State earns $57.5 mil­lion on in­vest­ments

Amount high­est since fis­cal ’09; trea­surer cites his team, Fed rates in­crease

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - MICHAEL R. WICKLINE

The state trea­sury earned $57.5 mil­lion on its in­vest­ment of more than $3 bil­lion in fis­cal 2017, the largest amount in al­most a decade, ac­cord­ing to Trea­surer Den­nis Mil­li­gan’s of­fice.

The fis­cal 2017 in­ter­est earn­ings are the largest since fis­cal 2009’s $72.6 mil­lion, the of­fice’s records show. Fis­cal

2017 ended June 30.

By com­par­i­son, the trea­sury earned $22.3 mil­lion in fis­cal 2015 and $48.9 mil­lion in fis­cal 2016.

The records show that the trea­sury had an av­er­age of $3.4 bil­lion to in­vest in fis­cal 2017 — up from $3.2 bil­lion in fis­cal 2016 and $2.8 mil­lion in fis­cal 2015 — so the of­fice’s in­creased earn­ings are based on a larger pool of in­vest­ments.

The in­vest­ments in­clude $3.28 bil­lion in bonds, about $277,500 in de­mand ac­counts and about $155,000 in money mar­ket ac­counts, said Mil­li­gan spokesman Stacy Peter­son.

Mil­li­gan’s of­fice re­leased in­for­ma­tion about the in­vest­ment earn­ings last week in re­sponse to this news­pa­per’s re­quest un­der the Arkansas Free­dom of In­for­ma­tion Act.

An em­ployee in the trea­surer’s of­fice, Ce­leste Glad­den, no­ti­fied the state Board of Fi­nance on Thurs­day that “it has been the pol­icy of Trea­surer Mil­li­gan not to re­lease these re­sults un­til the Board has been no­ti­fied

first. How­ever, our quar­terly meet­ing is not un­til next month and we must re­spond to this [FOI] re­quest.

“As al­ways, de­tails will be pro­vided to the Board at our quar­terly meet­ing in Au­gust,” Glad­den wrote.

The state Board of Fi­nance in­cludes the gov­er­nor or his rep­re­sen­ta­tive; trea­surer; au­di­tor; bank com­mis­sioner; direc­tor of the state Depart­ment of Fi­nance and Ad­min­is­tra­tion; the se­cu­ri­ties com­mis­sioner; and two ap­pointees each by the House speaker and Se­nate pres­i­dent pro tem­pore.

Mil­li­gan, a Ben­ton Repub­li­can who has been trea­surer since Jan­uary 2015, which was mid­way through fis­cal 2015, said Fri­day that in­creased in­ter­est rates by the Fed­eral Re­serve contributed “a lit­tle bit to the growth” in the earn­ings.

“Part of the suc­cess that we’ve had is sim­ply be­cause we are on this ev­ery day. We went from a pas­sive trea­sury to an ac­tive trea­sury, which means we are look­ing at num­bers,” Mil­li­gan said in an in­ter­view.

“I’m in here very early in the morn­ings. I’m look­ing at overnight mar­kets. Since it is a global econ­omy, I’m look­ing at how things are chang­ing, es­pe­cially with our short­term in­vest­ments be­cause some­thing hap­pens po­lit­i­cally around the world, then it can change our at­ti­tudes,” he said.

“I would cer­tainly credit the in­vest­ment team. I would credit our whole ad­min­is­tra­tion,” Mil­li­gan said.

In a spe­cial ses­sion held in May 2016, the GOP-con­trolled Leg­is­la­ture en­acted Repub­li­can Gov. Asa Hutchin­son’s high­way fund­ing leg­is­la­tion. The leg­is­la­tion re­lies largely on us­ing a por­tion of gen­eral rev­enue sur­pluses and in­creased earn­ings from the trea­sury to raise about $50 mil­lion a year to match an­other $200 mil­lion in fed­eral high­way funds avail­able each year. Start­ing in fis­cal 2018, the plan re­lies in part on $20 mil­lion a year in trea­sury earn­ings.

While Mil­li­gan has praised his in­vest­ment team, two of the team mem­bers have left in re­cent months.

Ear­lier this month, Larry Tate, who had worked in the trea­surer’s in­vest­ment depart­ment, went to work as the Arkansas Devel­op­ment Fi­nance Author­ity’s hous­ing pro­grams man­ager at a salary of $69,776 a year, said Ch­eryl Sch­luter­man, vice pres­i­dent of fi­nance and ad­min­is­tra­tion at the author­ity.

Tate, who was paid $68,400 a year as a trea­sury man­ager, re­signed his post in the trea­surer’s of­fice, ef­fec­tive June 30. In his res­ig­na­tion let­ter, he said he en­joyed work­ing with the in­vest­ment team for the past two-plus years and has been “most im­pressed with both the qual­ity of the state Board of Fi­nance and the qual­ity of the staff in the In­vest­ment Group.”

Tate is a for­mer busi­ness man­ager for First Bap­tist Church in Lit­tle Rock. He was op­er­a­tions man­ager for Hutchin­son’s un­suc­cess­ful cam­paign for gov­er­nor in 2006, ac­cord­ing to his re­sume. The Devel­op­ment Fi­nance Author­ity is an agency that reports to the gov­er­nor.

In March, leg­is­la­tion that would have shifted se­nior in­vest­ment man­ager Ed Garner, trea­surer man­ager Glad­den and Tate un­der the purview of the Board of Fi­nance cleared the state Se­nate but failed to clear a House com­mit­tee. Chief In­vest­ment Of­fi­cer Au­tumn San­son cur­rently works un­der the board’s purview un­der a law en­acted in 2013.

The spon­sor of the ill-fated leg­is­la­tion — Sen. Terry Rice, R-Wal­dron — sought the change af­ter Mil­li­gan hired Ron­ald Rober­son, a for­mer vice pres­i­dent and se­nior trader at the Bank of Ok­la­homa, as a se­nior in­vest­ment man­ager in Fe­bru­ary. Rice said the po­si­tion re­quires a col­lege de­gree, which Rober­son lacked. But Mil­li­gan spokesman Stacy Peter­son said Rober­son was placed in a post for which a de­gree is pre­ferred, not re­quired.

In May, Rober­son re­signed his job, which paid $70,000 a year, af­ter the Board of Fi­nance blocked Mil­li­gan’s plans to re­clas­sify Rober­son as a se­nior in­vest­ment man­ager. The Board of Fi­nance voted to re­quire that the per­son hired to fill the new se­nior in­vest­ment man­ager II po­si­tion have a col­lege de­gree.

Rober­son, who had 38 years of in­vest­ment ex­pe­ri­ence, had com­pleted 135 col­lege hours at the Univer­sity of Arkansas at Lit­tle Rock. Rober­son cited “the opin­ions raised … by a few mem­bers of the state Board of Fi­nance” in his res­ig­na­tion let­ter.

Af­ter Tate’s and Rober­son’s res­ig­na­tions, Mil­li­gan said Fri­day “right now we are just in a hold­ing pat­tern. We have to ad­here to the state Board of Fi­nance ed­u­ca­tion re­quire­ments. We’re look­ing at po­ten­tial re­place­ments for both.”

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