Cash & Investments

TRANSPARENCY: Vermont's Financial Reporting Page
Visit our new financial transparency page for investors. This page organizes, in one location, ten items that the National Association of State Auditors, Comptrollers and Treasurers (NASACT) recommend that state government provide for interim disclosure.
 

Trust Investment Account

The 1999 State Legislature authorized the establishment of a trust investment account (TIA) administered by the State Treasurer for purposes of investing restricted funds with non-expendable principal balances.  As of June 30, 2016, the fund had a principal balance of approximately $60.7 million, of which $19.3 million was allocated to the Vermont State Employees' Retirement System OPEB account, $30.2 million to the Higher Education Endowment Trust Fund, and the remainder to various smaller trust funds.

For fiscal year 2016, the fund had a total net return of 2.5 percent. For the same period, the S&P 500 Stock Index returned 4.0 percent and the Barclays US Aggregate Index returned 6.0 percent.

Vermont firms during the fiscal year 2014 were transitioned from an active to a passive strategy. This was accomplished through the selection of four Vanguard index funds, three of which were equity based, and one fixed income. The result of the restructuring of the portfolio was a reduction in management fees, which declined from 38 basis points to 6 basis points annually at the time of this report.

 

Trust Investment Account Returns

For more detailed performance information please review the 2016 Annual Report

 

Higher Education Trust Fund

The General Assembly established the Fund in the Office of the State Treasurer in 1999 with an appropriation of $6 million to provide non-loan financial aid to Vermont students attending the University of Vermont (UVM), the Vermont State Colleges, and other Vermont post-secondary institutions (16 V.S.A. § 2885).  The balance increased significantly in FY 2007 due to Estate Tax receipts of $5,223,449.94, and a $600,000 contribution from the State’s unclaimed property fund as a result of legislation proposed by the Treasurer in FY 2006. Assets decreased modestly in FY 2008 and FY 2009 due to low investment returns and minimal fund contributions and benefitted in FY 2010 and FY 2011 from a strong equity market. In FY 2010 and FY 2012 the Fund benefitted from estate tax contributions.

The statute provides that in August of each fiscal year, the State Treasurer is to withdraw up to 5% of the 12-quarter moving average of the Fund’s assets and divide the amount equally among UVM, the Vermont State Colleges, and the Vermont Student Assistance Corporation (VSAC). The amount appropriated, however, cannot exceed an amount that would bring the Fund balance below total contributions to principal.  Total principal contributions through June 30, 2016 have been $29,038,711.  The 5% distribution available this year is $1,153,297 in total or $384,432 each for UVM, the Vermont State Colleges, and VSAC. 

16 V.S.A. § 2885 further provides that during the first quarter of each fiscal year, the Secretary and the Subcommittee may authorize the State Treasurer to make an additional distribution of up to 2% of the Fund’s average assets available to UVM and the Vermont State Colleges for the purpose of creating or increasing a permanent endowment fund. Similar to the 5% distribution, the amount appropriated cannot exceed an amount that would bring the Fund balance below total contributions to principal. Further, each institution is required to match the appropriation by raising private donations of at least twice the appropriated amount.  At its meeting last year, Secretary Johnson and the Subcommittee voted to forgo this 2% appropriation for distribution to UVM and the Vermont State Colleges, based upon a recognition that lower expected returns in the near term do not support a total distribution of 7% from the fund.
 

After payments the Fund balance at the end of Fiscal Year 2016 totaled $29,038,711.

 

Tobacco Litigation Settlement Fund and the Tobacco Trust Fund

In November 1998, Vermont was one of 46 states to enter into a settlement agreement with four major tobacco companies. The State’s estimated share of settlement payments at that time was expected to total $806 million over the first 25 years of payment, with an additional $156 million of strategic contribution payments to be paid between 2008 and 2017. Through fiscal year 2016, the State has received payments totaling $546 million. In fiscal year 2000, the Vermont State Legislature established a Tobacco Litigation Settlement Fund (“Settlement Fund”) to be administered by the State Treasurer and subject to further appropriations. In fiscal year 2016, $28.75 million from the settlement fund was directed to healthcare services (Medicaid; includes funds redirected to the Medicaid Global Commitment Fund). A total of $3.82 million was spent on programs in various departments for tobacco enforcement, prevention, and education programs. Additionally, $1.42 million funded substance abuse and youth protection programs in the Agency of Human Services. In fiscal year 2017, $28.58 million from the settlement fund was directed to healthcare services (Medicaid; includes funds redirected to the Medicaid Global Commitment Fund). A total of $3.99 million was spent on programs in various departments for tobacco enforcement, prevention, and education programs. Additionally, $1.40 million funded substance abuse and youth protection programs in the Agency of Human Services. Any remainder of the settlement fund receipts is to remain in the fund for appropriation in fiscal year 2018. In fiscal year 2016, $201,000 was transferred from the Tobacco Trust Fund to the Tobacco Litigation Settlement Fund per Act 58 of 2015 sec D.103(a). The balance of the Tobacco Trust Fund investments at June 30, 2016 was $474,000 and down from $5.25 million at the end of fiscal year 2015. Of the $474,000 invested, $201,000 is committed to the above mentioned transfers to cover the deficit in the tobacco Litigation Settlement Fund as in past years. If State appropriated expenditures from the Litigation Settlement Fund and litigation settlement revenues both continue at similar levels to the last few fiscal years, the Tobacco Trust Fund will be fully depleted.

 

Vermont Veteran's Home

By legislative act in fiscal year 2001, the Vermont Veterans’ Home was required to transfer its endowment fund to the State for administration by the State Treasurer. The legislation allows the State Treasurer to invest these funds, if appropriate, with the long-term investments in the Trust Investment Account (TIA). During fiscal year 2016, there was one withdrawal from the Vermont Veterans’ Home TIA accounts for $50,000. As of June 30, 2016, the balance of the fund first contributed to the TIA was $595,875, and the balance of the second (later) fund was $759,772, for a combined total of $1,355,647.