Rising interest rates helped the state treasury increase its interest earnings last quarter to $20.2 million -- up from $17.7 million in the same quarter a year ago -- state Treasurer Dennis Milligan told the state Board of Finance on Tuesday.
The treasury's investment portfolio of state funds totaled about $3.5 billion, with about $3 billion in bonds and commercial paper, $500 million in demand accounts and $155,000 in money market accounts during the quarter that started Jan. 1 and ended March 31, according to Milligan's office.
During the first nine months of fiscal 2018, which ends June 30, the state treasury had $55.9 million in interest earnings -- up from $39.4 million during the same period in fiscal 2017. That's nearly a 30 percent increase, according to Milligan's figures.
That's "just shy of the $57.5 million that we receipted during the entire fiscal year last year," the Benton Republican told the finance board. "We are so close that I am comfortable telling you that our investment receipts for the fiscal year are expected to surpass last year's totals.
"With rising interest rates, we positioned our portfolio more toward the short-term, and this has allowed us to protect our investment principal until more favorable long-term options become available," Milligan said.
The state Board of Finance is chaired by Department of Finance and Administration Director Larry Walther. It also includes the governor or his representative; the treasurer; the auditor or her representative; the bank commissioner or her representative; the securities commissioner; and two appointees each from the House speaker and Senate president pro tempore.
Milligan said the treasury's short-term investment portfolio earned about $11.5 million in interest last quarter, compared with $2.8 million in the same quarter a year ago.
The treasury's long-term investment portfolio earned about $8.6 million in interest last quarter, a decline from about $14.8 million in the same quarter a year ago when long-term investments represented the bulk of the total portfolio, he said.
"This past quarter was the highest since I came into office and actually is the highest quarter the treasury has had since 2009," Milligan said.
With the quarter's interest earnings, the treasurer's office will be able to fulfill its $20 million obligation to the state highway transfer fund, which can be tapped to match federal highway funds, and its $5 million obligation to the Budget Stabilization Trust Fund, he said.
"This means that the funds from this quarter as well as receipts earned for the state in the fourth quarter should help our state better withstand any future economic instability that we might have," Milligan said, referring to the Long-Term Reserve Fund that was created in 2016.
In 2017, the Legislature approved Republican Gov. Asa Hutchinson's plan to transfer about $100 million in tobacco settlement proceeds into the fund. The fund's current balance is $123.4 million, finance department spokesman Scott Hardin said after Tuesday's meeting.
Beyond using $20 million a year in treasury interest earnings, Hutchinson's highway plan approved by the Legislature in 2016 also relies on using 25 percent of the annual general-revenue surplus and several million in reallocated state funds to raise about $50 million to match $200 million in federal highway funds.
The Budget Stabilization Trust Fund provides for temporary loans to be made for certain state agency funds to alleviate cash-flow concerns between month-end distributions of revenue. Its current balance is $158.9 million with loans of $27.2 million, Hardin said.
Milligan became treasurer in January 2015.
In fiscal 2016, his first full fiscal year as treasurer, the treasury earned $48.9 million -- up from $22.3 million in fiscal 2015, according to the treasurer's office. The investment earnings increased to $57.5 million in fiscal 2017.
During the past 15 years, the treasury's interest earnings peaked at $113.1 million in fiscal 2008 and dropped to $72.6 million in fiscal 2009. Earnings steadily slipped before bottoming out at $18.1 million in fiscal 2013, according to Milligan's office.
Newport Democrat Martha Shoffner was the state's treasurer starting in January 2007, midway through fiscal 2007, until she resigned in May 2013. In March 2014, a federal jury convicted her on 14 extortion and bribery charges. In August 2015, a federal judge sentenced her to two and a half years in prison for accepting $36,000 over three years to officially steer a substantial amount of the state's bond business to a broker friend.
After Shoffner's resignation, Democratic Gov. Mike Beebe appointed former Legislative Auditor Charles Robinson of North Little Rock to serve as the state treasurer until January 2015.
Metro on 05/09/2018