Date: 01/26/2006
Final
Department ofTreasury
COMMITTEE ON JOINT FINANCE
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10:04 AM -- Presentation by the Department of Treasury
Senator Sandoval, chair, called the meeting to order. Treasurer Mark Hillman began his presentation by discussing divisions in the Treasury, including its operations and unclaimed property divisions, and budget information. A copy of his presentation was distributed to the committee (Attachment A). He provided information on the department's investments. The market value of the largest fund currently under the Treasurer's management (T-Cash/T-Pool) is $4.2 billion, which yielded about 3.7 percent in FY 2004-05. Total interest earnings for FY 2004-05 for all investments were $150.8 million. He also discussed the Treasurer's accounting and distributions functions. The Treasurer accounts for all cash received by the state and is responsible for distributing money out of the Highway Users Tax Fund to the Department of Transportation and Colorado's counties and municipalities. Another Treasury function is managing the state's cash flows. The department must issue revenue anticipation notes to ensure that the state has enough cash flow during the budget year. The Treasurer uses an on-line bidding system to obtain a low interest rate on the notes. The interest cost on $700 million in notes issued in FY 2004-05 was 2.62 percent.
Treasurer Hillman also discussed the state's Unclaimed Property Program. The primary goal of the program is to reunite owners with their lost property. The program also provides funding for tourism by selling unclaimed securities held more than one year. The interest earned on the securities is then used to fund tourism. About $2.4 million in interest is expected for tourism from the program in FY 2005-06. The Unclaimed Property Program also provides funding for CoverColorado.
Treasurer Hillman continued by discussing the state's elderly property tax deferral program. In FY 2004-05, the program lent about $566,000 to the elderly for property tax deferrals. There are currently 425 participants in the program. The senior property tax exemption program is scheduled to resume this year. The Treasurer is requesting $61.2 million for the program in FY 2006-07. He continued by discussing the interest-free school loan program. There are 17 school districts participating in the program which allow districts to borrow money to help with their cash flow throughout the year. He indicated that the department must be careful and limit the amount of funds districts borrow. All districts now use the same format to apply to the program which helps the Treasurer pinpoint any financial issues occurring in districts. He also provided information on the bond intercept program which ensures full and timely payment of school debt. No district has ever defaulted on their debt under the program. He also indicated that legislation could be sought this year to raise the cap on the amount of money that can be borrowed by charter schools under the charter school bond intercept program.
10:14 AM
Treasurer Hillman continued by discussing the Department's initiatives in 2006. One initiative is PERA reform. He discussed the causes of PERA's unfunded liability. Solving the problem by increasing the employer contribution, which ultimately is funded by taxpayers, would cost more than $400 million per year and would represent seven percent of payroll this year. He noted that the problem requires all stakeholders to come to the table. He thought that any future changes in contributions and benefits should require an independent analysis. Also, reform should include reducing the cost of future benefits.
Treasurer Hillman discussed the need for a rainy day fund (RDF). A RDF should be constitutional with clear guidelines for saving and spending. He also discussed the state's Permanent School Fund, which receives proceeds from the sale and lease of publicly held lands and from the royalties earned from mineral sales. Colorado's constitution requires the fund to support K-12 public education in the state with the fund's investment income. Treasurer Hillman discussed the Department's initiative to build the fund so that it is large enough to generate $100 million annually for public schools and so that the fund includes a diversified portfolio with a long-term horizon to improve returns. Legislation this year would help implement these objectives (SB 06-007). Treasurer Hillman closed by discussing the securitization of tobacco settlement money. He stated that the money is unstable as there is a declining number of smokers and continued tobacco litigation. He indicated that the state could receive about $1.3 billion this year if it were to securitize.
10:20 AM
Representative Judd asked about the implementation of the program that uses the Unclaimed Property Program to intercept back taxes and child support payments. Mr. Ben Stein, Deputy Treasurer, indicated that the department is still testing the computer system used in administering the new program and that it will be fully implemented soon. In response to Representative Marshall, Mr. Stein indicated that CoverColorado only received a small amount of money this fiscal year because it is the only amount that the program requested. The program is requesting much more in the upcoming fiscal year.