State treasurer reports $77.2M in earnings

Arkansas Treasury earnings.
Arkansas Treasury earnings.

The state treasury earned $77.2 million in interest on its investments of more than $3 billion in the fiscal year that ended June 30 -- up from $57.6 million in the previous fiscal year -- Treasurer Dennis Milligan told the state Board of Finance on Wednesday.

Milligan, a Benton Republican, credited his office's management of the investment portfolio as well as rising interest rates for yielding the treasury's largest interest earnings since fiscal 2008. Fiscal 2018 ended June 30.

The treasury earned $113.1 million in fiscal 2008 after yielding $100.8 million the year before. Those were the only fiscal years during the past 16 in which earnings exceeded fiscal 2018's $77.2 million, according to records in Milligan's office. Gus Wingfield, a Democrat from Delight, was the treasurer during the first part of fiscal 2007. Newport Democrat Martha Shoffner was treasurer during the last half of fiscal 2007 and all of fiscal 2008. The last recession started while Shoffner was in office and interest rates dropped.

"I realize interest rates are a driving force of any investment activity, but I fully believe that our active management style is helping us make the most of market conditions, while certainly helping us meet our primary objective, which is liquidity," Milligan told the board.

"We really have taken the treasury from what I would term as reactionary toward a proactive management style in the office," he said.

The treasury's investment return was 2.10 percent in fiscal 2018, Milligan spokesman Stacy Peterson said after meeting. In May 2017, the board set 2.5 percent as the target rate of return, she said.

Milligan took office in January 2015, which was midway through fiscal 2015. In that year, the treasury had $22.3 million in interest earnings. Milligan is a former Saline County circuit clerk and former chairman of the state Republican Party.

He succeeded former Legislative Auditor Charles Robinson as treasurer.

Robinson, a self-described independent, was appointed by then-Gov. Mike Beebe, a Democrat, in May 2013, after Shoffner was arrested on an extortion charge and resigned. In August 2015, Shoffner was sentenced to 30 months in federal prison after a jury found her guilty of six counts of extortion, one count of attempted extortion and seven counts of receipt of bribery in connection with a series of cash payments she received from broker Steele Stephens between 2010 and 2013.

In Milligan's first full fiscal year as treasurer in fiscal 2016, the treasury earned almost $49 million on its investments, according to state records.

Milligan told the Board of Finance on Wednesday that investment receipts for the fourth quarter that ended June 30 totaled $21.2 million -- up from $18.1 million in the fourth quarter the previous year -- and that's the largest amount of earnings in a quarter under his administration.

The treasury's short-term investment portfolio's earnings for the fourth quarter reached $12.1 million -- up from $3.3 million for the same quarter a year ago -- and that's "due to the fact that our assets are more liquid than they were during the same period last year," he said.

Long-term investment earnings in the fourth quarter totaled $9.1 million compared with $4.8 million in the same quarter a year ago and that's also the result of the portfolio becoming more liquid, Milligan said.

At the end of fiscal 2018, the treasury's investment portfolio included about $2.95 billion in bonds and commercial paper, $474.5 million in demand and money market accounts and about $283.4 million in the State Treasury Money Management Trust, Peterson said.

"The results of what we had seen in the past were pretty anemic," Board of Finance Chairman Larry Walther said.

"I think over the last 3½ years, the treasurer and his team have done just a superb job of making a change in the way we invest our money, while protecting the money," said Walther, who also is the director of the state Department of Finance and Administration.

Besides Walther and Milligan, the state Board of Finance also includes the governor or his representative; the state auditor; bank commissioner; the securities commissioner; and two appointees each of the House speaker and Senate president pro tempore.

In a special session held in May 2016, the Legislature enacted Republican Gov. Asa Hutchinson's plan to raise about $50 million in state funds to match about $200 million a year in federal highway funds.

The law relies largely on using 25 percent of general revenue surpluses and $20 million a year in interest earnings from the treasury to raise that money. Fiscal 2018 was the first fiscal year in which the plan relied in part on $20 million a year in interest earnings.

A Section on 08/09/2018

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