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.
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 benefited in FY 2010 and FY 2011 from a strong equity market. In FY 2010 and FY 2012 the Fund benefited 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 2017 totaled $29,639,716.