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State treasurer programs earn hundreds of millions in interest; local pools and diversified funds explained to JFAC
Summary
Legislative analysts summarized four treasurer programs — Local Government Investment Pool, Diversified Bond Fund, Idle Pool and the Millennium Permanent Endowment Fund — and said the idle pool earned over $249 million in FY2024; members asked for fund‑by‑fund interest details posted to committee SharePoint.
Christopher Lahoset, a budget and policy analyst with the Legislative Services Office, summarized the state treasurer's investment programs for the Joint Finance‑Appropriations Committee and provided high‑level performance points and program purposes.
Lahoset described four programs managed by the treasurer's office: the Local Government Investment Pool (LGIP) for cities, counties and school districts; the Diversified Bond Fund (DBF) for longer‑term bond investments; the Idle Pool that manages the state's daily cash flow; and the Millennium Permanent Endowment Fund (MPEF), which invests the Master Settlement Agreement proceeds for tobacco prevention and health programs.
Lahoset said the idle pool — the day‑to‑day cash management account — earned about $249,000,000 in interest in FY2024. He described the LGIP as a low‑risk option that pools local government cash in short‑term, high‑quality securities so smaller governments can earn interest without forfeiting liquidity. He said the DBF targets a typical horizon of about 3.5 years, accepts a higher level of risk for higher return, and is benchmarked against a blended corporate/government and mortgage index. The MPEF was described as a long‑term endowment investing settlement proceeds for tobacco‑prevention programs.
Why it matters: Interest earnings on pooled cash and state funds can materially affect fund balances and agency receipts; committee members asked how interest earnings are allocated across funds and requested a fund‑by‑fund report posted on the committee SharePoint.
Questions and follow up: Representative Tanner asked whether some interest earnings bypass the general‑fund appropriation process and how to ensure earnings come through the appropriation process if desired. Lahoset said the direction of interest earnings is determined by statute for each fund and that compiling or changing those directions would require legislative action and review of multiple code sections. He said the LSO had posted a fund‑by‑fund interest report in the committee SharePoint and would make additional detail available.
Ending: The treasurer‑program overview concludes LSO's front‑end reporting to help JFAC track off‑budget and continuously appropriated funds; staff said they will continue to post detailed fund level reports and the treasurer's office will present earnings and cash‑management detail to the committee.
