Spaulding floats trust fund payout changeBy David Taube
VERMONT PRESS BUREAU | November 14,2012In order to withstand weaker stock and bond yields, a former state treasurer suggested Tuesday a possible policy change for a $30 million pot of investments that helps with hundreds of student scholarships each year and several college endowments.
Administration Secretary Jeb Spaulding, who served as state treasurer from 2003 to 2010, said during a conference call that legislators might want to consider changing the trust fund’s payout structure.
Spaulding said when the state started the higher education trust fund there was $6 million in it. But now that the fund has reached $30 million, due in large part to estate tax surpluses, Spaulding suggested reducing the current 7 percent payout to 5 percent.
When the fund was created in 1999, the state included a provision that payouts could never cut into the principal. But if the payout percentage were changed, the state could pay out a new distribution total, even if there’s a low return on investment and a full distribution would affect the principal, according to members of the PreKindergarten-16 Council higher education subcommittee.
The idea is that because the fund is larger now, and if the subcommittee is comfortable with how the fund can perform over time, the group might not want to worry as much if one year’s payout temporarily cut into the principal.
Spaulding suggested he wasn’t necessarily endorsing the idea but was presenting it as an option for the subcommittee to consider. The change would require legislators to modify the statute.
Vermont Student Assistance Corp. President and CEO Don Vickers, a subcommittee member, said the idea had merit. He said after the meeting that the change could reduce volatility in the number of grants available for students.
The subcommittee discussed the issue by phone Tuesday, moving themselves closer to a decision next year about whether the fund should continue to pay out 7 percent each year.
For the last 12 years, the fund has generally paid out 7 percent annually through stock and bond returns. Despite that success, Deputy Treasurer Stephen Wisloski said simply giving out the return each year is what financial professionals call “bumping along the base.”
Five percent of the fund is automatically distributed each year between the University of Vermont, the Vermont State Colleges and the Vermont Student Assistance Corp., all for direct student financial assistance which cannot be offered in the form of loans. Two percent goes to UVM and the state colleges for endowments, which can support anything from building projects to additional scholarships.
But projections say for at least three years beginning in 2015, the fund’s endowment payout will be reduced. For the next five to seven years, forecasters expect returns will be closer to 4 percent each year.
firstname.lastname@example.orgMORE IN Vermont NewsGoddard College is getting national attention for its choice in commencement speaker for the... Full Story
- Most Popular
- Most Emailed
- RICHARD'S POOR ALMANACK: Julius Caesar dedicates a temple to his mythical ancestor, Venus Genetrix; on this day in 1933, FBI agents in Memphis, Tennessee, arrest Machine Gun Kelly; Yves Rossi flies the English Channel with home-made jet-pack.
- RICHARD'S POOR ALMANACK: On this day in 1852, Henri Giffard demonstrates the first steam-powered airship, sailing 17 miles from Paris to Trappes; on this day in 1877, Japanese imperial troops crush the Satsuma Rebellion, Saigo Takamori dies in Kagoshima.
- TOMORROW'S HEADLINES TODAY: U.S. Rep. Peter Welch meets with Killington business owners, governor candidates debate, Gov. Shumlin discusses progress in anti-opiate campaign, Spanos trial venue moves to White River Junction.
- RICHARD'S POOR ALMANACK: On this day in 1776, as Nathan Hale is hanged by British military authorities for spying, he utters his famous last words — or does he? In 1975, Sara Jane Moore attempts to kill President Gerald R. Ford in San Francisco.
- TOMORROW'S HEADLINES TODAY: Patrick McArdle reports and the theft of an $89,000 shotgun, police release a video of the Monday Castleton robbery, O'Gorman reports a lawsuit by a local man claiming his vehicle unlawfully seized, police leave him in cold.
- RICHARD'S POOR ALMANACK: Giles Corey of Salem, Mass., is pressed to death during the Salem witch trials; on this day in 1952, film comedian Charlie Chaplin, while traveling to England, is denied re-entry into the United States by U.S. attorney general.