I was recently asked the question “How is a state treasurer’s job political? Aren’t they bound by law and GAAP?” While I don’t claim to be an expert, here is my “two cents” for an answer.
The Colorado State Constitution establishes the elected office of treasurer as part of the Executive branch of our state government (Article IV, Sections 1 & 3). As described on its web site, the Colorado State Treasury is:
“…the constitutional custodian of the public’s funds. It is the Treasury’s duty to manage and account for the citizen’s tax dollars from the time they are received until the time they are disbursed. The Treasury’s staff is committed to safeguarding and managing the people’s monies with the same diligence and care as they do their own.
What the Treasury Does
The State Treasurer and her staff serve the citizens of Colorado by providing banking, investment, and accounting services for all funds and assets deposited in the Treasury. By continually optimizing cash flows and maximizing the return on the state’s investments, Treasurer Kennedy plays an important role in helping to minimize the tax burden on Coloradans.
The Department of the Treasury is organized into five different operating sections: Accounting, Investments, Cash Management, and Administration. The Treasurer is also responsible for managing the state’s unclaimed property division – The Great Colorado Payback.”
As the fiduciary for the people of the state of Colorado, I would submit that the criteria for election should be based upon expertise in finance, accounting, investments and operations. The Treasurer makes decisions as to when/how/where to invest the state’s money, manage cash flows, structure financing for state infrastructure projects, and account for all of the state’s finances. How can the state squeeze every basis point out of the Treasury by making good investments, hedging risk, managing money efficiently, etc? There should be a high bar for the level of investment and finance expertise required of a state Treasurer. Certainly the treasurer must work within state statues and Generally Accepted Accounting Principles (GAAP).
In addition to strictly quantitative investment issues such as yield, credit quality, reinvestment risk, diversification, liquidity, etc., you also have potential political/social issues that may come into play such as do you adopt investment policies influenced things such as “green” strategies, social issues (apartheid, etc.), or other reasons? Some might respond that yes, this should be part of this elected position, while others (such as myself) would say no, that fiscal policy should trump political policy.
Closer to home, do you invest within Colorado to “support the local economy” or do you invest in other states where yields may be higher? While this could be described as a political policy question, a sophisticated approach would incorporate the expected financial impact of one decision over another, including the advantage of maintaining higher levels of capital within the state of Colorado vs. the potentially more efficient use of said capital placed out of state.
Should the Treasurer work to expand funding for schools by increasing taxes, expand health insurance coverage with new tobacco taxes, or push for TABOR time-outs like Referendum C, as current Treasurer Cary Kennedy boasts on the Colorado Treasury website? These are the political questions that should be evaluated when electing a state treasurer.
So, the treasurer has a financial and political impact upon how the state manages its money. Given that this is the case, it makes sense that it is an elected position.
However, I would end with the following questions (which I find myself asking of just about everything the government does these days): What is the state’s constitutional mandate and enumeration of powers for the responsibilities of the office of treasurer? Are our government officials acting within those constitutional restraints? Those are questions for another day…