Governor Jim Douglas’ plan to invest state pension funds in the Vermont Housing Finance Authority is running into opposition.
Douglas, who announced the plan as part of his $214 million economic stimulus package last weekend. Douglas wants the state pension board to buy more than $17 million worth of VHFA bonds to bolster state programs aimed at improving homeownership rates.
But State Treasurer Jeb Spaulding says the proposal may violate federal laws banning states from committing pension funds to investments that offer below-market returns. Yesterday, a Senate committee adopted a watered-down version of Douglas’ plan that directs the state to `"consider” the VHFA investment, rather than requiring it to do so.
Administration Secretary Mike Smith calls Spaulding’s argument a "red herring.”
He says the Housing Finance Authority’s bonds offer returns around 5.6 percent, and that because Wall Street investors are leery of bonds like the VHFA’S, it’s important that the state step in to rescue programs that rely on those bond sales.