The state treasury earned $42.2 million on $3 billion in investments in the first 11 months of this fiscal year, and that's almost double the earnings of the previous year, Treasurer Dennis Milligan told the Board of Finance on Tuesday.
Milligan, a Benton Republican who was sworn into office on Jan. 13, 2015, said the increased investment returns are "fantastic" and he thanked the Board of Finance -- led by the state's chief fiscal officer, Larry Walther -- for giving his investment officials the ability to more actively invest the treasury's funds to generate increased investment returns.
"The quick analysis is this: We are producing better results than in past years with less favorable interest rates," said the board's chief investment officer, Autumn Sanson.
For example, she said, the office earned $112 million in fiscal year 2007 when the federal funds rate was 5.25 percent. That rate is now 0.25 percent.
"We are now closing in on earnings similar to fiscal year 2009," when earnings totaled $47.5 million, said Sanson. The office's earnings totaled $34.5 million in fiscal 2010, $27.2 million in fiscal 2011, $22.8 million in fiscal 2012, $18.1 million in fiscal 2013, $20.3 million in fiscal 2014 and $22.3 million in fiscal 2015, according to the treasurer's office. Fiscal years start July 1.
In last month's special session on highway funding, the Legislature and Republican Gov. Asa Hutchinson enacted legislation relying largely on using parts of future general revenue surpluses and the treasurer's increased investment earnings to raise about $50 million a year to obtain $200 million in federal highway funding over the next five years. The law would tap $1.5 million from the treasury in fiscal 2017 and then $20 million a year, starting in fiscal 2018 and each fiscal year thereafter.
On Tuesday, Milligan told the board that his office tried to have lawmakers consider legislation in the fiscal session and the highway special session that would have cleared the way for the treasury to invest in repurchase agreements for bonds.
"Unfortunately, we ran out of time," Milligan said, and the governor's office decided not to add the proposed legislation to his call for the special session.
Milligan said he hopes the 2017 Legislature considers the proposal during its regular session starting in January.
In a letter dated May 6 to the governor's director of legislative affairs, Rett Hatcher, the treasurer's deputy chief of staff, Jason Brady, wrote that the Rose Law Firm "has found conflict within the law created by Act 1088 of 2013" and "we need this technical change to provide the [treasurer office's] another product that is safe and gives us diversity in the state's portfolio.
"The financial products we can invest in are limited to risk aversion," Brady wrote in his letter to Hatcher, released by the treasurer's office after Tuesday's board meeting.
"We were talking to Sen. [Bruce] Maloch during the fiscal session about adding special language to the [treasurer office's] appropriations bill," and Maloch had the amendment drafted by the Bureau of Legislative Research, Brady wrote in his letter to Hatcher. But Maloch decided the governor should be asked to add the proposal to his call for the highway special session.
Maloch, a Democrat from Magnolia, confirmed in a telephone interview Tuesday what Brady wrote.
Hutchinson spokesman J.R. Davis later said the treasurer's office made no formal request to add the proposal to the call for the highway special session. Staff members from the two offices had a conversation about this matter, he said.
At that point, the call for the special session was "pretty established," and the treasurer's office was asked if the proposal could wait until the 2017 regular session, Davis said.
On another matter Tuesday, Sanson, the chief investment officer, told the board that the treasurer's custodian of its securities -- the Little Rock office of First National Bankers Bank -- informed the office a few weeks ago that the bank was terminating the safekeeping service agreement.
"We are appreciative of all the work that FNB&B has done for us, but our operation has just exceeded their capabilities,' said Ed Garner, the treasurer's senior investment manager. "We already have reached out to several of the major safekeeping operations within the United States."
The treasurer's office has used First National Bankers Bank as its custodian for 19 years, Milligan spokesman Grant Wallace said after the meeting.
Metro on 06/22/2016