State government has been able to earn more than $1 billion on its investments since 2015, State Treasurer Michael Frerichs said Monday in announcing what he called a milestone. The last time a treasurer earned that amount for the state while in office was Judy Baar Topinka in 1999. Topinka, a Republican who served three
State government has been able to earn more than $1 billion on its investments since 2015, State Treasurer Michael Frerichs said Monday in announcing what he called a milestone.
The last time a treasurer earned that amount for the state while in office was Judy Baar Topinka in 1999.
Topinka, a Republican who served three four-year terms as treasurer from 1995 to 2007 and died in 2014, reached the $1 billion mark in about four years but had the benefit of higher interest rates that helped the state earn more money off investments, Frerichs said.
A Democrat who is midway through his second four-year term, Frerichs said at a Statehouse news conference that earnings off the state’s investment portfolio of $17 billion can avoid the need for tax increases and budget cuts.
The state was able to compensate for interest rates averaging less than 1% — compared with 5% during Topinka’s tenure — by broadening the state’s legally allowed investments to those that earn higher rates of return, Frerichs said.
State laws enacted in 2016 and 2019 with support of Democrats and Republicans in the General Assembly paved the way for the investment changes with a relatively low risk for taxpayers, said Frerichs, a former state senator from Champaign County.
“These common-sense changes include the new ability to invest in highly rated corporate bonds issued by such well-known titans as Caterpillar, Deere and Pfizer,” he said.
The changes also allowed investments in “secure, public-sector bonds such as those issued by school districts to purchase land or erect buildings,” he said.
Frerichs, who took office in 2015, said he and his staff also have worked closely with the governor’s and comptroller’s offices on cash flow so that the treasurer’s office, when possible, can invest money as long as possible to maximize interest earnings.
Frerichs was the first treasurer to seek re-election since Topinka. He hasn’t said whether he will seek a third term. His second term ends in early 2023.
Despite the state’s budget struggles with structural deficits that result in billions of dollars in unpaid bills to state vendors and more than $130 billion in unfunded pension liabilities, Frerich said the investment news “is evidence that not everything in Illinois is broken.”
“It also shows that when there’s a willingness to work together, we can achieve great things for our state,” he said.
One billion dollars “builds 330 miles of new roads in Illinois,” he said. “Think of the number of jobs that means. The lunches and dinners and gas tanks being filled. … Government can and does work to help its citizens.”
Investment earnings help the state pay down its backlog of bills but aren’t a long-term solution to the state’s struggles with its credit rating, which is just above junk-bond status, Frerichs said.
The credit rating affects the interest rate the state must pay when it borrows money. That rating doesn’t affect the state’s ability to invest its own money in other entities, the treasurer said.
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