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State Board of Finance hears Treasurer Milligan report, approves quarterly cash-management motions
Summary
Treasurer Dennis Mulligan told the State Board of Finance that Q2 FY2021 investment receipts fell from pre-pandemic levels and outlined portfolio diversification; the board approved routine quarterly motions directing no new CD deposits and authorizing the treasurer to purchase warrants under Act 1088 of 2013.
Treasurer Dennis Mulligan told the State Board of Finance that the states investment receipts declined markedly in the quarter ending Dec. 31, 2020, attributing the drop largely to the Federal Reserves low-rate policy during the COVID-19 pandemic. "Our short term portfolio earned a little over $961,000 in the Q2 that ended December 31," Mulligan said, adding that long-term receipts totaled $7,400,000 compared with $13,300,000 for the same period before the pandemic.
Mulligan said total revenue for Q2 of fiscal year 2021 was $8,390,000, down from $23,400,000 the prior year, and noted a near-$1,000,000 payout from the state's investment in Israel Bonds. "We've changed the internal structure of the State's investment team to ensure appropriate checks and balances," Mulligan said, and described broader diversification into agency callable bonds and mortgage-backed securities to stabilize returns.
Why it matters: the board manages state cash and investment policy that supports routine payments and reserves; large swings in fixed-income receipts affect what the treasurer can safely invest and how much short-term liquidity is available for state operations.
After the presentation the board approved a package of quarterly motions covering April 1June 30, 2021. The board voted that no funds would be placed into the State Board of Finance certificate of deposit program for the coming quarter, and it directed the treasurer to "purchase warrants for the succeeding quarter pursuant to Act 1088 of 2013" and to maintain reasonable amounts in demand deposit accounts and money markets for day-to-day transactions. The motions were seconded and passed on voice votes.
The board discussed statutory terminology used in cash-management law. An unidentified member asked whether the term "warrants" might be removed from the statute; TJ Fowler, legal counsel for the Treasury, said the Bureau of Legislative Research is leading a rules-standardization effort across the Arkansas Code and that the board will be notified of meetings and recommendations before any formal rule changes are promulgated.
The board accepted the treasurers report by voice vote. The board did not take additional action on investment policy at this meeting and will continue to monitor the fixed-income markets and federal policy for signs of rate normalization.
