[David Sharon]: In that neighborhood, I know that the amount that was interest at the end of the last accounting was enough to do the full distribution. I don't remember the exact number that it was, but I believe it was around 60,000,000. So summary of the distributions follows, as we just heard from legislative council, the fund provides non loan financial aid to Vermont students at those three institutions or flowing through VSAC. As we also mentioned, the annual distribution is dependent on the investments and gains and losses. If are no, if we're to an end in a year, and this has happened, where there were significant losses to the fund, there would be no distribution. And the 5% is a mandatory distribution. The 2% distribution is a discretionary authorized by the committee that the legislative council described. And I do have the list. I will bring that up in a minute from the most recent meeting that we had. Great.

[Trevor Squirrell]: Yep. Pardon? Okay. So I have a question. You said it was mandatory. If there's 5% if you have an interest amount for the year, you must take 5% of that and distribute it?

[David Sharon]: Yeah. The language in subsection c is that the state treasurer shall withdraw and divide an amount equal to 5%.

[Robin Scheu]: And the amount, because you have a rolling 12 quarters, if you have losses, it just means the 5% may be a smaller dollar figure than if you haven't had gains of the rolling 12.

[David Sharon]: That's exactly right. Yeah, so it's 5% of the assets provided that you can't spend any of the principal.

[David Yacovone]: So

[David Sharon]: if you had significant losses and this did happen right after the pandemic, I'll show you a chart in a minute, I believe it was 22. You can see there's no lines up at all because no distributions were made. So this is a graph that shows the 5% distributions and the 2% distributions. The 5% ones are obviously the taller lines, the light blue taller lines, the 2% are the dark blue shorter lines. You can see for the first about twelve years of the fund, were being made every year. Throughout teens, the 2% was mostly not being made. Really for most of the last twelve, thirteen years, the 2% has not been made. I can't tell you all the reasons behind it. I did talk to our predecessor treasurer to learn a little bit more about that. And she said that generally that was because it was either because the returns were too tight to allow for that distribution or for reasons of fiscal prudence, they thought it was best not to do that. So one or the other throughout most of those years, obviously in '20 and '21, you saw distribution in '25, you saw that distribution. And the one year where there was no distribution was 2022, and that was related to pandemic losses, as I understand.

[Robin Scheu]: And so do you know

[John Gray]: You don't have the institutional memory, but do you

[Robin Scheu]: get any intel on why in 2013 it jumped up so much? Was that another one of

[Eileen “Lynn” Dickinson]: those state tax things?

[Robin Scheu]: No, because that would be a rolling 12 quarters.

[John Gray]: It is

[David Sharon]: a rolling 12 quarters, so as a large income chunk comes in, will have an impact. I'm not exactly sure of why there was a spike, but let's take a look at We'll get to a chart in a minute. Let me actually skip ahead to that chart because that may give you something. You can see in what appears to be, I'd say that looks like 2011, there was a significant estate tax contribution. And my guess is that that impacted starting in 2013, that started impacting those that 12 that trailing 12 quarters.

[Robin Scheu]: If we go back to 2025, there was a 2% distribution. It wasn't a lot. It was 750,000 or something like that. So that was an adult. Do you know any more about that? Was it used by both college systems and how much did they get?

[David Sharon]: My understanding is that, yes, it was used by both college systems. We have here the numbers.

[Robin Scheu]: So

[David Sharon]: the 5% ended up with a 621,500 distribution for scholarships, and then the 2% for UVM and the BSC was approved and that was 327,250 for each. And that means that they were able to demonstrate to the committee that they had done that. They each raised

[Robin Scheu]: like 60 or something like that.

[David Sharon]: Exactly. And so, yeah.

[Robin Scheu]: That was a lot of scholarship money, 621,000.

[David Sharon]: That's right. It funded $6.75 scholarships for Vermonters and averaged $1,400 per scholarship. So there was a significant outlay.

[Robin Scheu]: And a lot of first gen students.

[David Sharon]: That's exactly right. Yeah. So it's a significant impact.

[David Yacovone]: So just looking at it, so if you had $6,000,000 in interest, said $600,000 or $300,000 for the 5% or portion of that. And then it looks like in those years, you probably have really low interest rates. You aren't really accumulating much. You can only spend a portion of that, not very much. So I'm just looking at that system, wondering whether or not that's a real good rate that might benefit from time. Potentially, could grow in a big endowment that may not be used if the interest rates aren't producing anything. I'm curious about Are we saving money for the unborn children? Or are we educating the people we need to now?

[David Sharon]: I think that's a very fair policy point. The legislature decided in 1999 to protect It was important to protect the body of the fund and to make sure that that didn't get reduced. But I take your point that that does mean that you have less flexibility in using the That's the thought.

[Thomas Stevens]: Yeah, yeah.

[Robin Scheu]: Right. This is the issue with endowments in general. And personally, having shared a bunch of nonprofit boards, board designated funds give you more flexibility. Then you have to tie up so much principle, you've used five percent, and then you just never use the money. And so, just sits there, which is not always sometimes okay, but not always, Lynn.

[Eileen “Lynn” Dickinson]: Yeah, I did a little bit of research on this and you ever heard of Buck Freeman?

[David Yacovone]: I don't know if I'm familiar.

[Eileen “Lynn” Dickinson]: Buck Freeman's father was one of the executives of the AIG, from the beginning. Mansfield Freeman died. It's the Freeman Foundation's, funded a lot of our land use.

[Robin Scheu]: They did, they were, I was on the land trust board when we did the last stuff.

[Eileen “Lynn” Dickinson]: So, Nanceville Freeman passed away, it might have been around 1999, 1998, 1998. Buck Freeman passed away maybe he was the one who passed away in New York by about 2000. And then his wife passed away about 2010. Those were the big infusions. This may all, to answer Wayne's question, that may have been a requirement of the donor. And then, of course, now we have this most recent case. Again, a large sum of money. So some of these things might have been mandated. I someone does research on that,

[David Yacovone]: it might have been mandated by the donor.

[Robin Scheu]: Because it's not just in case. They wouldn't

[David Yacovone]: be able to mandate oxide, the slog of the tobacco. The That's five part of percent of the interest would still have to be distributed.

[Eileen “Lynn” Dickinson]: Yes, well they may have put that all into whatever their donation was and that it was far higher than the statue.

[John Kascenska]: It's a contribution basically from that particular

[Robin Scheu]: Right, the state got to bring that up. It's another contribution, right?

[Eileen “Lynn” Dickinson]: And they're trying to preserve the corpus of the money so that it can be used over many years. I mean, this is really an endowment. This is not one time money. This is what I'm

[David Sharon]: Yes, that's exactly was established by

[David Yacovone]: not one time. Exactly. So maybe someone decided not to draw the money in those years. University Not

[Eileen “Lynn” Dickinson]: as much money. They could

[David Yacovone]: have decided not to draw the money, but in terms of the statute that says this 5% shall be drawn in a certain period of time, then any agreement that that wouldn't affect the statute would pay. So they'd have to choose not to take the money.

[John Kascenska]: Actually, you should just repeat what you said in a moment.

[David Yacovone]: When you look at the graphic there, there are years when no money was taken out. Correct.

[Robin Scheu]: On the endowment.

[David Yacovone]: So, was no money.

[Robin Scheu]: The 5% was distributed for scholarships every year, except for 2022. Oh, the 2%. The 2% is the dark blue and that's not used all the time. And you can see in 2000, it was probably like $20,000.

[Eileen “Lynn” Dickinson]: Think it was very much. And we had stock market fluctuating after nineeleven. After nineeleven and then in 2009, October '11, you know, by 2013 the stock market recovered now. Exactly. Great recession.

[David Yacovone]: I'd like to see the graph with the total amount of endowments to the economy also. It would be nice if all three of those were overlaid.

[Robin Scheu]: But the total amount of assets in the Yes. Do we have the total amount of assets?

[David Sharon]: I don't have that. The closest that I have to that is this one, which shows the annual contributions. We don't have one that has total amount, but I can certainly get you that. And I think in our annual report, which hopefully will get distributed to you soon, I'd have to do that.

[Robin Scheu]: Is that on the committee page?

[David Yacovone]: It's on the committee page.

[Eileen “Lynn” Dickinson]: Just to understand

[David Yacovone]: how much are we accruing money, are we losing it, is somebody choosing not to take the money? Obviously, there's a statute to correct certain things, but what's the rest of the operation? How that money gets spent or not spent?

[John Kascenska]: I I mean, is an annual distribution per year based on that 5% portion of things here that the entities receive, so they get that, and that's certainly

[Thomas Stevens]: the Treasury's got 24%

[David Yacovone]: for October.

[Robin Scheu]: Prashant provided that it doesn't go below.

[David Yacovone]: Right. Can't go below the

[Robin Scheu]: total interest. It's That sort of

[Trevor Squirrell]: I need a clarification. Is it 5% of the interest earned?

[David Sharon]: No. It's 5% of the total assets provided that the distribution can't touch the principal. So the interest has in order to do that full 5% or 7% distribution, if the committee chooses to do the full amount, the returns have to have been greater than 7% of the total assets of the fund. You have to the year has to end with greater than 7% or greater of the total assets of the fund in order to do that 7% distribution.

[Trevor Squirrell]: I'm just confused by the comment here that the annual distribution is dependent upon the investment gains and losses from the prior fiscal year. I thought we were dependent only upon the interest that was earned the biggest year and you take 5% of that.

[David Sharon]: No, so you're taking 5% of the total assets. That's the distribution. Except that

[Trevor Squirrell]: you

[David Sharon]: can't if those returns don't end up being equivalent to 5% of the total assets. Over three years. And yes, the assets are the assets measured as the trailing Right,

[Robin Scheu]: and that's why it's twelve month rolling quarters too, so you don't have this big round. Yeah. So I'm looking at the annual report and it kind of has it for '24, but going into '25, but we don't have like a little bar chart of what the principal is at the end of each fiscal year.

[David Sharon]: Gotcha, we can get you that.

[Robin Scheu]: That probably would be easy for you to get.

[David Sharon]: Easy, and you can sort of extrapolate from looking at this.

[Robin Scheu]: Yeah, but we like to see the numbers.

[David Sharon]: But I understand that it would be easier.

[Robin Scheu]: That was nerds, so that would be very helpful. Thank you. Thank you, John. Yes. Thank you. Okay. So where are we?

[David Sharon]: So I can also add about there's one other source that goes into the higher ed trust fund, which is a transfer from the unclaimed property division, which sits in the treasurer's office. As I mentioned at the beginning, this is really quite small compared to the the income that comes in from the estate tax. But just to explain it so you're aware of what is happening here, Around, I think it was 08/09, there was a piece added as I understand that this actually wasn't from the very beginning, but this transfer got added about eight or nine years in. And all of the unplanned property that is more than ten years old and is worth less than $100 gets transferred into the higher ed trust funds. So every year, these accounts age from year nine to year 10, and that year's worth of accounts that is worth less than $100 gets swept in to higher end trust fund. I will skip to this chart, which shows on the right hand side, you can see the last five years of those transfers. They're not nothing, but they're not a huge number compared to the estate tax. The largest ever transfer was in FY twenty five, and that was $147,000 You can see that at the very bottom of that chart on the right.

[Robin Scheu]: So there were a lot that were that hit that ten year mark that were under $100 that they're being claimed.

[David Sharon]: That's right. Yeah. And you can see then the trailing five years behind that 134, 01/2003, 01/2009, 01/1928. So there is a chunk that comes in. And as a matter of scale, you can see on that chart, those contributions are being recorded on the scale of annual contributions. But you can see that they're barely visible at the bottom of that X axis there. So you can hardly see them, but they are there. So that is another source of income to the higher trust fund. By percentage, it's quite small, but it does exist and is ongoing. And that's the So that is a summary of the Higher Ed Trust Fund as it currently stands and the sources of income and the distributions. I'm happy to answer other questions or any further questions about that.

[Robin Scheu]: I think we're clear on that. And then you have a proposal.

[David Sharon]: That's right.

[Robin Scheu]: You all have taken a position on the administration's request for the $15,000,000 and we'd like

[Trevor Squirrell]: to hear about that too.

[David Sharon]: Sure. So let me start with the second one. And the treasurer's position on that is that any proposal to change the way the higher ed trust fund works needs to have the agreement of all three beneficiaries to the higher ed trust. And that's his view. I know there have been ongoing discussions about this, and he would be amenable to something that has the agreement of all the beneficiaries. Okay.

[Robin Scheu]: And at this point, I don't believe that is the case. Has there been officials or anything? The Higher Ed Trust Fund Council hasn't met to discuss this or anything?

[David Sharon]: No, they have not. Okay. So that, as I understand it, discussions are ongoing, but I don't believe that that has been arrived. An agreement has been arrived at.

[John Kascenska]: Just to help clarify, because we're in a little code

[Thomas Stevens]: room here, so I don't always get details of what else is going on. So if we take $15,000,000 from the $65,000,000 that exists, we're taking it out one month's sum, is that the proposal?

[David Sharon]: As I understand it, that's the proposal.

[Thomas Stevens]: That will reduce any, any kind of future 5%, 2% things to each of its schools. So there's no agreement that says UVM receives this money, which is not in the way it's presently structured, it's not intended for capital projects essentially. So there's no agreement yet as to whether they would forego their access to this until they pay back the $15,000,000

[David Sharon]: Not that I'm aware of.

[Robin Scheu]: Yeah, and that's I don't even want to ask that again tomorrow when Adam comes in to talk about the administration.

[David Sharon]: Yeah, it's a fairness issue.

[Robin Scheu]: You also are reducing the principal by $15,000,000 which means that the interest available is going to be less and it's going to be less in scholarships over time because the five percent of the assets is the 5% of fewer assets go from 65 to 50 roughly right now so that the schools would get less money to do for scholarships for promotions.

[Thomas Stevens]: I mean I know there's investments, even relying solely on the interest gains that in and of itself you're going to gain less interest on equity than you are on 65 or 70.

[Robin Scheu]: That's right. Again gets us back to less money for students.

[Thomas Stevens]: Right. And if the purpose again is a capital project, without judging what the capital project is for, you know, it's one of those things where those of us who didn't go to UVM, who don't have a major interest in what's going on on campus like this, where's the donor? There's this like, why is it the state's fund? So that's philosophical That will

[Robin Scheu]: be the core of the conversation I think we'll have with Adam tomorrow.

[John Kascenska]: Part of this too, so just correct me if I don't accurately understand this here, but in the statute right here, certification by withdrawing whatever amount here needs to be doubled the amount of plans to withdraw so they can use that money to leverage private donations. I would assume that That was kind my understanding has with the been looking at here

[David Yacovone]: to see what might be possible.

[David Sharon]: Yeah. I mean, so the two to one requirement does require these institutions to do independent fundraising. I am I don't know for sure how they speak about this opportunity to potential donors, but my guess is that they probably do use that You're talking about donors to help As a leverage point?

[John Kascenska]: Yeah. Perhaps, but I'm not sure what those conversations are like today here, for sure. Right. Couldn't represent. The other question I have here too is we don't know the makeup of the council at all, Oh,

[Robin Scheu]: yeah. Do you know who council members are? Thank you. Yes. We didn't know there was a state rep and a senator, for example.

[David Sharon]: So this is the most recent these are the minutes of the most recent meeting. Is that in the in the report? This is not in the report, actually. These are the but this is posted on our website. We have a web page dedicated to the Higher Ed Trust Fund, and we have the the agendas and minutes. This is the most recent set of minutes.

[John Kascenska]: Could you send that

[David Yacovone]: to us?

[David Sharon]: And I can certainly send it to you.

[David Yacovone]: Just so it's a little more convenient.

[David Sharon]: Sure. Yeah. This isn't the most visible. I try to make it

[Robin Scheu]: Oh, I see. So we have some different

[Eileen “Lynn” Dickinson]: ways of meeting the spectrums.

[Robin Scheu]: Bridget and then Andy Burchlek are the two and then Kimberly Jessup is a former appropriations committee member Yeah, that would be good to

[David Sharon]: Yeah, we'll send that along too. Yeah, no problem. Yeah,

[David Yacovone]: David? I wonder if has anybody given any thought, irrespective of the center that's proposed, to using this in some way to mitigate the cut, the ache, to a meaner Yeah, like

[Eileen “Lynn” Dickinson]: that's a whole different, pardon? That's a whole different, plotter, it's a different-

[David Yacovone]: People are talking about amending their statute.

[Robin Scheu]: Well, yes, and whether it could be used through VSAC or something else to accomplish the same thing. Notion being non loan scholarships and grants to Vermonters. Anyway, yeah, that would be helpful to have. Thanks.

[David Sharon]: Yes, we'll send that along. Okay. Thank you.

[Robin Scheu]: Okay. So you also have some proposals that you wanna let us know about.

[David Sharon]: We do have a proposal. This is within the treasurer's omnibus bill, which will land here at some point. And this is a proposal about ensuring that the Vermont Saves program that was stood up in the treasurer's office in the last year has financial sustainability for the coming years until it reaches the point that it is self sustaining. And the proposal is that I'll start with the sort of outline of the proposal and then how it will impact the two funds that are at stake here. One is the Vermont Retirement Security Fund, which is the fund that supports the Vermont Saves Program. And as a reminder, the Vermont Saves Program offers a retirement funding opportunity for entities, businesses that do not otherwise provide a retirement savings opportunity in Vermont. That fund has been operational for just about one, just over one year now. Starting from zero, fund or the BTSACE program has about 5,500 individuals enrolled and going from zero assets under management is now at more than $5,000,000 under management. So we've seen rapid growth initially, and there is quite a lot of room for that growth to continue based on our estimations of how many individuals and businesses are eligible. And it is the case that it is not yet financially self sustaining. The agreement with the vendor that we use to manage these assets does mean that we earn money off of the fees come in to the vendor and then after the vendor, the treasurer's office in a consortium of other states. There's a group of states that are all doing this. Fees from the accounts and from the total assets under management come in. As they grow, it will eventually reach the point where it is self sustaining. The proposal to bridge the gap is that the and I'll show you some charts in the next couple of slides that give you more detail on that trajectory. The proposal is that unclaimed property that is more than ten years old and less than $150 as opposed to 100, so you're raising the ceiling here, any unclaimed property more than ten years old and less than 150 will be swept in. And so that means that there will be more that will

[Robin Scheu]: be swept in. Swept into what?

[David Sharon]: Swept in will be eligible to be transferred. To? And it will be transferred to the First to the Vermont Retirement Security Fund, which funds VTSAVES, and then the remainder will go to the Higher Ed Trust Fund. Let me skip ahead and show you what that would look like. So in FY twenty seven, VT Saves program revenue will be about 50 we project it'll be about 57,000 round up to 58,000. And the unclaimed property chunk, will be, you know, the the about the in order to make the make up the difference between the amount of costs to run the program and the revenues that are currently coming in, it'll need about 242 coming in from unclaimed property. As the revenues rise, which is the green bar, you can see that lower and lower amounts will be required to support the program until we reach FY '33, at which point the program will, we project that it will be fully self sustaining.

[Robin Scheu]: And what are you assuming for either assets under management or number of participants or both?

[David Sharon]: I can get you the so we have a full model built out that shows the assets under management. I don't have that in here, but I can send you the full model that was built out showing the estimated growth in both accounts and total assets under management. As those things get bigger, it gets more advantageous to the states that are in this consortium vis a vis the vendor who's managing the money. So people, customers, people with the accounts, they don't see any change, but the vendor gets less, the states get a bit more. And so as you go further along and the program grows bigger, there are jumps in the percentages that come to the states.

[Robin Scheu]: So for some reason, the number 20,000 participants is what I'm remembering for breakeven. There's some assumption on the value too, but is that what

[David Sharon]: That sounds right to me, and I apologize that I don't have that all up in front of me, but I can get to you. We can send the committee the model as it is all the underlying assumptions.

[Robin Scheu]: And then Wayne.

[Eileen “Lynn” Dickinson]: Fair. You say that number one, it would go to Vermont Retirement Security, which is Vermont SIDS.

[David Yacovone]: Is that

[Eileen “Lynn” Dickinson]: number two?

[David Sharon]: Number two is back to the Higher Ed Trust Fund.

[Eileen “Lynn” Dickinson]: So it would go to the dollar amount based on this model?

[David Sharon]: That's correct.

[Eileen “Lynn” Dickinson]: And then whatever the balance is would go to the higher education. And as it decreases

[David Sharon]: And if you go to the next page

[David Yacovone]: adds on there, yeah.

[Eileen “Lynn” Dickinson]: Would that mean that you would have more of it going to the higher education?

[David Sharon]: That's exactly right. The calculator. So you can see on this chart here, it shows the impacts of the Higher Ed Trust Fund. The orange, Is that orange? I think it's orange. Anyway, whatever color that is on the upper part of the bar shows how much money is going into the higher ed trust fund. And once you get to FY '29, you're already seeing more going into the trust fund than has ever been put into it before from under the current system. And it would increase from there until you get to FY '33. And now the full 300,000 that we're proposing each year would be going into the higher ed trust fund. This would mean that over the duration of this proposal, as sunset for 2040, over the duration of this proposal, the higher ed trust fund would see more coming into it than they would under current law. In the fall, we did check with the beneficiaries to the trust fund, and they were all they had no objection to this proposal, I believe in part because of the fiscal impact. So as of October, I can't make representations about more recently than that, but as of October, the beneficiaries were.

[Robin Scheu]: I think I talked to one of the beneficiaries who seemed fine about this, because they're getting more is going into this than would otherwise because you're upping it to 150.

[David Sharon]: That's exactly.

[Robin Scheu]: Or 100. And for those people, individuals who have 149.95 in here, they can still claim their unclaimed property if

[David Sharon]: it's been In

[Robin Scheu]: twelve years, if they figure it out, they'll get their money back.

[David Sharon]: This is the people's money. They can always claim it. And so we want to make that I

[Robin Scheu]: just want to be colorful.

[David Sharon]: Yes. And yes. So Wayne, I'll go back to it. So

[David Yacovone]: we're going to be changing the level from $100 to $150 for both. So in the short term, the education fund is going get the amounts that are less than $100 still.

[David Sharon]: The amount that's eligible $350

[David Yacovone]: will go into other one?

[Eileen “Lynn” Dickinson]: The $150

[David Sharon]: threshold will govern the transfers generally. And then the question is, which fund gets the result of that money that's eligible to be transferred up to a cap of 300,000? And initially, there will be the amount necessary to make up the difference between revenue and cost in the BT sales program will go to this fund that supports the BT sales program, and the rest will waterfall into the Higher Ed Trust Fund. And so the 150 applies to both funds and the overall cap.

[David Yacovone]: At the end of the period, we've raised the limit to 150 that goes into the old fund.

[David Sharon]: That's correct. Yeah, so they will see a benefit over the duration of this proposal.

[David Yacovone]: I would look at how much money accrues at the $100 level, how much is $100 to $150 level, looking at the two section.

[David Sharon]: That's a great point. And the graph on the right hand side does show the trailing five years. Here you can see the difference between if the threshold had been 150 versus 100. And there is actually it's a significant difference. It is. It's quite a bit more that becomes eligible.

[David Yacovone]: I who's faster in that 100 to 150 category because the value of numbers are bigger. You get a lot of pennies down there more.

[David Sharon]: Yeah, I think that's exactly right.

[Robin Scheu]: Yeah, mean, adding the $50 as you're adding 50%, it more than doubles what would be available. Lynn?

[Eileen “Lynn” Dickinson]: I think I got my question answered. I was just trying to figure out where the 300 app is, but I see it's in there. Okay.

[Robin Scheu]: Continue.

[David Sharon]: And then this is a final chart just showing the impact. FY 'twenty six is blank, not because it's $0 but because we don't have that number yet. But that will be figured out shortly. And you can see the trailing five years here, FY 'twenty one to 'twenty five of what went to the higher ed trust fund from the unclean property. Then you can see the projections going forward. So FY 'twenty seven, 'twenty eight, there is a reduced amount starting at '29 that is greater than the historical amounts, and it goes up from there. And so just another it's very similar to the prior chart. It's a different facial representation.

[Trevor Squirrell]: It's a traditional Marty? Isn't there some funding from the unclaimed property that goes into the education fund, not this?

[Robin Scheu]: There

[David Sharon]: is a transfer that goes to the general fund. I don't believe it's the ed fund. Understanding that not all not all unclean property gets claimed as a factual matter. But of course, it's all if somebody makes the claim, they will get. So that portion goes to the general fund. The amount that gets transferred has exceeded the budgeted amount every year significantly. So over the last ten years, the transfer has generally averaged the legislature to decide what to do with if historical patterns continue. But we don't given how extensive they are and how significant the difference is, we anticipate that they'll continue.

[Robin Scheu]: I

[David Sharon]: getting transferred.

[David Yacovone]: So don't, amongst those unclaimed properties, you don't ever get large amounts that sit there, such that if you didn't have enough money to transfer too much to the general fund, that you wouldn't have enough money to pay the claimant if they eventually can. And then general fund had to pay that ability of them. Do you know I mean? I'm asking him if they're all just little claimants or if it could be a big multimillion dollar

[Robin Scheu]: The big ones don't get transferred. So there's money in an unclaimed property balance.

[David Sharon]: That many huge claims could all be made at once, and it would run through that general fund. And then, yes, the legislature would have to make an appropriation to cover that.

[David Yacovone]: We should know whether or not

[Robin Scheu]: million dollar claims on there. They were $17.5

[David Yacovone]: I think you may have $150 of mine, but

[John Gray]: You can check it

[Trevor Squirrell]: on the list.

[Robin Scheu]: Okay, is there more that you

[David Sharon]: That was everything that I

[Robin Scheu]: That's everything you wanted to tell us. So do you have draft language for this?

[David Sharon]: Yeah, so this is in the treasurer's omnibus that's passed

[Robin Scheu]: Committee, we are back at one with the One Housing Conservation Board. Some of us have meetings various times, but we could be back here at one Oh, I will tell you that on the floor, there will be a roll call request for the vote, as far as I know, so we may have

[Trevor Squirrell]: to let's see what happens there.

[David Yacovone]: On VAA, though? Floor starts at 03:30?

[Robin Scheu]: Floor starts at 03:30. So, we'll take a look at the agenda.