State investment earnings jump

LITTLE ROCK — The state treasury’s $6 billion investment portfolio earned $17.5 million last quarter — up from $9.05 million in the same quarter a year ago. The increase came amid volatile investment markets with the assistance of slightly higher interest rates, state Treasurer Dennis Milligan told the state Board of Finance on Thursday.

The board also learned the state’s Employee Benefits Division has received proposals from three companies to provide the option of a group Medicare Advantage plan to retirees in the state’s public school and state employees’ health insurance plans.

The state treasury’s total interest earnings during the first three quarters of fiscal 2022 that ends June 30 is $45.1 million, and that’s more than the $24.2 million earned in the same period in fiscal 2021 that ended June 30, 2021, Milligan said.

The portfolio’s investment return in the quarter that ended March 31 was 1% and exceeded the state Board of Finance’s target range of 0.85% to 0.95%, he said.

The finance board later voted to increase its target range to between 1% and 1.1% for the treasurer’s investment portfolio in the quarter that ends June 30.

While the economy is growing and unemployment is low, investors are very cautious because of the highest inflation rate in 40 years and Russia’s invasion of Ukraine, Milligan said.

The state’s investment portfolio included “nothing directly owned in Russia,” said Robert Romanik, the treasurer’s senior investment manager in response to a question from a board member.

Milligan said he wants to build on the treasury’s solid investment portfolio.

“We have a very competent investment team,” which will be watching the investment markets to present investment opportunities to him with the Federal Reserve expected to boost interest rates significantly this year, Milligan said.

The treasury’s long-term investment portfolio earned $16.5 million in interest last quarter — up from $8.2 million in the same quarter a year ago — he said.

The long-term portfolio includes mortgage- backed and government securities, Milligan spokeswoman Stacy Peterson said afterward.

“One component of our strategy is to stagger the durations of the bonds we purchase in order to promote continual income within the portfolio,” Milligan said.

But the treasurer’s shortterm investment portfolio earned $942,824 last quarter — up from $808,000 in the same quarter a year ago, he said.

The short-term investment portfolio includes commercial paper and demand and money market accounts, Milligan said.

“This portion of our portfolio is heavily dependent upon federal interest rates, which have been near zero since March of 2020,” Milligan said. “We’re hopeful that as rates begin to rise our shortterm portfolio will start to see increased receipts.

Milligan has been the state’s treasurer since 2015. He is barred from seeking reelection to state treasurer this year under the state’s term limits amendment. In this year’s election, he seeks election to the state auditor post, an office held by term-limited Russellville Republican Andrea Lea.

The state treasury’s interest earnings gradually increased from $48.9 million in fiscal 2016 during Milligan’s first full fiscal year as treasurer and eventually rose to $116.9 million in fiscal 2019 before dropping to $80.7 million in fiscal 2020 and to $35.4 million in fiscal 2021 amid low interest rates.

MEDICARE ADVANTAGE

The state’s Employee Benefits Division director, Jake Bleed, told the finance board three vendors have submitted proposals to provide the option of a group Medicare Advantage plan to the retirees in the state’s public school and state employees’ health insurance plans.

Humana Insurance Co., United Healthcare Services Inc. and Benistar Admin Services submitted proposals in response to a request for proposals for Medicare Advantage and prescription drug services, Tanya Freeman, statewide procurement coordinator for the state Office of Procurement, said afterward.

Bleed told the state Board of Finance that he expects to ask the board to consider a proposed contract with a vendor in May or June.

The state’s health insurance plan for public school employees includes about 16,000 retirees, and the state’s health insurance plan for state employees has about 14,000 retirees.

Bleed told the board in March that he wants to make sure there is sufficient time to educate retirees in the state’s health insurance plans for public school and state employees about their options for coverage through a group Medicare Advantage plan.

Under a group Medicare Advantage plan, retirees will enroll in a program specifically designed for them and built according to the requirements of the state, Bleed said. This plan will only be available to state and public school retirees and will be significantly different from Medicare Advantage plans available to the public.

“The proposed plan will in many ways mirror existing benefits, but at lower costs for the member and with other perks which are currently unavailable,” Bleed wrote in a memo to the finance board last month. “The proposed plan, however, may not be the best fit for all Medicare-eligible retirees, and a strict ‘opt out’ option will be included, giving retirees a choice of whether they should keep their existing plans.”