The nation’s state treasurers provide financial management and accountability for a wide variety of public funds. In many states, they also work to safeguard the financial interests of citizens through professional management of college savings plans, unclaimed property programs and professional debt management efforts.
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The National Association of State Treasurers is an organization of state financial leaders that encourages the highest ethical standards, promotes education and the exchange of ideas, builds professional relationships, develops standards of excellence and influences public policy for the benefit of the citizens of the states. NAST is composed of all state treasurers or state finance officials with comparable responsibilities, from the United States, its commonwealths, territories and the District of Columbia. The private sector is represented through a corporate affiliate program that was established to build professional relationships and foster cooperation between the public and private sectors.
State treasurers throughout the nation play a central role in ensuring that state budgets are well managed and that the public’s financial interests are safeguarded. From prudent management of state investments to responsible debt issuance, treasurers are at the forefront of sound state fiscal policies.
State treasurers also play a unique role in setting policy at both the state and federal levels. On issues ranging from taxation questions on municipal bonds to those involving money market mutual funds, state treasurers are active in policy discussions and in the development of initiatives that attempt to safeguard investments made by and on behalf of the residents of their states.
While responsibilities of the office vary widely, almost all state treasurers are responsible for the cash management practices in their state. Treasurers are tasked with the job of keeping the public’s money safe while maximizing its growth. Most treasury offices invest general fund dollars to earn interest income, while ensuring that the principal remains safe. This provides earnings for the state, rather than letting those funds sit idle.
While the task of investing state funds may seem fairly straightforward, the process is actually quite complex and requires specialized knowledge and skill. Treasurers must invest using the safest, most efficient methods available, while earning the highest possible return or yield. State treasurers’ performance and record of investment income critically affects state budgets, which, in turn, can impact budget performance in any given year.
Beyond cash management, treasurers play a critical role in responsible debt issuance. States borrow money to finance a wide variety of public infrastructure projects, including roads, schools, health care facilities and public utilities. In most cases, these projects must be financed over a long period of time. In order to accomplish this, state treasurers and other finance officials manage the process of selling bonds to investors in the municipal market.
Since the sums involved are so large, the process is more complicated than taking out a bank loan.
Officials must assess market conditions, prepare disclosure documents for investors and regulators, market their bonds and sell them. They also must manage the responsible repayment of bonds that are issued.
Many treasurers play a key role in promoting sound financial policies to maintain a state’s good credit rating, which preserve the state’s ability to borrow funds at competitive rates.
Yet another responsibility that some treasurers perform is in the governance and investment of state pension funds. These funds cover a wide range of people, including state employees, public school teachers, firefighters, police officers and others providing a myriad of public services. Many treasurers either serve on the governing board of these plans, as a trustee or as sole trustee. In several states, the treasurer is the primary official responsible for investment of pension plan assets.
Financial Literacy Efforts
State treasurers are active in financial literacy and empowerment activities. The lack of a sound financial education in the United States crosses all income levels, social classes and ethnicities. Yet financial literacy is a critical component to every individual’s well-being.
The nation’s state treasurers are widely involved in financial literacy efforts at the state level. For example, Utah State Treasurer Richard Ellis serves as chairman of the Utah Council for Financial and Economic Education, a coalition of nonprofit, for-profit and government agencies all dedicated to supporting initiatives in Utah.
West Virginia State Treasurer John Perdue is a leader among treasurers in the area of financial literacy. Perdue has initiated legislation to require financial literacy education as a high school requirement for graduation in his state. Similar efforts are under way by other treasurers across the United States.
In fact, treasurers’ work on this issue goes beyond our nation’s borders. The National Association of State Treasurers Foundation has created a cooperative agreement with the U.S. Agency for International Development to work with Mexican public finance officials to provide Spanish-language financial literacy information.
Qualified Tuition Programs
Related to financial literacy, many parents have found that paying for their child’s education is one of their greatest financial worries. State treasurers also play a role in assisting families with this financial goal. Many states have created innovative college savings programs designed to meet the needs of their citizens. Today, 49 states and the District of Columbia have established qualified tuition programs, commonly called 529 plans.
These plans allow individuals to save money for their child’s education and the earnings are free from federal taxation if the funds are used to pay for qualified higher education expenses. Additionally, many states offer tax deductions or credits, matching grants, scholarships or other incentives for families to save in 529 plans. Most state treasurers have a role in administration of these qualified tuition programs, either through program operations, board responsibilities, investment responsibilities or committee membership.
The mission of these plans is to encourage families to save for the higher education of their children. 529 plans come in two forms—prepaid tuition programs and college savings plans. The prepaid tuition program offers families a method to prepay tuition based on current college tuition rates and provides a guarantee to keep pace with tuition inflation. The savings plans offer dedicated qualified state college savings accounts, which provide families a variable rate of return in a tax-advantaged college savings account.
Unclaimed property programs across the U.S. return millions of dollars each year to their rightful owners. One of the oldest consumer protection services, unclaimed property programs are established by state statutes and usually conform to one of the model acts drafted by the National Conference of Commissioners on Uniform State Laws.
State treasurers are responsible for the administration of this program in the majority of states. Sometimes referred to as abandoned property, unclaimed property refers to accounts in financial institutions and companies that have had no activity generated or contact with the owner for at least one year or longer, depending on the type of property.
Some of the more common forms of unclaimed property include savings or checking accounts, stocks, uncashed dividends or payroll checks, refunds, traveler’s checks, trust distributions, unredeemed money orders or gift certificates, insurance payments and life insurance policies, annuities, certificates of deposit, customer overpayments, utility security deposits, mineral royalty payments and contents of safe deposit boxes.
Acting in the best interest of consumers, each state has enacted unclaimed property statutes that protect these items from reverting back to the company if it has lost contact with the owner. These laws instruct companies to turn over forgotten funds to a state official, who then makes diligent efforts to find the rightful owner or the heir. Each year, millions of lost dollars are returned to their owners.
According to the National Association of Unclaimed Property Administrators, state treasurers and other agencies are safeguarding more than $41.7 billion. Claims can be made in perpetuity, in most cases, even by heirs who are unable to prove ownership.
While the roles and responsibilities of treasurers are wide and varied, all are of critical importance to the fiscal well-being of their respective states. Sound and profitable investments and prudent debt management make it possible for state budgets to be balanced. In addition, treasurers’ work on behalf of financial literacy initiatives, college savings plans and unclaimed property to help protect the right of individual citizens while assisting them in making the most of their financial reserves.