Douglas vetoes state pension investment bill

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(Host) In his first veto of the year, Governor Jim Douglas has rejected a bill allowing state pension systems to jointly invest their portfolios. The governor said he agrees with the concept of the legislation but his criticism has to do with the way the new system is structured.

VPR’s John Dillon reports.

(Dillon) The pension system bill was designed to save money by combining the investments of the three state pension systems.

A new investment committee would oversee how the $2.6 billion in assets are managed. The governor’s objection centers on how that committee is selected. Douglas says it’s not right that only four of the eight trustees of the state employees’ pension system are allowed to elect members of the investment committee.

(Douglas) “I can’t think of another example where only a portion of a member of a body select who represent it. It would be as if only the majority caucus were voting on legislation. It just doesn’t make any sense.”

(Dillon) The bill, which cleared the Legislature last week, would restrict the selection of the new investment committee to trustees who are either retired state employees, teachers, or retired teachers. From the governor’s point of view, that gives too much weight to the vote of organized labor.

(Douglas) “I think this exacerbates a labor/management split in an unfortunate way. The value of the system we have now is that 50 percent of these boards are labor representatives and 50 percent are management. And I think it’s inappropriate to say only the 50 percent who are labor get to choose who represents the entirety of the boards on this new investment committee.”

(Dillon) The bill was a top priority for State Treasurer Jeb Spaulding and it puts him at odds with Douglas, a former state treasurer himself. Spaulding says it will save about a million dollars a year in management contracts and improve the fund’s market performance.

Spaulding rejects the governor’s argument that the selection of the new investment committee is undemocratic.

(Spaulding) “I don’t buy it. That’s like saying that only having the Senate confirm appointments that it’s undemocratic because the House doesn’t get to vote as well. There are all kinds of ways that people are selected to being on everything from judicial retention committees to state boards of education. This is not a unique process that we’ve come up with. We actually modeled it on what was done in Massachusetts.”

(Dillon) Spaulding says he was surprised by the governor’s veto and he urged the Legislature to over-ride it. The bill may come before the Senate as early as next week.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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