The state treasurer’s office is responsible for managing billions of dollars in financial transactions on behalf of the state and local governments, as well as administering a variety of programs including the Millennium Scholarship Program and the Prepaid College Tuition Program. In addition to these daily responsibilities, the office must also work closely each biennium with the state Legislature as it debates the merits of numerous legislative proposals. In the wake of the recently concluded 71st session, considered by many to have been the most difficult in recent memory, the state treasurer’s office finds itself with exciting new responsibilities.
Some legislative changes affected the core investment and balance sheet management activities currently conducted within the state treasurer’s office. Others led to the expansion of responsibilities in several areas. For example, the state treasurer may now utilize lease-purchase financing, invest long-term trust monies in higher-yielding equity securities (upon judicial approval), establish a tax-advantaged College Savings Program and make easier the return of millions of dollars “lost” by residents of Nevada.
Following is a list of the bills passed by this session that affect the Treasurer’s Office:
AB 554 — This bill created the College Savings Program, a “Section 529” plan (named after a section of the IRS tax code) that complements the existing Prepaid College Tuition Program. While the Prepaid College Tuition Program guarantees contract beneficiaries tuition at state-run colleges (contracts are portable to any accredited college or university in the United States), the College Savings Plan allows for the same tax break for educational expenses beyond tuition, such as room, board, books and supplies. No taxpayer money is involved in the establishment of this program; moreover, I project this program will indeed generate substantial earnings for the state’s general fund. This bill also served to legally reaffirm the Prepaid College Tuition Program, which currently has over 8,000 children enrolled and $20 million under management on their behalf.
AB 567 — The passage of this bill allowed for lease-purchase financing of real property by the state. Due to a decision by Nevada’s Supreme Court in 1970 and its subsequent broad interpretation, any financial obligation entered into by the state beyond the legislative biennium constituted a debt of the state to be counted against the 2 percent debt limit established by the Nevada Constitution. In practical terms, this forced the state to either pay cash for state buildings from reserves or from bond proceeds, or enter into simple rental agreements for office space required for employees of the state. The state currently spends approximately $18 million per annum on rent. After a successful test case of this old Supreme Court ruling and the passage of this bill, the state may now convert this rent money into lease-purchase financing. Lease-purchases would allow the state, without one cent of additional taxpayer money, to convert this annual drain of precious resources into $150 million to $200 million of new state-owned building capacity or long-term balance sheet relief.
SB 487 — This law now allows, upon judicial approval, long-term trust funds managed by the state treasurer to be partially invested in equities. While highly conservative, fixed-income investments are most appropriate for the shorter duration general fund monies, long-term trust funds, such as the Permanent School Fund, would achieve substantially greater earnings over a period of years if a diversified portfolio structure were allowed.
SB 489 — The passage of this bill generates a $10 million to $12 million dollar windfall to the state’s general fund during this next biennium by altering the laws pertaining to the holding periods regulating unclaimed property in Nevada. The bill also serves to transfer the Division of Unclaimed Property (currently housed in the Department of Business & Industry) to the state treasurer’s office. This move is anticipated to enhance and improve the delivery of services performed by this currently low-profile agency.
While the Legislature looked favorably upon the majority of the legislation proposed by the treasurer’s office, one of my greatest disappointments was the failure of SB 488 — the so-called “Tobacco Securitization” Bill. This bill would have allowed the $1.2 billion Tobacco Master Settlement Agreement monies due Nevada from the four largest tobacco companies over the next 25 years to be sold for an upfront sum. This strategy would have allowed Nevada to transfer the risks of receiving future tobacco industry payments to investors willing to assume that risk, thereby preserving these monies, which fund such programs as the Millennium Scholarship Program and SeniorRx.
I look forward to implementing these new responsibilities as state treasurer, and pledge to continuously strive to improve upon the methods used in the performance of my duties on behalf of Nevada’s citizens.