The current model for managing the Idaho state treasury is 127 years old. It is outdated and broken. It is time to forget how the public’s money was managed in the 19th century and modernize our management practices using a 21st century model. Idaho’s taxpayers deserve no less.
Our proposition is prompted by renewed questions about the financial management practices of Idaho State Treasurer Ron Crane. As has happened before, these are questions raised by trained professional financial managers and denied by Crane, who is not a trained financial manager.
The state treasurer is charged with handling the day-to-day banking and short-term investing and borrowing for most of state government. The office oversees about $4.5 billion in various financial holdings.
The elected office of state treasurer is a holdover from an earlier era when the amount of funds involved and the degree of managerial sophistication required were minimal. Because of that, when the office was established in the Idaho Constitution in 1890, the eligibility requirements were minimal. You must be at least 25 and a resident of Idaho for two years. Once you take office, you need to reside in the state and must maintain an office in Boise. That’s it. No educational requirement, such as a degree in accounting or finance, and no need for previous financial management experience.
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The background of the current treasurer and the controversies over his management practices demonstrate how outdated the current structure of the office is. Crane served in the Idaho Legislature and ran a family-owned burglar and fire alarm business. But he had no prior education or work experience relating to the degree of expertise that should be required for managing billions in public funds.
Crane is not seeking re-election in 2018. Given the criticism of Crane, his retirement presents an opportunity for the state to consider making changes in the administration of the state treasury.
For openers, the Legislature should consider placing a constitutional amendment on the next general election ballot eliminating the treasurer as an elected official. Idaho has done that before with a statewide office that became outdated. In 1971, the constitution was amended to eliminate the elected office of state inspector of mines and the responsibilities were assigned elsewhere.
The next thing that the governor and Legislature should undertake is to establish a volunteer board of professionals to oversee the financial management responsibilities currently assigned to the elected state treasurer.
There are two similar panels in operation in state government:
▪ The Endowment Fund Investment Board is a seven-person board of five skilled professionals and two members of the Legislature. It employs a staff of full-time professional managers. The board oversees approximately $1.8 billion in funds relating to the state’s land endowments.
▪ The Public Employees Retirement board is a five-member board made up of business professionals and two PERSI members. They oversee Idaho’s $14.8 billion Public Employees Retirement Fund. It serves 144,000 PERSI members working for 775 public employers. It employs a large professional staff to carry out administrative and investment activities.
These two investment boards offer a sharp contrast to the current practice of having Idaho’s state treasury managed by a politician with no professional expertise.
There is a state Treasurer Investment Advisory Board that was created in response to earlier financial problems in the Treasurer’s Office in 2014. But the treasurer serves as board chair and can either accept or ignore the board’s advice. If the treasurer ignores the advice and mismanages state funds, he can’t be fired, which is a major difference between the Treasurer Investment Advisory Board and the PERSI and Endowment Fund Boards. Making the treasurer an appointive position serving at the pleasure of a board would solve a litany of problems and significantly improve the management of the citizens of Idaho’s state treasury.
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