The state treasury's director of investments, Ed Garner, has tendered his resignation, effective Sept. 11, because it's time to pursue other financial opportunities, he said Wednesday.
Garner, a former Republican state representative from Maumelle, submitted his resignation in a letter dated Tuesday to Treasurer Dennis Milligan, a Republican from Benton.
"It is with regret that I resign, effective September 11, 2019," Garner wrote in his letter to Milligan, who hired him in January 2015. "I want to say how grateful I am for the opportunity you gave me when you hired me.
"The challenges faced by management and the investment team in the beginning of your administration were huge," Garner wrote. "We not only met those challenges, while transforming the investment team we set records ... every year, including the most recent as the treasury announced an all-time record exceeding $116 million ... ."
Based on an investment return of 2.79%, the treasury's interest earnings totaled $116.9 million in fiscal 2019 that ended June 30, exceeding the previous high of $113.1 million in fiscal 2008, according to the office's records.
Garner's resignation comes after Milligan hired a former investment analyst and strategist for Arizona's treasury, Martin Kelly, as senior investment manager at a salary of $119,900 a year. Kelly started work on July 22.
Milligan declined to give Garner, whose salary is $108,000, a pay raise in fiscal 2020, which started July 1. Milligan spokeswoman Stacy Peterson has declined to say why Garner wasn't given a raise.
"I think it was good timing for me to move on," Garner said in an interview. "They are being amicable about this."
Asked if not receiving a raise was a factor in his resignation, he said, "The direction of investments has changed and I think I need to pursue a better fit."
Milligan said he didn't seek Garner's resignation and wasn't expecting it either.
"That said, it's too early for me to make a determination about how I plan to fill his position," he said in a written statement.
"I want to thank Ed for his service to my administration and the State. He took on a great challenge in transforming the thinking and investment mindset of my predecessors. His impact will not easily be missed. I wish him and his family the best on this next endeavor," Milligan said.
"I will continue to fulfill my fiduciary obligation to the taxpayers of Arkansas in managing their $4 billion portfolio while adhering to the priorities set forth by the state Board of Finance: Ensure safety of investments first, liquidity second, and return on investments third," he said.
Garner submitted his resignation after a report earlier this month by two financial analysts, who are faculty members at the University of Arkansas at Little Rock, that found the treasury had issued between $600 million and $1.5 billion in commercial paper to two single issuers. They recommended tighter restrictions on commercial paper as a result.
"Upon being made aware of this, through the independent team of financial analysts that we requested and hired, I directed my team to withdraw concentration in commercial paper, and those changes began promptly," Milligan said earlier this month. "We are unwinding the state's position in commercial paper in a very careful, methodical and deliberate way, and that change should be completed in full by September 1."
The report led the state Board of Finance, chaired by Larry Walther, on Aug. 6 to adopt these changes to the treasury's investment policies, after Walther stated that the treasury should be able to meet its new 2% target returns with the adjustments made. Walther is the secretary of the Department of Finance and Administration.
The board lowered its target rate of return from 2.5% in fiscal 2019 to 2% in fiscal 2020, at Walther's recommendation. The target rate of return applies to the treasury's general investment portfolio of about $4 billion.
"There was no surprise at the investments being made," Garner said Wednesday, though there is a debate about investment risk.
Sen. Bruce Maloch, D-Magnolia, said Wednesday, "I had some questions about the extent of investments in some securities that weren't government-backed or secured."
"I wish [Garner] the best," he said.
Walther said in a written statement, "While I am very disappointed Ed is leaving this position, I am grateful for the insight and innovation he brought to the role of director of investments in the office of the treasurer.
"Through his work, we experienced record levels of earnings from investments. I wish him the best as he moves forward to new opportunities," Walther said.
The Board of Finance will consider granting a pay raise to the board's chief compliance officer, Autumn Sanson, during its November meeting, said Scott Hardin, a spokesman for the finance department. Sanson's salary is $93,785, according to the Arkansas transparency website.
Earlier this year, the Legislature authorized the treasurer's office to create the director of investments post held by Garner with a maximum-authorized salary of up to $141,856, and also increased the maximum salary for the senior investment manager post from $108,581 up to $120,000 in fiscal 2020.
In March, Sen. Jason Rapert, R-Conway, praised Garner, noting the treasury's increased investment earnings.
"With the performance that you had basically with one person that is charged with doing that trading, in the private sector they would be worth hundreds of thousands of dollars ... because they absolutely have been a blessing to your office," Rapert said then.
Rapert said Wednesday, "It is very sad for the state of Arkansas to see Ed Garner resign.
"He has done a fantastic job for this state," Rapert said in an interview. "All you have to do is to look at the reports of the performance of the state treasury's assets since Dennis Milligan took office and hired Ed Garner. I think Ed has done yeoman's work and the entire state of Arkansas and all of the taxpayers of Arkansas owe a big thank you for the great job over the last several years in taking the assets that we had available and getting the best return he possibly could out of them."
Metro on 08/29/2019