Vermont Legislature SmartTranscripts:

[Rep. Matthew Birong (Chair)]: Yes. Heard you. Alright. We are live. Okay, everyone. Welcome back from lunch. We are on Friday, January 9. We are being joined by the treasurer and his team for an introduction and walkthrough to h five sixty seven. It is an act relating to unclaimed property, state retirement systems, and capital debt. Mister treasurer, how are you?

[Michael Pieciak (Vermont State Treasurer)]: Yeah. Good. Thank you very much for having me. Nice to be with the committee this afternoon. I wanted to mention you know, you mentioned our team, I'd like to just introduce them to the committee for those that haven't had the chance to meet them. Our deputy treasurer. And, he previously was the state director for congresswoman Becca Ballon for the last three years, and he came over with us in November. So we're very happy, to have him on our team. And then Jeremiah Breer is our CFO. So, he runs the Treasury Operations Division in our office. And he's been with us for about three and a half years. Then Peter Trombley will be our point person in the legislature this year. And he's been working with me for a couple of years for a year. So, if you have any needs, David and Peter will be in here quite a bit. Feel free to reach out to either of them. If you need any information from our office, you need anything from me, you have any questions about things that relate to our work or any ways that we can be helpful, just make sure you reach out to these folks, and they'll get you what you need. So, happy to run through the bill and some of the specifics with the committee, if that's the prerogative of the chair.

[Rep. Matthew Birong (Chair)]: Yeah, I mean, I guess, like, a little bit as to why, you know, you and I and your team have been working on this on the sole sponsor of the bill. I kind teed that a little bit. So, yeah, run through what you want, but then we're gonna do a a full page by page council afterwards. Yeah. Great. Really strict

[Michael Pieciak (Vermont State Treasurer)]: with our service. Yeah. It sounds great. So what I'll do then is give, like, a very brief broad overview. I'll go section by section just to talk a little bit high level about why each section is in there, and then that I don't think we'll steal the thunder from, you line by line of

[Rep. Matthew Birong (Chair)]: shared thunder. I like it, shared

[Michael Pieciak (Vermont State Treasurer)]: the thunder. So, as the chair said, the bill impacts our unclaimed property division and our retirement division. Largely the first five sections are pertaining to unclaimed property. The remaining sections are pertaining to retirement in some way. And then the last section is talking about a position for retirement and two positions for unclaimed property, which I'll talk about both at the beginning and later on. But just generally, our unclaimed property division, they are a small team of four people with a temporary person as well. So, or a team three and then the director. So they work to return unclaimed property, forgotten property, missing money to Vermonters. So anytime you had a deposit, maybe with a landlord or there is a final paycheck that they had a different address for you and it never got to you, those businesses, those nonprofits are required to turn that unclaimed property over to our office. And that's our responsibility to reunite Vermonters with that unclaimed property. Generally, over the last twenty, twenty five years, the amount of unclaimed property coming into our office continues to go up at a really steady rate. Why is that? It's a national trend. But people are more mobile. There's just literally more people around to lose more money. There are a lot of electronic assets that I think can sometimes be easier to lose. People's mailing addresses aren't always up to date. So for whatever reason it is, we've begun a pretty steady increase on property. Similarly, we've been really focused on getting this money back to Vermonters. So we've done a lot of outreach, we've done a lot of communication, we've tried to do a lot of partnerships. We've been trying to do some automatic programs where we automatically send money back to Vermonters so they don't have

[Rep. Sandra "Sandy" Pinsonault (Member)]: to go through the paperwork and the hassle. And all

[Michael Pieciak (Vermont State Treasurer)]: of that has resulted in significant increase in claims. A couple of years ago, we had about 18,000 claims in a given year. And this past year, it was closer to 32,000 claims. So a really dramatic increase. That year, we had 18,000 claims. It was about 3,800,000 that we returned to Vermonters. And last year, we returned about $9,800,000 to Vermonters. So that's all good. But that is certainly very taxing on our team in terms of being able to process those claims, verifying the information, making sure that we're paying the right person, getting all the documentation that we need, and the statute, you know, has some requirements around that. So it's been a significantly increased workload. All that being said, even though we're paying out more to Vermonters, we're still collecting more in unclaimed property from holders. It's coming into us. The amount of money that we send to the general fund has gone up every year as well, and we anticipate that continuing to happen, even if we got these two positions that we're requesting. And just for the committee's benefit, our unclaimed property division is self funded. We are paid with the proceeds of the unclaimed property funds. There's no general fund money that goes into our unclaimed property division. So that's just the broad overview. In terms of these sections, section one is related to an issue that we've identified when it comes to unclaimed property that comes from a medical insurer. So they will oftentimes send us an unclaimed property package. It'll have a specific dollar amount, let's call it $25,000 and it will just say for ABC Hospital. But we don't know, is it really for the hospital or might it be for a number of patients that have been treated at the hospital that paid out of pocket and are now being reimbursed. And they never were able to get that money directly to the patient. They don't currently provide us enough information for us to make that determination. So what we want to have happen is we want to require the insurer to provide us some identifier, whether it's an explanation of benefits number to identify the patient or similar number that we will then pass along to the hospital and say, can you identify who this money is supposed to go to? And then can you also make the direct reimbursement to that patient of yours? So it's something that's really a consumer enhancement, making sure we're getting the money to the right person. We just don't have the authority now to require that for insurance companies.

[Rep. Sandra "Sandy" Pinsonault (Member)]: We

[Michael Pieciak (Vermont State Treasurer)]: are just paying the hospital or providing the hospital that money because that's as much information as we have. It very well may be their money in many cases. But we have a we have a have an expectation that in not all cases it is. That in some cases, it's actually Vermonters money. We want to make sure we get it back to them. So section number two and three. This is relating to unclaimed property, but it's also relating to a program that you're familiar with called Vermont Saves. This is a publicly administered retirement program that we started here in this committee three years ago. And we got the authority to set it up. We got a one time appropriation of $750,000 We entered into a contract with the state of Colorado that helped us set the program up as quickly as any other state has done it. I think we were about the seventh state when we set it up. And now there is well over a half well over a dozen states that have a similar program. So we were toward the early end, but not the first one, which gave us a lot of examples from other states about how best to do this, and we were able to set it up very quickly. So this past December, it launched for the first time December 2024. It's now gone through its one year anniversary. We have about 1,300 businesses that are engaged in the program. There are about 5,300 individual employees who are saving in the program. And then collectively, they've saved about $5,000,000 in this first year. And it's really grown like this throughout the year. The number of businesses, the number of people saving, and then the dollar amount as well. So we anticipate in the next five years or so that we'll be at about 20,000 accounts, at 5,300 now. That in the next five years will be at tens of thousands of dollars tens of millions of dollars, rather, tens of millions saved. You know, we're at 5,000,000 now. So it's all proceeding very well. When you look at the data of those 5,300 folks, fifty five percent of them are 40 and thirty percent of them are 30. So, 55% 40, thirty percent 30. So, it's a lot of young people saving, which really was one of the hopes of this program, and that's what we're seeing. So that has been great too, because even just a couple of $100 by someone in their 20s every month, you know, will be hundreds of thousands of dollars by the time they reach retirement. And we've been in touch with a lot of businesses and nonprofits across the state as well, wanting to understand how is the program going, how do they how do their employees appreciate it, and how do they appreciate it as an employer. And, of course, you know, not a universal sentiment, but the message that we've been hearing, by and large, is our employees have been asking for some kind of retirement program and we haven't been able to afford it or we always thought about it but put it off. And now we've been able to provide it to them and they're very happy. Them as an employer have been telling us it's easy to use. And we feel like this is a recruitment and retention tool for our workforce. So the feedback across the board has been very strong. So the reason it's in here is, you know, the one time appropriation is set to run out in this fiscal year, the $750,000. It requires about $300,000 to run annually. That's sort of the rate. Most of that is for two employees that run the program. Some of it's for some money that goes to our vendor and some outreach money. And this year, last year we collected, I don't know, about $18,000 let's say in fee revenue. Next year, it will be more like $38,000 in fee revenue. The next year it will be more than double that, more than double that. But it's going to take a little bit more money to get us between here and let's say five or six years from now when the program is self sufficient from the fees that are being charged, we get a very small fee, from an annual account fee, and we get a very small fee from the assets under management as well. So as those accounts grow and as the assets under management grow, the amount of revenue that comes into the state, will grow as well. So over the next six years, we expect it to be about 800,000. It's about what we had previously that we'll need. When we asked for the seven fifty three years ago, it was the smallest appropriation that any state had asked for. So Maine had a more significant appropriation, so did Delaware. So, you know, it's going well and is successful, but we need to get it to that point of sustainability. But our suggestion in terms of revenue source is not to take it from the general fund. We have a transfer that we make from our unclaimed property fund every year that goes into something called the higher education trust fund. And it's about, you know, anywhere between a $152,100,000 dollars that goes into that fund. We're suggesting that it gets diverted from that fund into Vermont Saves on a temporary basis until the program is sustainable, and then it goes back into the Higher Education Trust Fund. And the reason we picked that as a proposal is because that fund got a significant windfall this past year from excess estate tax revenue. It was about a $26,000,000 one time deposit into that fund. So that trust fund went from $30,000,000 to basically $60,000,000 overnight. And just to give you a sense of how long it took to get the $30,000,000, the fund was started in the year 2000. So it took it twenty five years to get to 30,000,000 and then overnight it got to 60,000,000. So it's in a really good position in terms of its ability to provide money for scholarships for students for higher education in Vermont. We've talked to the stakeholders of that Higher Education Trust Fund, VSAC, UVM, the Vermont State Colleges. They all have been in support using this money temporarily to support this other program given the windfall that has gone into the Higher Education Trust Fund. So that's sort of our proposal and the reason for it, and it's in the unclaimed property section because it would be coming from our unclaimed property division. So section four, and then similarly section five, kind of deals both with the consumer component, making it easier and more efficient for consumers to get their money back. But it also deals with the sort of workforce capacity issue that I mentioned as well. So our proposal is to streamline this sort of fast claims process that we have in our office. We can do a fast claim if it's under $250. That means that we don't have to have original documents. We don't have to have notarization. We don't have to have certain information that sort of might be overkill when you're talking about a claim as low as 100 or $50 So, those are fast tracked through our office once we have a reasonable determination that it is that person's money. We'd like to raise that threshold from $250 to $1,000 It will help us return money more quickly. There's less bureaucracy. Even $500 a lot of times you'll hear from Vermonters who are required to provide an authorization or some other original documentation. And they'll be really frustrated that they have to do that because they're like, it's my money. Can't you just get it back to me? So, I think consumers will be happier. There's very low risk just because of the amount of money that's at stake relative to how much claims we pay out. And also, our team will be freed up in terms of a lot of that bureaucratic documentation that they have to handle and require to be able to approve a claim that's over $250 now. So I think it's a win all across the board. And we want to make that proposal. Similarly, on section five, it's raising the threshold for claims that would have to go through probate. So, now, anything that's over $5,000 that would be paid from a decedent to somebody that's a beneficiary in some way. If it's over $5,000 we require it to go through probate. We'd like to raise that threshold to $10,000 This doesn't happen as often, obviously, as the claims that are between 250 and 1,000. We have a lot of those claims, but it still is a regular occurrence. And it also is just a lot of work in bureaucracy for a family to have to open up a probate if they don't have to otherwise. And by doing this, you know, we're just helping folks out a little bit, Vermonters, and freeing them from the burden, getting them the funds that are owed to them a little bit more quickly, as well.

[Rep. Matthew Birong (Chair)]: Do you have any idea, like,

[Michael Pieciak (Vermont State Treasurer)]: the last time that threshold was raised? Yeah. I well, I know that we did that big, you know, national unclaimed property administrators reform maybe like five or six years ago when Beth Pierce was treasurer. So I think those thresholds were put into place then.

[Rep. Matthew Birong (Chair)]: In that era.

[Michael Pieciak (Vermont State Treasurer)]: Yeah, exactly. So I mean, that's almost like close to an inflation era. Yeah. I mean, inflation has been quite high. Yeah. Right. High in the last six years. But just in terms of Yes. When we think about just from even our own experience, like, we are, you know, what claims do we think are risky? What claims are there additional bureaucratic benefit? Know, bureaucratic burden rather not benefit? Where does the consumer get more frustrated when they have to provide, you know, original documentation or notarization. And we think these are sort of good thresholds for where we are now. Then just the other part of that section, payments that are made to joint owners. So if there's a decedent and there is a brother and a sister, for example, that threshold for making a fast claim was $2.50. And now we want to move that up to a thousand as well. So it's just making it in line with the other threshold that we want to move from $2.50 to a thousand. It just sort of, you know, just as the same rationale as the others. So that's everything with unclaimed property in terms of what we're asking for in terms of the policy changes and the statutory changes. I mentioned that Section 24 does request two positions as well. And I mentioned that the rationale for that is the claims increase that we've seen. We've also seen fraud increase as well. Like there's a lot of fraud. I mentioned that these are low risk because they're low dollar amount. We still have to verify it's the right person. There's still work that goes into that. But we've seen a lot of attempts on larger claims to try to defraud the unclaimed property division from money. And unfortunately, the ways that people can do that are quite sophisticated. They can create licenses. They can create original documentation that looks like the original thing. There's no way we can differentiate. For larger claims, we do require somebody to physically come into our office to pick up the check. It's kind of one of the only ways we can actually verify that the property we own and or hold rather, and the property that somebody is owed is the rightful owner. So it's a little bit going back in time to, you know, but it's something that we think we have to do sometimes to verify person and make sure it's the right person. One second. Represent Isle? Yes, I would just probably

[Rep. Sandra "Sandy" Pinsonault (Member)]: ask some questions before we go on to the other.

[Michael Pieciak (Vermont State Treasurer)]: Yeah, please.

[Rep. Michael Morgan (Member)]: Yeah, I'd rather.

[Rep. Sandra "Sandy" Pinsonault (Member)]: I've got a couple of questions. As a town clerk, I've spent, many, many hours trying to get unclaimed property to my constituents. Lots of them are less than $1 They don't want to bother. That's not worth a cent. Would it make sense to have a proposal that if it's less than $10 after two years or whatever, the state just takes the money?

[Michael Pieciak (Vermont State Treasurer)]: Yeah. It's a great question. So remember, I was mentioning the higher education transfer that we make. So the reason we make that transfer is that we do a calculation every year from the properties that are ten years or older that are under $100 We're suggesting in the statute that that $100 gets raised to $150 because that hasn't changed in quite a long time. That's sort of inflationary as well. But we then transfer that money to the higher education trust fund. The only difference is that people never lose the right to claim their money. They can always come back and say, hey, wait a minute, that $100 was mine. And we just figure that out through our calculations.

[Rep. Sandra "Sandy" Pinsonault (Member)]: So does their name remain on

[Michael Pieciak (Vermont State Treasurer)]: that list? Yeah, it does.

[Rep. Sandra "Sandy" Pinsonault (Member)]: That's what I was trying

[Michael Pieciak (Vermont State Treasurer)]: to The one thing, the only I I think it's a great idea. The only reason at this moment in time, I'd say, like, let's just continue to wait and see is because a number of unclaimed property divisions across the country are facing legal lawsuits over similar concepts. And the reason they're facing them is eminent domain sort of thing. You can't take somebody's property without just compensation. And they're saying, hey, you're taking my money and you know, the government's taking the money. They're not giving me just compensation. So there's some constitutional and legal battles that are trying to be sorted out.

[Rep. Sandra "Sandy" Pinsonault (Member)]: I get that. But you would think for something less than $10.

[Michael Pieciak (Vermont State Treasurer)]: No doubt. But you know how lawyers are.

[Rep. Sandra "Sandy" Pinsonault (Member)]: So many years. It cost you more to fight for it than to

[Michael Pieciak (Vermont State Treasurer)]: It costs us about $4 to write a check. So Yeah. We would we would be happy to

[Rep. Sandra "Sandy" Pinsonault (Member)]: That's why what's the question is. As a tax collector, I was I was going to banks a lot of times when they were changing the, safe deposit boxes.

[Michael Pieciak (Vermont State Treasurer)]: Yeah. Oh, yeah.

[Rep. Sandra "Sandy" Pinsonault (Member)]: What happens to all the property?

[Michael Pieciak (Vermont State Treasurer)]: Yes. So we items. We have a physical vault in our office. It's not like you would see in a bank, but it is a vault room. And those safety deposit boxes are turned over to our office. So we have unclaimed property in cash. We have unclaimed property in stocks. And then we have physical property So as we have about $150,000,000 in unclaimed property. That's money. There's about 20 or so million that's in stocks. And then the valuation on the physical property, that's based on what somebody might value it at. But it's hundreds and hundreds of thousands of dollars. But when you go in there, it's everything from gold bars to family heirlooms to Tiffany jewelry to Tiffany silverware to locks of hair. I mean, personal items like that. Baseball cards. Yeah. So that money

[Rep. Matthew Birong (Chair)]: like a storage wars thing. Yeah. No. Yeah. Auction it off.

[Rep. Sandra "Sandy" Pinsonault (Member)]: It's really after 10 after so many years, it could be just been

[Michael Pieciak (Vermont State Treasurer)]: In some states, they do auction off. The reason for it is that they run out of space in their vault. Yeah.

[Rep. Michael Morgan (Member)]: They're say some days. Yeah.

[Cameron Wood (Office of Legislative Counsel)]: So they turn the

[Michael Pieciak (Vermont State Treasurer)]: physical property, the money, and then they leave they they don't take the money away. It's still in there. So if you had a safety deposit box, you know, the website is called missingmoney.com. It's the one we send people to because it's every state treasurer Yeah. In the country. You So can search all at once. But if you search, it'll tell you physical property or safety deposit box or the cash or potentially mutual funds. So it's in there in our database when people search for it. Brett, or

[Cameron Wood (Office of Legislative Counsel)]: did you think you're

[Michael Pieciak (Vermont State Treasurer)]: done sitting?

[Rep. Sandra "Sandy" Pinsonault (Member)]: I think so. I had another one, but I can't think of it as well.

[Rep. Michael Morgan (Member)]: No. It just made me think about it, mister treasurer. How do you safeguard that from potential fraud

[Rep. Sandra "Sandy" Pinsonault (Member)]: within the office?

[Rep. Matthew Birong (Chair)]: Flurry? Yeah.

[Michael Pieciak (Vermont State Treasurer)]: I just, you know, like that. I would say, yeah,

[Rep. Matthew Birong (Chair)]: referring that would occur.

[Rep. Michael Morgan (Member)]: But what's We're humans and humans do that stuff.

[Michael Pieciak (Vermont State Treasurer)]: Yeah. For sure. What's I mean, it is a locked, you know, physically locked, secure facility. I don't this for an example, like, don't have the ability to get into that room and I've actually never been in that room. So the custody is narrow. Yeah, exactly. Custody is narrow and you don't go in with one person, it's multiple people and we have an inventory of what's in there. I think we will in the near future want do a re inventory and then an audit. So that's another part of what you do as well. But yeah, who has access to it and then It's pretty controlled. Yeah, exactly right. Thank you. Hey, Lee Repstone?

[Rep. Mary-Katherine Stone (Member)]: Yeah. Do you see this having any impacts on administration in your office? Do you feel like these changes will have any administrative impact on the treasurer's office? Are there any additional resources you feel like?

[Michael Pieciak (Vermont State Treasurer)]: Yes, think what we're suggesting when you think about the statutory changes and then the position request is both of them in some ways are designed to make it easier for our office to function. The threshold changes will mean there's less back and forth with individual Vermonters that are trying to claim their money because we don't need something that's notarized or we don't need the original birth certificate or whatever it might be that we normally need. So that'll make it easier for them to process claims on the one hand. On the other hand, the additional two positions will make it easier to process claims, make it easier to do diligence on fraud sort of concerns around claims. And it'll also give us some capacity to look at the people that actually hold the money, the businesses and the nonprofits. Because sometimes they'll turn money over to us, but they don't turn all of it or they don't turn enough of it over. Or there's some businesses that like national businesses that have never turned money over to us, and we suspect that they probably do and they just are not following the Vermont statute. So across the board, it would help us with the functions of our office.

[Rep. Sandra "Sandy" Pinsonault (Member)]: Okay. In general. Yep. I do have another question. Since it's come this has been asked of me. So for instance, if somebody's on there, they've passed away. Yeah. The children want to claim it, but they don't want to open up the estate because it's only like $35 So how do they go about getting a check to admit? Does the check then get written to the child that's claiming it? Or do they have to prove that there's five other brothers and sisters? What do they do?

[Michael Pieciak (Vermont State Treasurer)]: So we'll, right now, as it is, if it's under $5,000 they won't need to open the probated estate. We want to make that higher,

[Rep. Sandra "Sandy" Pinsonault (Member)]: $5,000

[Michael Pieciak (Vermont State Treasurer)]: to make it easier to get money back to them without having to go through that. You know, if you're if you have $8,000 and you have to hire a lawyer to open up the probate estate and you're spending that time and everything, I mean, you get to a point where you're thinking what's, you know, what's the value, you know. So we want to make that easier and get it back to people. If it's under 5,000 now or if it's under 10,000, if the statute passes and there's multiple family members, then there's a couple of different ways you can deal with that. You can split it up so each family member gets a proportional share. If the family has some kind of arrangement where they say we want this one sibling to have it all, as long as there's a documentation among the other siblings that that's their intent, then we can honor that intent as well. So it's just working.

[Rep. Sandra "Sandy" Pinsonault (Member)]: If that person is the executor of the estate or whatever.

[Michael Pieciak (Vermont State Treasurer)]: Yeah. Yeah.

[Cameron Wood (Office of Legislative Counsel)]: If there

[Michael Pieciak (Vermont State Treasurer)]: is if there is a state open. Yeah. Exactly.

[Rep. Sandra "Sandy" Pinsonault (Member)]: And then the other question is, what do you do as a town clerk? If you know that somebody has died, they're in there for a lot of money, there no children,

[Rep. Matthew Birong (Chair)]: you

[Rep. Sandra "Sandy" Pinsonault (Member)]: know, what do you do?

[Michael Pieciak (Vermont State Treasurer)]: Yeah. So there's still potential under the the decedent transfer. There's still possibility that there's somebody like a niece or a nephew that would be in line to receive that. So it still stays in our unclaimed property until until that person claims it. If they never claim it, it really just remains an unclaimed property. And just so the committee is aware, I say we have a 150,000,000 in unclaimed property. That's how much of every single person woke up and said, I'm gonna claim my penny or my dollar or my $10 or all the money. That would be how much would be eligible to be paid back to people. But some of that money is 50 years old. It's multiple levels away from somebody that's alive. There's money that gets turned over to us where the company says, I don't know who this belongs to. We don't have the records, but it's not our money. And we're going to send it to you. So there's a lot of money we know won't get paid back. And ever since this unclaimed property program has existed, the treasurer's office does a calculation that looks at paying the claims in that particular year, paying for the staff that it's required, making an assumption about claims for the next year. And then we send a general fund transfer to the legislature to use in the budget. So when we say there's $150,000,000 there's probably only 18,000,000 or $20,000,000 that we hold to pay those claims, pay ourselves, and then have a reserve for future claims. If every single person woke up and claimed their money, we'd have to come to legislature and ask for some repayment, I guess. But that is such an unlikely occurrence is why we can do that transfer. So it's not like the money sits there forever and there's no good use for it. The money that we do hold, I mean, earn interest on it. And then the money that we think is in excess, do send here to the legislature for spending.

[Rep. Michael Morgan (Member)]: Alright,

[Michael Pieciak (Vermont State Treasurer)]: so getting on to section six and the rest of the sections that relate to retirement. Section six is about the state retirement system. So we don't have the authority under the state retirement system to have a penalty for late or inaccurate employer payments to the pension system. Now you would think it's only the state of Vermont, that's the employer. And state of Vermont makes their payments to us on time. But there's also a couple of municipalities and sheriff's offices that are in the state system. And we don't have any authority if they don't pay us on time. We don't have any way to force them to do that. And the thing that is the issue, the only actually, the only authority we have is to kick their employees out of the system, which seems unfair since it's the employer that's not paying their share of the contribution. The other systems that we manage, the teachers and administrative systems do have authority for us to apply late fees and penalties. So, what we want to do is expand that to be equal across the three pension systems. And we have run into examples recently where those offices that are not the state but are paying into the state pension system have been late and have not paid us on time. And we obviously don't want to punish the fees. We want to leave them in. But at the same time, when we don't get the money when we need it, we're kind of underfunding the pension system. That money is not in there working and earning investment return to help pay for those benefits. So we think it's an important authority. It will be similar to the authority that we already have for teachers and for the municipal employers. So, Section seven. This is in connection to the state pension and retirement system, really the OPEB system. OPEB stands for other post employment benefits. It's primarily health care. So when you're a teacher or a state employee, you work toward your pension and you also work toward your health care benefit. They're all separate systems. We have a teacher's pension, a state pension, a teacher's OPEB, and a state OPEB. And when the pension reforms occurred a number of years ago, we got both of those systems, all of those systems back on a better track to be fully funded. The pension system is by 2038, and the OPEB system is by 2048. We've made very good progress the last five years. We've had funded ratios that continue to go up. Everything is moving in the right direction. So in some ways, it's a good problem to have because what we're trying to solve for by asking to create a task force to look at this amortization question in terms of how do we get from where we are now to 2038, is the closer we get to 2038, there is an assumption that is off, the market goes down in a way that is dramatic, all of a sudden a much larger unfunded liability be created than we were expecting, and we only have so many years to spread that unfunded liability over. So what would happen is we would have a really significant market downturn, let's say, when we're only about five years away from 2038, that unfunded pension liability would be realized immediately, it would be spread over a really short number of years, and it would mean that the annual payment that we're requiring from the legislature to go to the system would just dramatically balloon, And you could be in a situation where the legislature is not in a position to fund that. You could be in a position to fund that, but it would mean cutting a lot of other priorities. And what we want to try to do is avoid that risk. But instead of coming forward this year and saying, this is the solution to this problem, we want to have a task force that brings all the stakeholders together, similar to the pension reform task force, but much, much more narrow, focusing on this specific question. We do think there are some really viable solutions that basically getting the systems close to or maybe all the way funded on the timelines that we expect, but reducing a lot of that risk that could come from a budgetary standpoint between now and 2038. So our goal is to have the task force, to have the stakeholders come together, and then to come with a proposal, a recommended proposal by everybody, the beginning of next legislative session. I'll just flag also that there is a oh, oh, I'm sorry.

[Rep. Matthew Birong (Chair)]: Had a hand over here. Yeah.

[Rep. Mary-Katherine Stone (Member)]: Just because I know it probably come up this year. Are there fiscal notes or cost estimates that you have for administrative burdens to that task force?

[Michael Pieciak (Vermont State Treasurer)]: Yes, exactly right. If you look on the last sentence there, we say 75,000 for one time appropriation. And that would be for actuarial services. We'll need to have a few scenarios run with different approaches that we could take. But just to give you a sense of that, I mean, one of the scenarios that we looked at, if things went dramatically wrong and it was really close to the end of the system, and we're talking hundreds and hundreds of millions of dollars that could pop up basically overnight that the legislature would be required to come up with to fully fund the pension by 2038. So, sections eight to 20, this is specific to those OPEB funds that I mentioned. When we did the pension reforms a number of years ago, we broke off VPIC, the Vermont Investment Pension Commission. It was called the Vermont Pension Investment Committee previously. The staff of that committee were part of our office. Our office was heavily involved in that. But one of the governance items was to break them out of the treasurer's office, make them their own independent commission, and then have them have a board, you know, that sort of oversees their work. So that happened. They took the billions of dollars in pension investments that they manage with them, and they're managing those pension investments. But what got left behind were the investments for OPEB. At the time, we only had about $62,000,000 between the teachers and the state employees. So it was relatively small amount of money. There were some questions about administratively how would BPIC keep those funds separate, but also invest them at the same time. But since we've committed to pre funding all that just in this short three or four years, that number between the two systems is closer to 400,000,000 and we expect it to continue to grow quite substantially into the future to the point where it's billions of dollars similar to the pension fund. So it's getting to the point now that it's at 400,000,000, where we would need to hire more staff or more resources to manage that. And if we're going to hire somebody in our office to manage this portfolio, just don't think it makes a lot of sense when VPIC is there established doing that kind of investment on their own. So this suggestion is that we transfer the responsibility of managing those funds from our office to VPIC to manage them. The other thing to mention from a governance standpoint is with the OPEB funds, I myself as the treasurer has sole fiduciary responsibility. So I make I would make those decisions myself. The trend across the country has been to move toward a board. So you don't have one person making that decision, but a group of people. And that's what the Vermont Pension Investment Commission is set up to do. So I think it's good governance that we do that. Again, we would be in a position where we need a position in the near future to manage that fund. And we just don't think that makes sense since there's a team at VPIC. So, section twenty one and twenty two. This is relating to vSTRS and vMERS. So vSTRS is the teacher system, vMERS is the municipal system. And we want to have it be authorized that members of those two systems that they can purchase service credit for their time served spending as president of an employee organization such as the NEA, while being fully released from employment. So, would be similar to other purchase agreements that we have for military service or Peace Corps service or other sort of school service. We are in support of it because it is actuarially neutral. You have to pay in the amount that is actuarially required. There won't be any cost to the system. And it does provide organizations like the NEA more flexibility in terms of who can serve in their leadership. So, that's early career or mid career might not want to leave because of the retirement benefits being so critical to them. But now a whole host of additional individuals will now be eligible to serve because it is much more financially advantageous for them to do so. So that's why those organizations want this change. But from our perspective, again, it's revenue neutral and it's something we're happy to support. So, section 23. This is the last sort of substantive section. This is relating to CDAC, the Capital Debt Affordability Advisory Committee. So, our office is the chair of CDAC. And we regularly meet, but particularly at the beginning of a biennium to make a recommendation about how much debt the state of Vermont can issue that, puts us in line with our needs, but also puts us in line with, you know, what other states are doing, what other AAA, the highly rated states are doing so that we don't fall too out of line with best practice, if you will. We made a recommendation pretty much over the last ten years of issuing less and less and less debt, trying to get our debt burden down. And that generally is a good thing. But what this change would do is include some other considerations when we're making that recommendation, including the useful life of state infrastructure. So basically, how much need might we have in the next few years? And that should factor into how much bonding capacity we think that we have, potential future capital maintenance and replacement costs, and then other metrics recognized by, bond rating agencies, specifically unfunded pensions. So the rating agencies used to look at states and say how much bonded debt do you have outstanding? And that gave them a good sense of, like, how much in debt you were. But then over time, the rating agencies said, well, for the state of Vermont, we have $600,000,000 in outstanding bonded debt, but we have billions of dollars in unfunded pension liability. And more and more, the rating agencies are incorporating both of those when they're thinking about how much debt particular state has. So we want to be able to include those kind of factors when we're making our recommendation through CDAC. We passed the language very similar to this last year. There were some changes that the CDAC committee, including the administration, agreed to that didn't make it through for whatever reason. So, this really is kind of a cleanup item from last year. The administration asked if we would propose it and we said we'd be happy to do so. I don't view it at this point as anything that's substantive based on what was changed last year, I think it's important to get the language correct and what everybody agreed to. So then Section 24 is what we've been alluding to, which is the position request. Mentioned the unclaimed property positions. There's sort of that data in there that describes sort of the increased workload and what these positions would do that I've mentioned. The retirement division, I haven't mentioned sort of the reason for that, but this would be a policy and research manager. When you look at our retirement division and then look at how many employees they serve, we basically have a single employee for every 2,800 members of our pension systems. And that's one of the leanest pension systems in the country. On average, there's one employee per 1,300 members. So we're more than double that. And then when you look at pension systems that are similar in size to Vermont, it's one employee per 1,200 members. So that's almost well double we have. So we run a very lean operation. We have a very complex pension system for how small we are. Our team at times gets taxed and we want to make sure that they have the capacity to do what they need to do. The stakeholders of the pension system, we've talked to them and they can mention their support. They all seem supportive of the concept. One example from this past summer, on July 1, we got a notice from Blue Cross Blue Shield for the teachers retirement that they were going to propose a 50% increase, five zero, for this upcoming year. So that was a significant increase. It would have meant a significant impact to retired teachers. It would have meant a significant impact to the state budget as well. So we quickly pivoted. Our retirement team went out to try to find alternatives, did a lot of due diligence. We didn't think we'd find viable alternatives necessarily. We thought we'd have to take the 50% rate increase. But ultimately, we did develop an alternative in HealthSpring. We did due diligence with them. We had to do a lot of work to get the contract in a place where we could execute it. But we did. And that increase was 16.8%. So much, much, much lower increase. It saved the state about 20 to $22,000,000 this year to not have to get the 50% rate increase and save teachers hundreds, if not thousands of dollars. So we were really happy with that from our retirement division, obviously. But it is projects like that, which can potentially they don't have the time to work on something that major because they're so lean. So it's building out a little bit of capacity in that division.

[Rep. Matthew Birong (Chair)]: Alright.

[Michael Pieciak (Vermont State Treasurer)]: And again, I should mention, just like unclaimed property, the retirement division is self funded through the retirement systems as well. So, it's not a general fund request.

[Rep. Michael Morgan (Member)]: Questions for the trigger on the back half of that?

[Rep. Sandra "Sandy" Pinsonault (Member)]: That retirement funds went well?

[Michael Pieciak (Vermont State Treasurer)]: Yeah. So, I mean, there was a time, you know, before the pension reforms. Right?

[Rep. Mary-Katherine Stone (Member)]: I think then.

[Rep. Sandra "Sandy" Pinsonault (Member)]: Yes. Oh.

[Cameron Wood (Office of Legislative Counsel)]: Indeed. You're

[Rep. Matthew Birong (Chair)]: a you're indeed. Have to onboard.

[Michael Pieciak (Vermont State Treasurer)]: You know, when we did the pension reforms, I would tell you the high stocks are relatively well funded position. We continue to look at all of the systems and whenever we see any issues, we try to act quickly. VMware has had its funding ratio come down a little bit, but we did enter an agreement that the legislature passed maybe two years ago now to extend some increases and contributions from employees and employers into that system to try to get it on the right setting. So it's in a it's in a good track and the teacher system and the state employee systems are in good tracks too. The teachers at one point was about 50% funded, which when you get below 50%, you're getting really worried. But it's over about 62% or 63% funded now. And then the state employees was about 60% funded, and now it's up to 72 or 73% funded. Over the last four or five years, they've started to climb out of the challenges that they've been in. It doesn't come without a lot of money from the budget, but the progress is is important because, you you know, once you pay those down, there'll be significant freed up capital. And, basically, either you pay now or you pay more later.

[Rep. Matthew Birong (Chair)]: Anything else for the treasurer?

[Michael Pieciak (Vermont State Treasurer)]: Well, I thank the committee for your time and thank, the chair for sponsoring the bill and any questions that folks need, we're happy to get back to you and make sure, we get you the information you need.

[Rep. Matthew Birong (Chair)]: I have always loved a good treasurer's office. He's a sponsor. So, yes, this is right in my comfort zone. Thank you, mister chair. Alright. Well, thank you. And with that, we will shift over to council and just do, like, more of a just due to time. I have a 02:30 speaker's office, so we'll be more of a jaunt through the words, and then dive into it deeper later.

[Rep. Mary-Katherine Stone (Member)]: Thank you. Alright.

[Rep. Matthew Birong (Chair)]: A great day, gentlemen.

[Rep. Sandra "Sandy" Pinsonault (Member)]: Elizabeth the acronyms, crap. I know. The patient system is acronym bustle.

[Rep. Matthew Birong (Chair)]: Counsel, how are you?

[Cameron Wood (Office of Legislative Counsel)]: I'm doing wonderful.

[Cameron Wood (Office of Legislative Counsel)]: Happy Friday afternoon. It's my first time being with you all. So with your lead, mister chair, I'll just do an introduction for myself. Please. So my name is Cameron Wood. I'm an attorney with the Office of Legislative Counsel. I just said, my first time being with you all. But within my portfolio is housing, consumer protection, and then I also cover retirements and pensions for the office. So that's why I got this lovely draft. And it was a pleasure working with the sponsor and the treasurer's office and pulling it together. I will highlight, I clerked for this office around ten years ago. That was my first job with the state of Vermont. I'm originally from the state of Alabama. I went to the University of Alabama, both for undergrad and law school. So I know I have a fellow alumnus here

[Rep. Sandra "Sandy" Pinsonault (Member)]: That's on amazing. You say one second to me. Yeah.

[Rep. Matthew Birong (Chair)]: I just wonder each one was gonna fire.

[Cameron Wood (Office of Legislative Counsel)]: The great thing is when I was a clerk, my office was actually right outside. Was literally on the other side of the wall. So happy to be here. I was assured by my team lead, Tucker Anderson, who I know you all are familiar with. He assured me that I would have a hog's head of whiskey as soon as I finish this walkthrough. So I'm gonna try to be succinct. And for those not familiar with that reference, I'd be happy to share the video

[Rep. Matthew Birong (Chair)]: with

[Cameron Wood (Office of Legislative Counsel)]: you.

[Rep. Matthew Birong (Chair)]: I found actually some other scalable measurements from that era that I want to let me just say I'm saving the image for when we get into the alcohol bill, but it escalates from heart's head. Yes. Actually, before we jump into that, I want take a second. Since you are new here for the first time, we don't do this often, but let's just do like a round of horn introduction. I mean, you already know me, Representative Matt Birong, for Jen's area's chair of the committee.

[Rep. Lisa Hango (Vice Chair)]: Representative Lisa Hango, Franklin V on the Canadian border. I'm vice chair of the committee. Representative Sandy Pinsonault, I represent Bennington, Rutland one, which is DMV, Dorset, Mount Tabor, Peru and Lantworth.

[Rep. Michael Morgan (Member)]: Michael Morgan, all of Grand Isle County, so five Towns Area, Albert, Alamont, North Hero, Grand Isle, South Hero, and then the western corner of, Milton. Gail Coffin, Windsor District 2, so that's Cavendish, Weathersfield, and

[Cameron Wood (Office of Legislative Counsel)]: Baltimore, three towns.

[Rep. Mary-Katherine Stone (Member)]: Mary-Katherine Stone, Alabama grad, Burlington rep.

[Rep. Kate Nugent (Member)]: Kate Nugent, a part of South Middleton. Hi,

[Rep. Chea Waters Evans (Ranking Member)]: welcome. I'm Chea Waters Evans, from Charlotte, and I represent the heart of Hinesburg as well.

[Rep. Matthew Birong (Chair)]: And now with us today are representative Boyden from Cambridge, we are Addison, both of our troopers, one from Randolph and one from Burlington.

[Cameron Wood (Office of Legislative Counsel)]: Okay. I will jump right in, age five sixty seven. Thank you all for having me. I think that Treasurer Pichak did a great job of really describing the bill, both the intent behind the bill from the treasurer's office, which they speak to, not me, but also the substance of the bill. There really wasn't anything that I felt that was missed. So, think he did hit on all of those topics. But just to run through the language very quickly, as was mentioned, the first five sections are related to unclaimed properties. As was mentioned, I think a lot of these amendments are relatively minor substantive, adjusting some caps of monies that they would be able to distribute without additional need to go through process, etcetera, as he was discussing. Here on the bottom of page two, this is in the contents of the report as he was describing what the information that has to be provided to the treasurer's office. And this is what he was just referring to on line 20, an explanation of benefits as the report is provided to them. So, they can require that information. Moving through page three, you have the expenses that the treasurer's office can deduct. And here, under subdivision five, lines 12 through 20, As was mentioned, there's an increase from 100 to 150. They, the treasurer's office, transfers that money over to the Vermont Higher Education Endowment Trust Fund on line 17. And the new language you have here would be diverting up to $300,000 of that to the retirement security fund. And as he mentioned, that's the administrative fund that they use to govern the Vermont SABE Program. So, So have the new language there. Section three at the top of page four is simply removing that. This is the sunset that would go into effect 01/01/2040. So, you would have 13, give or take thirteen and a half years of funds going into the Vermont Saves Fund until it sunset. Moving into section four, the bottom of page four and the top of page five, this is going to be, as was mentioned, when an individual is claiming property so you can see there, Section fifteen fifty three, Claim for Property they have to provide certain information to verify its completeness and accuracy, unless the administrator can waive those requirements. And this is where it's raising the cap, as he mentioned, from two fifty to 1,000. You move into the next section, as was mentioned around estates and deceased individuals or multiple claimants. So you can see here the administrator on line seven, administrator may deliver the property as follows. In the case of a closed estate, if it's valued at increasing from 5,000 to $10,000 in the absence of an open state, or a decree of distribution, again, increasing from 5,000 to $10,000 And this just outlines how those funds are distributed from the unclaimed properties. So then, moving into section six. This is going to be on page six. The majority of this bill is dealing with the Vermont Retirement Systems. And as was mentioned, everything primarily here is going to be transferring administration of those OPEB trust funds from the state treasurer's office over to the Vermont Pension Investment Commission. So what you'll see here, once I get to Section eight and beyond, there's a lot of strike through of language. And then it's simply enacting that exact same language over in the Pension Investment Commission chapter. So, it's really just a lot of moving of language from a statutory perspective, moving it from one section over into another section. Quickly though, section six, as was mentioned, this is for employees of political subdivisions that are participating in the state retirement system. The language here does allow the treasurer to assess a penalty. I'm on line four here, a penalty against the employer at a rate of 1% of the amount due for each month calculated. The treasurer, I think, described this adequately. I would just highlight for you all, this is the state treasurer assessing penalties against other political subdivisions of the state. And then potentially taking those entities into court to recover those funds if necessary. So I'm just flagging that for you all. Other than that, it's the penalty. It's 1% of the amount due for each month. And the second half of this provision, again, allows them to take action in court, if necessary. Section seven, the funding task force, as was mentioned. I'll just run through a few quick things. Membership, which is going be on the top of page eight. Membership of this task force is the chair of the House Committee and the Senate Committee on Appropriations, the Secretary of Administration or designee, the State Treasurer or designee, one member appointed by the Vermont National Education Association, one member appointed by the Vermont State Employees Association, and one member appointed by the president of the Vermont Troopers Association. So, that would be the membership of the task force as it's currently outlined. Hours and duties, reviewing the existing funding schedules and methodologies for those four trust funds, the state the state employees' retirement trust fund, teachers' retirement trust fund, and then those two OPEB trust funds that was mentioned. One thing, the specific review, what they will be looking at here on page nine, I won't go through each of these. I would just comment that the task force this is on line thirteen and fourteen. The Task Force shall not make recommendation on member benefits, contribution levels, or assumed rates of return. So, there is a little bit of what they will look at, and a specific provision of what they will not look at. There is a report due at December 15 year. This is all standard information regarding task force and working groups that we have. When do they meet? What's a quorum? Compensation? There is per diem reimbursement for individuals who are not state employees. And then, as was mentioned, there is an appropriation of $75,000 from the general fund to cover the costs of the task force. Okay, section eight, and we are on page 11. So here's where, as I mentioned, everything at this point going to where we get to the debt provision is just removing language and then moving it over to the Vermont Pension Investment Commission. So I'm not going to go through each of these line by line. But some things that I will highlight are top of page 15. So this is in the State Employees Retirement Trust Fund section. So you can see sub a members of the Vermont Pension Investment Commission are the trustees of those funds. So what we're doing is we're just taking away the fact that the state treasurer is the custodian. I highlight that the state treasurer can already enter into agreement with the Vermont Pension Investment Commission to invest these funds. But I think the state treasurer and I shouldn't speak for him, but I think their goal is to not have to go through that and really give the ownership of those to the Vermont Pension Investment Commission, and not have to go through that process where the state treasurer would then still be the custodian and the fiduciary of those. Again, what you have, you're just removing language in each of these sections, and we're moving it over. So this is just a lot of cleanup of language in each of these sections. So apologies for the quick scroll. I'm just trying to keep you all moving forward. Page 18, section five twenty one here, this is where we're adding under the definition of plans. So this is for the Vermont Pension Investment Commission. We're adding the retired teachers OPEB and the state employees OPEB trust funds into their purview. So everything, again, continued over is simply cleanup of all of this information, and then moving over, work for work, what has been struck in the state teachers and the state employees retirement sections. So with that, unless you all have any questions, I'm going to move you all the way down to the end of the bill. Apologies for the scroll. Good thing, Matt. Good jaunt. Yeah. Okay. So, we get to section 21, which is on page 32. This is where, as was mentioned, these next two sections are authorizing individuals who serve as president of an employee organization, allowing them to receive credit for that service. And I think he walked through those two pieces. So this one is for the Vermont Teachers Retirement Fund, just allowing, as I said, individual elected service president to elect to have that year served as creditable service. And then the next section, Section 22, is in the municipal chapter for municipal retirement. Lastly, the capital debt. Here's where I will make a few additional comments to what was mentioned by the treasurer. You have this Capital Debt Affordability Advisory Committee. As was mentioned, they issued this report every year. There was some recommended cleanup language. You all made some amendments to that section last year. And I will simply highlight that it's not the changes that you all made to the sections last year are not word for word what was recommended by the committee, but I think it still accomplishes the same goal. So I'm not sure that this change is actually necessary. I leave that to you all, as whether you want to just go with what the committee recommended or not. But I will simply highlight, this is in the report that has to be provided. And it says, the committee shall consider, among a lot of things here, you have, under sub-four, criteria that reorganized bond rating agencies use to judge the quality of issues of state bonds, including you all change this to say other metrics at the committee's discretion. And the recommendation here is to strike that and say other metrics adopted by recognized bond agencies. And my point would be, there's nothing at the committee's discretion. There's nothing stopping them from reviewing that as the language is currently written. So what you would be doing of adopting this language is further narrowing the scope of things that they can consider. I leave that to you all whether that's good policy. I'm just saying that they could take into consideration what's being recommended already based on the language you passed last year. Same thing with the next change here on the top of page 36. I think this is just more a change of language as opposed to a change of substance. But happy to dig into that if you all take this bill up and want to move it forward. Last thing I'll comment, positions. As was mentioned by the state treasurer, two full time positions for unclaimed property, one full time position for policy and research manager for the retirement division. Effective dates, the task force would take effect on passage. So they could go ahead and begin their work because they have the report due in December. And then section three is the sunset of taking those unclaimed property funds and giving them to Vermont Saves program, the diversion of that money. That's the sunset, would go into effect 01/01/2014. That's your bill. I think I did all that

[Michael Pieciak (Vermont State Treasurer)]: in less than twenty minutes.

[Rep. Mary-Katherine Stone (Member)]: Nice work.

[Rep. Michael Morgan (Member)]: Any questions for counsel

[Michael Pieciak (Vermont State Treasurer)]: right now? I mean, are going to do extensive work on this. Extensive.

[Rep. Matthew Birong (Chair)]: Well done.

[Rep. Sandra "Sandy" Pinsonault (Member)]: You.

[Rep. Matthew Birong (Chair)]: Maybe Barbara wanted to give you

[Michael Pieciak (Vermont State Treasurer)]: some downtime before 02:30. So, wow. We did it.

[Rep. Matthew Birong (Chair)]: Alright. Happy Friday to everyone, and we will be back in action on Tuesday. If

[Michael Pieciak (Vermont State Treasurer)]: I

[Rep. Matthew Birong (Chair)]: were