State Treasurers Caught in Politics’ Crosshairs
As finances grow tighter and pension liabilities stay in the spotlight, treasurers in several states have been clashing with their peers about how best to manage the money.
A handful of recent government fights have centered on a somewhat unlikely office: the state treasurer.
Look at South Carolina, where State Treasurer Curtis Loftis has been involved in a very public scuffle with the investment commission that oversees the state’s pension fund. He prompted an investigation into the commission chairman for allegedly steering state business to his firm; he and the board have traded insults in the media; and in March the commission voted 5-1 to censure Loftis (he was the sole dissenting vote). In April, the commission filed suit against him for holding up an investment contract; the state supreme court threw it out once Loftis approved the contract before it cost the commission more money. “We don’t appreciate trying to referee kids in a sandbox,” said one of the justices at the hearing.
Why the conflict? It comes down to a fundamental disagreement over how South Carolina’s $26 billion retirement fund should be performing. Loftis thinks the board hasn’t gotten a high enough rate of return. (According to one independent assessment, compared to other pension funds over $5 billion, South Carolina ranks in the bottom 40 percent.) The commission says it’s comfortable with the returns and doesn’t want to change its portfolio.
The South Carolina skirmish isn’t the only current clash between a treasurer and other state money managers. In Delaware, State Treasurer Chip Flowers has been engaged in an ongoing fight with the board that oversees the state’s $2 billion investment portfolio. Flowers has publicly called for members of the governor-appointed board to resign. In an 11th-hour move at the end of the state’s legislative session in June, Gov. Jack Markell pushed legislation that would have gutted Flowers’ duties and exempted the investment board from being required to publish and accept public comments on policy decisions.
Then there’s Wisconsin, where lawmakers have stripped so much power from the treasurer’s office over the past decade that current State Treasurer Kurt Schuller has been begging them to eliminate his job altogether. (In fact Schuller, a former restaurant manager who was elected state treasurer in 2010, campaigned on a promise to get rid of the position.) At different points in the past, Wisconsin’s treasurer has overseen a variety of functions, including managing the state’s cash, running a college savings program and directing a local government investment program. But in recent biennial budgets, all those duties have been moved to other executive agencies. Today, Schuller says his only real remaining official duty is as chairman of the three-person Board of Commission of Public Lands—a position Schuller has said amounts to a 15-minute phone call twice a month. (In fact, Schuller does have a few other official duties. His office is still statutorily responsible for promoting, but not running, the state's unclaimed property program. He also serves as a member of the board that selects which financial entity the state uses for its banking, and he functions as the treasurer for the University of Wisconsin Board of Regents.)
These kinds of disagreements aren’t new, but they’re becoming more prominent as finances grow tighter—and as pension liabilities have moved into the spotlight. “Decision-makers are becoming more and more concerned about liabilities that are going to be displayed in their financial statements,” says Virginia State Treasurer Manju Ganeriwala, the current president of the National Association of State Treasurers. “There’s more focus and more scrutiny, and that brings more tension.”
This latest rash of financial fights involves isolated incidents, Ganeriwala says, and not a larger evolution toward diminished roles for state treasurers.
But that’s not how Scott Feldt sees it. Feldt, the current deputy treasurer of Wisconsin, says he sees a “national trend” of attempts to move state treasurers’ duties into the hands of boards and executive agencies. Transferring fiscal duties to unelected boards and commissions isn’t good for the public, Feldt says. “It’s not smaller government or better government. It’s less accountable government.”
UPDATE: This story has been updated to include additional duties assigned to Wisconsin Treasurer Kurt Schuller, who recently released a statement clarifying his role.