Ellis: When Managing Taxpayer Money
Requires Unparalleled Experience

The Utah Constitution designates the State Treasurer as the “custodian of public moneys.” State statute tasks the State Treasurer with other duties related to receiving and investing taxpayer moneys. The State Treasurer is also statutorily designated as a member of several boards and commissions ranging from the Utah Retirement System to the Utah Communication Agency Network. In each case, the treasurer is appointed to the board because of expertise in state finances, investments, and debt issuance.

The following are a few details about what happens in the State Treasurer’s office:

1. Receive, transfer and invest on average $80 million a day.
2. Handle over $25 billion in deposits and investments annually.
3. Invest approximately $12 billion of taxpayer money held in the Public Treasurers Investment Fund on behalf of the state, counties, cities, school districts and other government entities.
4. Earned more than $480 million of investment income from July 1, 2006 to June 30, 2007. That’s $480 million that didn’t come directly from taxpayer pockets.
5. Coordinate the issuance of bonds authorized by the legislature. Since 1997, the state has issued over $3.5 billion of bonds.
6. Act as the principle point of contact with the three bond rating agencies. Maintaining the State’s AAA bond rating saves millions of dollars in interest expense annually.
7. Manage the arbitrage rebate reports for the state’s outstanding bonds.
8. File the operating and financial reports and continuing disclosure statements required by the Municipal Securities Rulemaking Board (MSRB) in relation to the state’s bonds.
9. Return abandoned property to rightful owners.

The reason almost all Utah local government entities hold their cash balances in the PTIF is that it provides a safe, inexpensive, and very liquid investment vehicle that consistently outperforms other short-term funds. Recently in Florida the $27 billion state-managed local government investment pool suffered what can only be described as an old-fashioned run on banks because those making investment decisions were not aware of all the risks of certain investments.

The Florida treasurer’s office had invested $2.2 billion in subprime-related structured investment vehicles (SIVs). $725 million of these holdings have already defaulted. Over the course of several days, local governments withdrew over half the balances the Florida fund held, prompting fund managers to freeze the pool, basically prohibiting further withdrawals. This temporary freeze left local towns and school districts struggling to cover payroll and other operating expenses. We have not experienced this problem in the state of Utah.

The treasurer may delegate the authority to perform these tasks to others, but the responsibility remains with the treasurer. Proper investment strategy, asset allocation, debt structure and other technical considerations can be recommended by advisors and consultants. Remember, they earn a fee for each transaction, but Utah deserves a treasurer that understands the issues and can make the best decision for the state on his own.