Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Morning. Morning, Today's January 22. It is Thursday. It's 9AM. We are gonna have a very, very morning. Sorry for whatever mental whiplash happens from it. So we're going to talk about the health care IT sunset, which we'll need to do something about in miscellaneous tax. We are going to do a straw poll vote on H five forty five. We're gonna hear about one piece in the Budget Adjustment Act that we did not hear about that sort of peripheral to ways and means. More on five forty five, because our two witnesses were divided. And then the miscellaneous tax bill. I don't know if folks remember when we walked through it last week. Rebecca wasn't available at that point, so we're going to do that with tax. And then we're going to hear about the budget all before lunch. I know. Wild times. But we get to start the day with Jen and Nolan. So please join us, however works for you.

[Noel Langwell (Joint Fiscal Office)]: All right, for the record, Noel Langwell, the Joint Fiscal Office.

[Janet Garbett (Office of Legislative Counsel)]: And Janet Garbett, from the Office of Legislative Council.

[Noel Langwell (Joint Fiscal Office)]: They were here to talk about the HIT fund tax, but you can't talk about that without talking about the health claims tax. But I do have an issue brief on this that I had done, and it should be posted, and it's just here. I didn't even put together a presentation because it's so short and simple.

[Emilie Kornheiser (Chair)]: This is totally different from the provider tax, right? Totally different from the

[Noel Langwell (Joint Fiscal Office)]: provider tax.

[Emilie Kornheiser (Chair)]: Which we're going to hear about soon, folks, but not today.

[Noel Langwell (Joint Fiscal Office)]: So health claims tax, so the difference between the two is provider tax is taxed on providers. Now claims tax, they tax on claims insurers. Today we're talking about They're all named. Yes. So they used to be called the Healthcare Claims Assessment, but it was actually chaired in 2013. I'm actually jumping ahead of myself, but at the time the chair of finance, let's just call it tax tax, and so they changed name, and they also, it used to be collected by AHS, now it's collected by the tax department. But what it is, is it's a tax equal to 0.999% of all health insurance claims paid by health insurers by their Vermont members for the previous year, so it's a look back. 2% of that goes to the Department of Tax, it's for its software stuff, and then the rest gets split eightytwenty between the HIT fund and the Jeff fund. Now why is a point nine nine? Well, first, in 2008, the Health IT Fund was created, along with Act 192, which created catamount, and it was a 0.199% tax on claim, well, assessment, that's on claims, and all that money went to the HIT fund. The very next year, or the year after that, I forget which, this high-tech act came out from the federal government that we were able to get all this nine to 10, so now it's a mix of, we get all these different matches, and I'll get into that later. That fund was created specifically for health information technology. Fast forward to 2013, when the state was looking for new revenue, and it was expanded an additional 0.8%, for a total of 0.999%. The difference is that 0.199 still goes to the health IT fund, the rest goes to the general fund. At that time, it actually went into the state healthcare resources fund, but now it goes into the general fund, along with lobbying the taxes. So we get to the sunset. The sunset, I believe, was created in 2013 and actually, it's fine. So the sunset, I believe, was in 2013, and the original one sunset in 2017. And then you can see what's happened, and the purpose of the sunset, I think Representative Branagan might be, oh, no, there two members who were on the committee at the time. And the idea behind this sunset was, when we did the 0.8 and we did the 0.199, the conversation was had, well, we should start looking at this every several years, and just have the conversation about whether it needs to be necessary. And as you can see from this list right here, this is all the time that the Health IT Fund sunset has been extended, seven times. And in the governor's gov rec, he proposes to postpone it one year. So you'll see when you get to the budget language, it's postponed to 07/01/2027. Jen, is there anything you wanna add?

[Janet Garbett (Office of Legislative Counsel)]: No, I mean, can show you the existing statutory language, if it's helpful to sort of see what that looks like, and or what it looked like when you extended it the last time in legislation, so you would know what to expect. It's okay.

[Emilie Kornheiser (Chair)]: Does anyone want to? It sort

[Janet Garbett (Office of Legislative Counsel)]: of lives in two different places because of the money, so it has to get amended in two different places.

[Emilie Kornheiser (Chair)]: Because it's a

[Janet Garbett (Office of Legislative Counsel)]: recovery It's tax rate itself, exactly, and there's the revenue that's going into the HIV fund.

[Noel Langwell (Joint Fiscal Office)]: And so this is the revenue that's been collected since the C section. So you can see, point eight goes, it was State Health Care Resources Fund, and then I know it's general up to 2018, and starting 2019 it went the general fund. And you can see we estimate that the point eight will bring in 24,000,000, the HIT fund will bring in about 6,000,000. Now, for those who are saying, well, where did that money go? I do have a link to the HIT fund report, but I can also pull it up. Try to pull it up. I'm going have to stop sharing my screen for a second. And then So, in the report, in that HIT fund report, this is where the money has been spent, or how it's allocated for fiscal year 'twenty six. When I asked them, I did make a request about two weeks ago for what the 'twenty seven allocation estimations are going be, but I haven't received it. But you can see the first two, there's 6.7 and then there's 5.3, so that's the majority of the fund is allocated for Vital Week. And then two zero five that goes to Cathedral Square, which is for blueprint stuff. This 2,000,000, this was actually part of Act 68. It was from the HIT fund to AHS for grants to hospitals for collaborative efforts to reduce hospital costs. Was a thing such as enhancing telehealth infrastructure. None of this money has, I don't know if this money has actually been allocated out, but the $2,000,000 was taken out of the HIT fund for that particular purpose. It doesn't happen very often where money from HIT fund is used for non specific HIT debt, but in this case they had done that. But This gives you a sense of how the money is being spent.

[Emilie Kornheiser (Chair)]: Some thoughts from my head about next steps for the committee. A one year sunset seems just kind of annoying. Also, removing the sunset seems like a step too far. Think it is helpful to refresh our minds about some of these less usual crucible analysis. And so, we'd love to start the conversation. This would go in miscellaneous tax, probably. And so we have until crossover to make final decisions about it. I'll propose to the committee five years. I think on the other side of where the spending goes, I think there's an As we get clarity on the federal health care grants that we are gonna have no ability to appropriate or make any decisions on. It's fully a conversation between the administration and the feds. Once we get more clarity on it, it's possible there's some overlap here that we might wanna work out with the administration about where that spending is happening. But that also can't happen until We're probably not going to get the grant finalized for probably another month or so or a few weeks. And so we won't have that information for a while either.

[William Canfield (Vice Chair)]: About the hundred and nine trauma? Yes.

[Emilie Kornheiser (Chair)]: And so the Joint Fiscal Committee is going to take testimony on that grant when it's finalized. But that won't be for a little while. Does anyone have any questions for Nolan or Jen? Yeah. I recall, Madam Chair

[Carolyn Branagan (Member)]: years ago, that the concern was that this wouldn't last very long, that we would eliminate it. So that's why they wanted it to be just a year. But that's been proven wrong. So do we know why the governor wanted to just continue the one year? Did he just not think? I don't know.

[Emilie Kornheiser (Chair)]: Adam and Rebecca are coming in later today, so we can ask them. Sure. I mean, I agree.

[Bridget Burkhardt (Clerk)]: I feel like we're really going to have

[Emilie Kornheiser (Chair)]: a conversation again next year. Whoever's at this table Well, I thought maybe because things are so difficult financially that there might be some change that would be recommended for next year.

[Carolyn Branagan (Member)]: That's nice.

[William Canfield (Vice Chair)]: We can always change the sunset next year.

[Emilie Kornheiser (Chair)]: We make changes even when there's a sunset. Like the sunset can sign there and we can make legislative changes. That's right. Changes before a sunset. That's right. Okay. We don't have to wait. Other questions there?

[William Canfield (Vice Chair)]: I do. For Nolan, do you have any idea of do other states charge this similar fee?

[Noel Langwell (Joint Fiscal Office)]: Don't know. I think when we did it, we were one of the first. I think when Hi Tech came out, a lot of states were looking to maximize that.

[Emilie Kornheiser (Chair)]: What came out?

[Noel Langwell (Joint Fiscal Office)]: It's called the Hi Tech Act. I don't remember what it stood for, but it was a push in twenty early aughts to promote electronic health records and health information technology, real push. I don't remember the specifics of it, but I don't remember when it happened. A lot of states tried to come up with ways to raise money to get them back to £10. I don't know what exists today, or if there's anything like this, any problems.

[William Canfield (Vice Chair)]: I think that it was a couple years ago, and vital was really under a microscope. Yeah. Are you aware if the issues that were surfaced then have dissipated, so that's why it's kind of a non event from the renewal of this versus previous years?

[Noel Langwell (Joint Fiscal Office)]: What I can say is that in some of these acts that have this in the issue brief, there were, in 2017 and 2018, were some specific looks and requirements of Vital to dig deep into what was happening. I know that at one point Mike Smith was brought in to of right the ship. I cannot speak to anything about them in the current environment. We're happy to hear from them.

[Janet Garbett (Office of Legislative Counsel)]: Yes, what I can say is that there were significant attention paid, as Nolan said. There was specific legislation directing them to do certain things, but also kind of transforming some of the oversight into an active role by Diva, the Department of Vermont Health Access. And so we have not heard similar concerns since that time.

[Carolyn Branagan (Member)]: I don't know if that that

[Janet Garbett (Office of Legislative Counsel)]: means that everything is going well, but we haven't heard similar concerns. And there is a new executive director at Vital who I just met within the last week or two in this building. So I expect people will be hearing from him as well. I

[Noel Langwell (Joint Fiscal Office)]: will also just add that at one point there was legislation that required the Green Mountain Care Board to look at Vital's budget the same way they look at hospitals, and they did that for several years. It was just repealed last year, just

[Janet Garbett (Office of Legislative Counsel)]: eliminated last year. And the reason it

[Noel Langwell (Joint Fiscal Office)]: was eliminated was not because of Vital, but because the board was trying to focus its energy and and its resources more efficiently.

[Emilie Kornheiser (Chair)]: Anyone else? Thank you both. Nolan, Page five forty five, is there a fiscal impact? So

[Noel Langwell (Joint Fiscal Office)]: the two places where I would look for there to be a fiscal impact would be, does it impact the state and sloyees plan, and does it have an impact on programs in the state? So I spoke to the folks at HR, and they said it does not have a noticeable impact on the state employee plan. We already cover a lot of those vaccines, so there's nothing new or great there. And then when I spoke to AHS, they said, well, there may ultimately be a need for state to pay for vaccines that are not covered under the federal program. That has to be determined, and this specific legislation does not have any direct fiscal impacts on the state. So in short, I did not do a fiscal note because there did not seem to be any immediate pending. And those are both appropriations specialists that you're asking. So you don't see any revenue impacts either? There's no fees in this band. Right now.

[Emilie Kornheiser (Chair)]: Okay,

[Noel Langwell (Joint Fiscal Office)]: great. Don't fix all of them. Okay,

[Emilie Kornheiser (Chair)]: thank you both. You have ten minutes. I was going to ask if there's any enjoy yourself.

[Bridget Burkhardt (Clerk)]: Gonna I was gonna was sit.

[Noel Langwell (Joint Fiscal Office)]: I need to go get my iPad downstairs. Yeah. No. Do whatever you need to do. That's fine. Go for it.

[Emilie Kornheiser (Chair)]: Would folks like to take a break, or is there a particular conversation that anyone would like to have to fill the next ten minutes of our lives?

[Edward "Teddy" Waszazak (Member)]: We had a good committee dinner last night.

[Emilie Kornheiser (Chair)]: Woah, wait. It's a policy conversation anyone would like to have for the next ten minutes. And one of the things is, like, we ask people to read reports. And if you want to If there is not testimony scheduled soon, or you're not aware of when testimony is going be scheduled related to the report that you read, and you would like to have a conversation about that, please talk to me and Sorcha about finding time for sort of like a book report type situation of sorts. Yes. They'll need to

[Bridget Burkhardt (Clerk)]: do a book report, but we have read and pulled out some key highlights from some

[Emilie Kornheiser (Chair)]: of the reports. What do want us to do with those?

[Bridget Burkhardt (Clerk)]: Can we send it to Sorsha? I mean, how do you want it shared with the community?

[Emilie Kornheiser (Chair)]: I think it depends on what it is, because if it's something that we already have testimony scheduled on, would just really appreciate the folks who read the report to really help dig in and lead the conversation with witnesses as we're looking at the report and send them out maybe very close to the time that we take the testimony so they're fresh in people's minds, your notes. If it's something that we don't have testimony scheduled on, let's figure out a plan for how we can talk about that report in committee.

[William Canfield (Vice Chair)]: Madam Chair, we did get a request from government operations committee, I believe, on reports that are supposed to be sent to us and as to whether or not we should be discontinuing on.

[Emilie Kornheiser (Chair)]: You know, it's so funny. I just finally this morning was like, I'm gonna open up that email and really dig in on it. So well timed. Thank you.

[Noel Langwell (Joint Fiscal Office)]: And they are old. Yes.

[William Canfield (Vice Chair)]: And statute dating back to 2009 saying this report should be sent to the Committee on Ways and Means. I don't some of them, I don't think we've seen this year or last year. So I I don't know if they're being sent to us or maybe they are. We're just

[Emilie Kornheiser (Chair)]: Sharsha, do you want to share your screen so we can look at that list? I would like to find it. It's from Tucker. Yeah, I can set up a spreadsheet, which makes it harder to

[Noel Langwell (Joint Fiscal Office)]: Yeah, sort.

[Emilie Kornheiser (Chair)]: Oh, all the pension people are here. Hi. Thanks for being a little bit early because we're running ahead.

[William Canfield (Vice Chair)]: Couple of the reports that were listed there actually seemed interesting.

[Emilie Kornheiser (Chair)]: They do.

[Bridget Burkhardt (Clerk)]: Since we asked about it. That's a

[Emilie Kornheiser (Chair)]: low bar. The Private Fund Advisory Committee annual report, I know I have seen that before. That does come out annually. And I think we still want that.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: I've heard actually I'm

[Emilie Kornheiser (Chair)]: opposed to that, I don't get that. You don't get that? I mean, I haven't. Oh, can you note that we need to find it, but we want it? And then

[William Canfield (Vice Chair)]: Could you also make that bigger? Sorry.

[Bridget Burkhardt (Clerk)]: Thank you, was literally huffing the thought of my head. I'm a guy doctor. Really struggling.

[Emilie Kornheiser (Chair)]: Similarly, I think a special funds report is really useful, but I don't remember seeing that one.

[William Canfield (Vice Chair)]: Was that the year that there was an all out war on eliminating special funds?

[Carolyn Branagan (Member)]: I don't know if that happened.

[Edward "Teddy" Waszazak (Member)]: Like, yeah.

[Emilie Kornheiser (Chair)]: Teddy, do you remember in 2014 when there was a war on special funds? You're nodding.

[Noel Langwell (Joint Fiscal Office)]: I just It was. Please, just

[Emilie Kornheiser (Chair)]: don't like special funds. No, I'm kidding.

[Noel Langwell (Joint Fiscal Office)]: I'm interested in revisiting the war.

[Emilie Kornheiser (Chair)]: I would be happy to revisit and wage a war in special funds again, so maybe we could find that report.

[Bridget Burkhardt (Clerk)]: Appropriations would support you on that. I think that's a previous conversation.

[Emilie Kornheiser (Chair)]: I think the staff would have a little party.

[Noel Langwell (Joint Fiscal Office)]: No agenda item.

[Emilie Kornheiser (Chair)]: I would be curious what this authorizes submission of plan for electronic filing fees thing is, but I can't imagine we still need it. That seems like a onetime report Yeah. Not an ongoing report.

[Edward "Teddy" Waszazak (Member)]: About resources made available from the My Enterprise funds. That

[Emilie Kornheiser (Chair)]: doesn't sound like something that we need, but it might be something other committees need.

[William Canfield (Vice Chair)]: Two different acts.

[Emilie Kornheiser (Chair)]: Nope. It's the same act. It's just listed twice. There's the annual on the one time. Can we scroll down, Sarsha?

[William Canfield (Vice Chair)]: Okay, I'll play dumb, asking for somebody else. Where does the Mott Enterprise phone?

[Emilie Kornheiser (Chair)]: You could read it. Okay.

[Edward "Teddy" Waszazak (Member)]: Lottery.

[Emilie Kornheiser (Chair)]: Liquor lottery.

[Edward "Teddy" Waszazak (Member)]: Liquor lottery. Okay. Cannabis.

[Emilie Kornheiser (Chair)]: Don't think cannabis is there.

[William Canfield (Vice Chair)]: But but there was something new added in the last few years to the enterprise. Oh, yeah. Interesting. Secretary of of the Enterprise. Anyway yeah.

[Emilie Kornheiser (Chair)]: Services for care is not really our thing. The Medicaid report, do still get, and it's useful. And it's also part of the eBoard meeting. Have you

[William Canfield (Vice Chair)]: seen that recently?

[Emilie Kornheiser (Chair)]: It's part of the e board meeting.

[Noel Langwell (Joint Fiscal Office)]: Okay.

[Emilie Kornheiser (Chair)]: Nolan it's when Nolan sits there for the e board.

[William Canfield (Vice Chair)]: Well, can you just that's better. Provided that last week?

[Emilie Kornheiser (Chair)]: I think that's on our

[Carolyn Branagan (Member)]: Yeah.

[William Canfield (Vice Chair)]: Census.

[Emilie Kornheiser (Chair)]: Is Sharsha, do know what this one is? Incentives authorized in '32 committee? No. The incentives authorized in 32 VSA. What about the treasurers? I think we should do this activity again with more staff. Okay.

[Noel Langwell (Joint Fiscal Office)]: Okay.

[Emilie Kornheiser (Chair)]: Alright. Great.

[Jeremiah Greer (Chief Financial Officer, Office of the State Treasurer)]: If it is helpful, can we can provide that report to you that's filed on it. It's posted on the Traders Office website.

[Emilie Kornheiser (Chair)]: But you're not submitting it. But you're not submitting it.

[Jeremiah Greer (Chief Financial Officer, Office of the State Treasurer)]: I do believe we also submitted it.

[Emilie Kornheiser (Chair)]: I thought so too? Yes. I feel like I've seen it.

[Jeremiah Greer (Chief Financial Officer, Office of the State Treasurer)]: Yeah, it's definitely. If it's helpful, can send it.

[Emilie Kornheiser (Chair)]: No, that's okay. I can find it. Yeah. Thanks. Thank you. Okay, we're gonna end this activity and do it again with staff. And move to the budget adjustment act. Is everyone ready? It's gonna make such a fun day. Okay. Tim and Jeremiah, would you like to join us? Or just one of you? Whatever works. Great. I'll be in the back. Okay, cool. Thanks. Hello, and welcome to Ways and Means.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Thank you very much for having me today. My name is Tim Duggan. I'm the director of Vermont Retirement Systems and the office of the state treasurer. With me today is Jeremiah Greer, our chief financial officer. Today, we are here to talk about a request we have for the Budget Adjustment Act. It's a $3,000,000 request to make up for some federal grants that are not coming in to help pay the teachers' pension costs. So if it's Okay, I will share my screen and walk through the issue. One thing I am proud to say is that we are not asking it to be in a special fund.

[Noel Langwell (Joint Fiscal Office)]: Hopefully.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Alright.

[Emilie Kornheiser (Chair)]: Yep. I remember seeing it. So

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: I will start with what is the federal grants assessment? So the teachers' pension costs, the employer part of those costs are paid by the state. Beginning in 2016, the legislature established a federal grants assessment to basically charge any federal grants that fund a teacher physician, charge the pension component to that grant as well. So just, for example, if there's $100,000 salary being paid out of a federal grant, then there's this additional amount of and this year, it's 25.47% That covers the pension costs, and that directly from the schools. And it's an offset to what the state has to pay for the pension costs. That's basically how it works. I put the statutory reference in there. And as a practical matter, what we do is treasurer's office, Jeremiah's team, they calculate that percentage every year. It's informed by what the actuaries determine is the employer portion of of the cost in the annual valuation. And once we start getting data on the fiscal year salaries and information, then the first quarter will close. And then Jeremiah's team will send out bills for the federal grant piece of it to schools. And then we start getting paid by the schools. So there's real lag here. We're estimating what the federal grants are going to be in the fall and the winter when we're doing the budget for the upcoming fiscal year. And then we don't start seeing any receipts until really right now, where we don't even have the full first quarter in yet. So that lag is sort of what's causing the issue here, as I'll explain. And just to kind of for the details of how it fits into the overall funding scheme for the pension systems, the state pays the VISTA's employer costs. There are two components really that make up the employer cost. One, we call the normal cost. That's basically the amount of this year's cost. For everyone that's teaching this year, what is that one additional year of service cost? That's the smaller component. The larger component is the unfunded liability payment. And that is what we are the amount the state pays to close out the unfunded liability by 2038, consistent with the state's statutory funding plan. So the FGA revenues offset this amount. There's a third component that folks may remember from act one fourteen, the pension fund that was undertaken in 2022. It's this plus payment. That comes from the general fund, and it's not offset by the FTA. It's basically just an additional payment to pay down this unfunded liability more quickly. It's like making an extra payment on your mortgage to close out that unfunded liability a little quicker. So what's that look like in 2026? The normal cost so on the left hand box, that's the total ADEC, the amount the actuaries say the employer of the state needs to put into the pension system this year. It's total of $212,800,000. 41.4 of that is that normal cost, the cost of the ongoing benefits of running the system. If we had no legacy unfunded liability, that's what it would cost. 171,300,000.0, that's the amount we need to close out the unfunded liability. So of that amount, the state You can see in the rightmost column, the state pays by far the lion's share of that. And the school districts, through this federal grants assessment, pay the estimate at when we were developing this last year was $13,300,000. That estimate is what's changing, and it's why we're here today. And I put the references from the big bill in there just so you have them if you want them. So this really is the chart that I wanted to share with you today. When you look at how we projected revenues, you can see that over the years, it's been conservative. And we would always have I think that was somewhat intentional, be a little conservative because you can't miss the ADEC. We have to pay that amount. It's very important for our credit rating to make sure that we stay on our statutory funding path. So we would be a little conservative in the budgeted amount, and then actuals would come in. And as you see in really kind of starting in '21, but then '22, '23, '24, I mean, remember, Esser funds, you remember all the federal money coming in. The actual receipts really skyrocketed there. And then last year, around the budget time, was when we first saw evidence that, woah, that's ending. The federal grants are coming down substantially. So that's, you know, that's why 2025 is so close. And we came in and talked to the legislature, and and fortunately, you put a provision in place to help with that in the budget. But we had already projected FY 'twenty six, the FY 'twenty six FGA. So that offset, you see, it's finally catching up with those higher receipts just as federal grants are falling off. And of course, all the uncertainty, not just in ESSER, but in Federal one, two, IEA, all of them. So when we realized that, we came in. That was sort of we were just getting the second quarter of receipts, realized that there was a problem potentially for 'twenty five and likely for 'twenty six. So as part of the budget, the legislature appropriated a $3,800,000 reserve to backfill FGA revenue in 'twenty five and 'twenty six. So we didn't need it in '25, just barely. But in 2026, we'll need that whole amount and as as we're projecting now, then some. So that $13,375,000 projection that we did last year, we've now revised down to $6,500,000 approximately. And so the request that we have is another $3,000,000 to be appropriated in the same manner that you appropriated that 3,800,000.0. We don't need it this year. We'll just carry forward into the following. And a note about the following year. Our projection for next year is 8,000,000 We need to watch it. You know? We've we're there's a lot of uncertainty right now. We're we're projecting a very moving target. We have to do it way in advance. And so our goal is just to be transparent. As soon as we know things, let you know. But what we think makes sense is an additional $3,000,000 in the BAA. Worked with folks in JFO, and they helped come up with some language that we think would effectuate that appropriation. Makes sense to us. And so that is what we are asking for today and happy to answer any questions you may have. Oh, I would be remiss seeing Chris in the room. He's done a wonderful issue brief on how we pay for school retirement costs for teachers. And it talks all about the FTA, gives great detail and explanation. So there's a link to it in our deck. Do I have any answers? It's on this last page right here. This.

[Carolyn Branagan (Member)]: Yeah, oh, yes. Thank

[Emilie Kornheiser (Chair)]: you. Sure.

[Rebecca Holcombe (Member)]: Yeah, appreciate the intention of the volatility around federal funds. We also know that districts are cutting K-twelve teachers right now. There's been a decline of about 2% total. Policy decisions we make this year may actually change the distribution. We know that they increased pre K teachers, for example, in the last couple of years, that somewhat offset the decline, which was down about 8%. But what happens when we reduce the number of active teachers through policy, and whether at the federal level or at the state level, and what is the impact? And how are you working to anticipate that?

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: For this purpose, it really depends on we don't know how those are cut. So if there are cuts that are coming from federal grants drying up, it's actually not very simple, because a lot of I think what's been happening after the ESSER influx of money is that positions that were funded out of ESSER funds have moved into local budgets. So when that happens, that position is no longer federal grant funded, and we're no longer receiving this federal grants assessment. So we have to wait and see how it plays out. We are engaged. Last year, we did so this is just with the federal grants assessment. But your question is more broadly.

[Rebecca Holcombe (Member)]: I'm just saying objectively. We lost about 7% of our students. We've lost about 8% of our K-twelve classroom teachers. So there is some transition happening in the field, and that is going to have an impact on the pension. I'm just curious how you anticipate.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: So one thing we did last year was we performed risk assessments for all of our funds. In the teacher system, we asked our actuaries to tell us, well, what happens if we have a substantial reduction in members? Again, we're still trying to dial that in because if we just say, what happens if we lose members, they'll say, well, not much. Because a lot of times, they're assuming that those numbers will be evenly distributed among the population. So one of the things that we think about in the retirement system is monitoring what kind of policy choices might be made if there is a decrease in teachers. For example, is there a retirement incentive being put in? Because that will affect the pensions, or would it be more of like a grid?

[Emilie Kornheiser (Chair)]: Going on to

[Rebecca Holcombe (Member)]: you then.

[Emilie Kornheiser (Chair)]: Yes. Oh, yes. Incentive. Yeah.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Yes. And that affects the pensions. And I actually, we see it in our evaluation. Our evaluation results this year, it tells us we have our assumptions that we go in with. And then in a lot of different areas, the purpose of evaluation is to true up our actual experience with our assumptions. And over the past couple of years, retirements is an area of loss, meaning that people are retiring earlier than our assumptions predict they will retire. And that's financial pressure on us.

[Emilie Kornheiser (Chair)]: And just to refresh folks' memory, Chris came in and did some testimony on answering this exact question last year when we were diving into this. I don't

[Noel Langwell (Joint Fiscal Office)]: think we had you in, Tim, but I

[Emilie Kornheiser (Chair)]: think Chris talked to you extensively about it in order to testify. And we can have Soursha send around

[Noel Langwell (Joint Fiscal Office)]: that testimony as well if folks wanna of Right.

[Emilie Kornheiser (Chair)]: I guess I guess what I'm

[Rebecca Holcombe (Member)]: saying, I'm hearing from multiple districts that it is cheaper for them locally to offer a teacher buyout. Of course. And they save hundreds of millions. And I'm just wondering how we're tracking whether or not that's materialized because that's future data. And we haven't got

[Emilie Kornheiser (Chair)]: that's just so that we're all having the same conversation. We did dive into that last year, we can spend more time on it this year. But I just want

[Noel Langwell (Joint Fiscal Office)]: to make sure that we're not

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: repeating. Let's circle back to this specific point, Rebecca representative Holcombe. Sorry. Representative. Thank you. I apologize. One thing we are seeing some we're hearing anecdotally is that school districts are understanding how to get the best value out of federal grants for their district by if you have a choice on a grant to put someone who's not in the teacher system or a teacher in, what would the rational business officer do? They put the aid in because you don't have an additional 25% that you have to add to it, and you'd fund the teacher in a local budget if you have that choice. There may be some of that going on. It's sort of a rational reaction to an economic signal. But it is also causing us to see a shortfall in the FGA, and that's what brings me here today.

[Emilie Kornheiser (Chair)]: Your question's great, and I'm happy to have folks back to dive into that as we're making policy decisions. I just want to make sure that we're closing the loop on the budget adjustment.

[William Canfield (Vice Chair)]: I just have a very simple question, just understanding the math. And using round numbers, not reflective of anything, but say it's a $100,000 position that is federally funded. So are you saying that the FGA is an additional 25.7% that's being sent by the federal governments?

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: It's going from the federal government to AOE to the district to us. Great. But

[William Canfield (Vice Chair)]: it is an addition. It's not coming out of that $100,000 appropriation.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Yep. And the point is to it was a way to have the school districts share some of the burden of pension costs, where that's been a long standing. It's been the state's responsibility. I think the purpose there was to realizing that where there were federal funds that were funding a position, it makes sense to it's typical. That's what happens in the state side. A lot of positions are funded out of transportation bond or what have you. You And fund the whole you would fund the pension piece of that out

[William Canfield (Vice Chair)]: of there, too. Just saying about 25, 26% to or other benefits.

[Emilie Kornheiser (Chair)]: Correct. I thought I understood before I'm trying to

[Bridget Burkhardt (Clerk)]: ask that question. I thought I understood what was happening.

[Emilie Kornheiser (Chair)]: Can we just wait one second? Does anyone have anything else about budget adjustment? Okay. I'm closing that door. Bridget, sorry, Representative Burkhardt, please ask your question So broader budget type of the

[Bridget Burkhardt (Clerk)]: school district gets a specific size grant, and the school district makes that choice about who to put in there. Then out of that grant, it hasn't gotten bigger, the grant. The grant is what it is. It's a block, that 25%. So they have to factor that in when they decide who they're funding out of that grant. It's not that there's additional grant money coming from any place. Because I got confused by that answer a little bit. So it is just the grant is what it is, and the district has to decide how to use it.

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: You're absolutely right. I'm sorry if I was unclear on that.

[Bridget Burkhardt (Clerk)]: And that's being done for all that calculus is being done for all positions, not just federally funded And this was a big push by treasurer peers, because for years, those federal positions have been underfunding the pension fund.

[Emilie Kornheiser (Chair)]: Anything else you want to share with us about future pensions more broadly as we're making policy decisions to move forward?

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: Oh, boy, I could talk for hours. Don't think there's any

[Emilie Kornheiser (Chair)]: Would you rather reschedule a time specifically to talk about it?

[Tim Duggan (Director, Vermont Retirement Systems, Office of the State Treasurer)]: If you have specific questions, I mean, I'm happy I'm always happy to come into this committee and talk more broadly. I've been you know, I put together a one on one just on pensions generally. I if that's of interest, we could drill down on teacher's side. Happy to be available to this committee as you'd like.

[Bridget Burkhardt (Clerk)]: Specifically, when we talk about pre K, could we have the treasurer's office come in and talk about that? Because we did increase pre K teachers in that five year window by about 22%. So any policy work we do around early childhood is going to have an impact on the fund as well.

[Emilie Kornheiser (Chair)]: President Russell?

[Edward "Teddy" Waszazak (Member)]: Yeah, thank you. 101 on pensions generally, have we seen that before? We have. The short version is, I may be able

[Unidentified Committee Member]: to find it, but I, for one, would like

[Edward "Teddy" Waszazak (Member)]: to see it again and maybe other members of the committee would too. If it's something that's already prepared. We

[Emilie Kornheiser (Chair)]: have seen it before. I think we even saw it last year and spent some time on pensions last year. I want everyone to know everything, and we only have so many hours before crossover. So we're gonna find it and send it around to people rather than Since we don't have well, pensions there's a pension impact to some of our decisions.

[Noel Langwell (Joint Fiscal Office)]: We're not making sort of Yeah. I'll speak to

[Edward "Teddy" Waszazak (Member)]: the extra review. We just wanna see it. Thank you.

[Noel Langwell (Joint Fiscal Office)]: Thanks, Erin.

[Emilie Kornheiser (Chair)]: How many things? And now we're ahead and behind. Then we can okay. I wonder when a day will be like this.

[Noel Langwell (Joint Fiscal Office)]: Okay. Same time.

[Emilie Kornheiser (Chair)]: Yeah. Great. We're gonna take a break until 10:15. We're catching up with that report on reports.

[Noel Langwell (Joint Fiscal Office)]: Alright. Good. I'll see if you don't mind. Hey.

[Edward "Teddy" Waszazak (Member)]: Janine, you're fine?