TREASURERS Role of State Treasurers Expanded During the Great Recession By Lisa S. Cleveland The nation’s state treasurers provide a wide range of financial management services to their constituents. They work to safeguard the financial interests of citizens through the professional management of college savings plans, unclaimed property programs and professional debt management efforts. Many are also actively involved in financial literacy efforts and they regularly offer their input and expertise on financial efforts at the federal level that have the potential to impact state treasuries. Public finance officials “are accustomed to the nonprofit, nonpartisan National Association of working in the trenches,” said Utah State Treasurer State Treasurers, also known as NAST. Richard Ellis, 2014 president of the National Asso - Ellis has said one of his goals for 2014 is to con - ciation of State Treasurers. tinue to raise the profile of NAST and the concerns What he means is that state treasurers are often of state treasurers in Washington, D.C. Treasurers intimately involved in the day-to-day development are actively involved in a myriad of issues at the of their state’s public finance decisions. They handle federal level, including: a wide variety of issues, dealing with everything from pension plans and debt management to the Tax Reform and Its Effect on States investment of public funds and the administration For the past 18 months, the nation’s treasurers have of college savings plans. In many states, treasurers been monitoring congressional discussions about also provide an important consumer protection tax reform and have expressed their concerns function through the administration of unclaimed about proposed federal legislation that would property programs. repeal the exemption of municipal bond interest, Treasurers act as the watchdogs of the people’s which would increase the cost of purchasing and money and, in most states, are elected by their con- holding bonds for most investors. State and local stituents. This check and balance in the executive governments rely on the issuance of tax-exempt branch of state government provides an effective bonds and other tax-advantaged bonds to finance oversight mechanism and increased transparency. the construction of public infrastructure projects. The treasurer’s office has a wide variety of responsi- State treasurers appealed to Congress through bilities and those responsibilities vary significantly comment letters and testimony during hearings from state to state. before the House Financial Services Committee. During the Great Recession, some state legis- State treasurers will continue to be engaged in latures expanded the statutory role of the state monitoring all related tax reform efforts in Wash - treasurer to include additional responsibilities. ington, D.C., due to the concern that state budgets The North Carolina legislature transferred admin- could be negatively impacted by decisions made at istration of the health plan for teachers and state the federal level. employees to the state treasurer. In Washington, the “We need to … make sure we’re at the table in state treasurer was added to the state’s Economic Washington when those discussions are going on,” and Revenue Forecast Council and was asked to Ellis said during a 2014 interview with Municipal chair the Washington State Commission on Debt. Finance Today . Another outcome of the recession was state treasurers becoming much more active on the Municipal Securities Market federal level. As they work to protect and enhance As investors, states use money market funds as an their own state’s financial positions, treasurers efficient tool for managing large volumes of short- often find themselves actively involved in finance- term liquid assets. Money market funds that seek related legislative efforts on Capitol Hill. The to maintain a stable value per share are permitted nation’s state treasurers speak as one voice through investments for many states. The Securities and The Council of State Governments 209 TREASURERS Exchange Commission recently proposed changes treasurer, Crane uses his office as a bully pulpit to to money market funds that would change the way teach students and adults about financial literacy their net asset value is calculated. topics. He created a private nonprofit organization Virginia State Treasurer Manju Ganeriwala, the that has produced a Smart Women, Smart Money 2013 president of NAST, said in a press release conference for the past 15 years. More than 19,000 issued in September 2013, “while we appreciate women have attended these conferences, learning the commission’s efforts to reform the regulation about everything from creating a budget to estate of money market funds, NAST remains concerned planning. that some of the proposed changes will have the Another early leader in financial literacy educa - unintended consequence of negatively impacting tion is West Virginia State Treasurer John Perdue. states, cities, counties and other municipal entities.” Perdue has said he believes it is a treasurer’s duty In early 2014, NAST submitted a comment let - and responsibility to take the lead in this effort ter to the U.S. Department of Treasury, the Board and he’s putting his money where his mouth is. of Governors of the Federal Reserve System In 2008, Perdue’s office partnered with the West and the Federal Deposit Insurance Corporation Virginia State Board of Education to implement expressing the treasurers’ concern that a proposal NetWorth, a comprehensive financial education to exclude municipal bonds from the high quality program designed to teach personal financial liquid asset definition could make municipal bonds management in all of the state’s public schools. In a less attractive investment. 2009, NetWorth received the Excellence in Finan - “As state treasurers concerned about the finan - cial Literacy Education Award from the Institute cial strength and integrity of states and all govern- on Financial Literacy. mental units within our states, we appreciate this In February 2014, Nevada State Treasurer Kate opportunity to comment and express our concerns Marshall testified before the Financial Literacy with the proposed rule,” said Ellis, in the comment and Education Commission in Washington, D.C. letter. Marshall discussed some of the programs under - taken in Nevada to raise the financial literacy of Pension funds Nevada residents. Pension funds have been in the news for several Many treasurers in other states also have made years as states struggle to make their funds sus - financial literacy education a priority. Utah’s Ellis tainable. While some treasurers serve as the sole serves as chairman of the Utah Council on Financial fiduciaries of their state’s pension fund, others sit and Economic Education. This organization serves on their state’s pension boards. as a centralized access point for financial literacy Ellis said during a 2014 interview with Municipal information, linking state residents to programs Finance Today that state treasurers play a role in and resources that meet their needs. In fact, Utah “helping the public really understand what’s going was one of the first states to have a requirement for on in these pension funds.” students to take financial literacy courses before graduating from high school. Financial Literacy Ellis believes state treasurers—who are often By virtue of their role as public finance officials, referred to as the “people’s bankers”— are a natural state treasurers are an obvious choice to lead fi- fit for advocating for financial literacy programs. nancial literacy efforts. They are viewed as trusted and credible sources of sound financial advice and Qualified Tuition Programs have long recognized the need for responsible fis - Related to financial literacy, many parents have cal decision-making for the management of both found that paying for their child’s education is one public funds and personal finances. of their greatest financial worries. State treasurers Much work remains to be done on this issue. A also play a role in assisting families with this finan - 2013 study by the Center for Financial Literacy at cial goal. Many states have created innovative college Champlain College in Burlington, Vt., assigned savings programs designed to meet the needs of grades to each state regarding the quality of its fi- their residents. Today, 49 states and the District of nancial literacy education. Only seven states received Columbia offer qualified tuition programs, com - an “A” ranking, while 22 garnered a “D” or “F.” monly called 529 plans. One highly ranked state in financial literacy is These plans allow individuals to save money for Idaho, home to State Treasurer Ron Crane. As their child’s education and the earnings are free 210 The Book of the States 2014 TREASURERS from federal taxation if the funds are used to pay find the rightful owner or heir. Each year, millions for qualified higher education expenses. Many of lost dollars are returned to their owners. states also offer tax deductions or credits, match - According to the National Association of Un - ing grants, scholarships or other incentives for claimed Property Administrators, state treasurers families to save in 529 plans. Most state treasurers and other agencies are safeguarding more than have a role in administering these qualified tuition $41.7 billion. Claims can be made in perpetuity, in programs, either through program operations, most cases, even by heirs who are able to prove board responsibilities, investment responsibilities ownership. or committee membership. 529 plans come in two forms—prepaid tuition Conclusion programs and college savings plans. The prepaid While the roles and responsibilities of treasurers tuition program offers families a method to are wide and varied, all are of critical importance prepay tuition based on current college rates and to the fiscal well-being of their respective states. provides a guarantee that the money will keep Sound and profitable investments and prudent debt pace with tuition inflation. The savings plans are management make it possible for state budgets to tax-advantaged investment plans designed to be balanced.