What would these men do if they got their hands on the
state’s billions?
By Abraham Hyatt
Outside of state government, Oregon’s state treasurer is
not a widely known man. And that, says Randall Edwards, the man
himself, is probably how it should be. As head of what amounts
to the central bank of Oregon, he says the job should be
slightly under the radar.
But within state government the office of treasurer is one of
the most powerful. It’s made up of several divisions. The
Investment Division manages a portfolio — made up of
retirement, insurance and school funds —with a market
value of well over $75 billion. The Finance Division serves as
the central bank for state agencies and manages more than 13
million financial transactions totaling $120 billion each year.
The Debt Management Division oversees all of Oregon’s
state-issued debt.
The treasurer also sits on or chairs 10 councils, commissions
and boards including the Oregon Investment Council and the
powerful State Land Board.
“There is a lot of power behind this office. The pulpit
is wide and the credibility is heavy,” says Edwards. The
position “is one of the most interesting and powerful
jobs that an elected official can hold.”
Edwards is coming to the end of eight years in office; term
limits prohibit him from serving a third term. Come November,
one of two men will step into his shoes. Both are well known to
the state’s business community and have deep roots in the
state’s economic fabric. Both are eager to take on the
role of the Oregon’s fiduciary steward even as the
economy sinks and state revenues threaten to follow.
And while their positions on some of the most critical issues
facing the state are different, both Allen Alley and Ben
Westlund agree that Oregon’s treasurer should be on the
front lines of the state’s next economic battles.
We asked both of them to explain what they would do if Oregon
voters hand them the office of treasurer — and a good
chunk of the state’s economic future — in
November.
Allen Alley
Age: 53
Party: Republican
Current job: Pixelworks board chairman
Previous jobs: deputy chief of staff to Gov. Ted
Kulongoski; co-founder and CEO of Pixelworks; venture
capitalist, engineer
During his tenure,
Treasurer Edwards has been a vocal advocate for specific
issues. For instance, he’s spoken very publicly about
the kicker being a terrible idea. What role do you think
the treasurer should play as an advocate?
I look at the role of treasurer as the CEO of the Bank of
Oregon. You have other roles — sitting on the land
board — and so you have to have knowledge of issues
like taxes and land use. But it’s incumbent on the
treasurer to weigh in on problems. This is one of three
constitutionally elected offices — that comes with a
lot of responsibility.
What
kind of advocate would you be when it comes to, for
instance, tax reform?
This is my feeling on taxes: Every state I’ve lived
in has elements that believe their tax system is broken. To
be the architect of a perfect system where everyone says,
“This is the right thing” — you’re
chasing a difficult place to get to. That said, different
systems have weaknesses and strengths. For instance, Oregon
has very volatile ups and downs. When you have a system
like that and don’t have any reserves to speak of,
that’s not prudent.
Other
state treasurers in the U.S. have argued for states to
divest public funds from companies that do business with
terror-designated countries. Divestiture has also come up
with Oregon’s College Savings Network. How do you
find the balance between your responsibility to create a
high return on investment and the idea of socially
responsible investing?
I’m going to be on the side of getting the best
possible returns for seniors and the citizens of Oregon.
You have to have fiduciary responsibility. There may be
other options with different trade-offs and returns where
individuals can opt in or out, that’s fine. But to
start taking money from seniors and other citizens because
of a social agenda, I’m not in favor of doing
that.
How
will you learn to manage an investment portfolio worth at
least $75 billion? Who will you turn to for advice?
I was at an Investment Council Meeting this morning
listening to the presentations and I started writing down
questions that I would be asking if I was sitting up there.
I’m someone who’s done this. I’m not an
expert but I’m very familiar with the issues.
But
are there specific people you’ll need to help with
the transition?
There are people on the existing staff and there will be
new people to draw upon. The interesting thing about
investments and investment portfolio is that it’s
getting dramatically more complex. I think the treasury is
getting more sophisticated and the role of the treasurer
has changed. It’s because the financial markets have
become much, much more complicated. You need somebody that
has some experience who can ask the right questions and
pierce through the fog. If you were actually interviewing
for this job you’d have to have a background similar
to mine to even be considered.
This
year Oregon regained a high credit rating. Part of that was
beyond the treasurer’s purview — for instance
the creation of a rainy-day fund. But what could you do to
ensure that we keep our rate high?
Our credit rating is based on our ability to pay our debts
and our ability to pay our debts is based on the money we
have in reserve. We could increase that, but we could also
look at what we borrow. We overlook that side of the
equation. If I can simplify that kind of language I can
help the Legislature understand when they’re pushing
the edges and when they’re on thin ice.
What
scares you most about this job?
I wouldn’t use that word. The more I learn about the
job, the more excited I get about it.
Nothing would
present a learning curve?
The interesting thing about my background is that it fits
so well. There will be a natural progression with lots of
things to learn, but it’s not like I don’t
understand bonds, or leveraging funds or venture capital.
I’ve taken companies public. There are things I need
to learn like municipal bond offerings, but I’m very
comfortable.
What’s the
most critical economic issue facing the state and what can
the treasurer’s office do about it?
The first one is that we have to have a vibrant economy.
It’s the economy. It’s the economy. It’s
the economy. We have some amazing assets statewide that we
have to figure out how to responsibly move forward.
I’m very bullish on that. The red flag I see is our
lack of growth capital. Since 1990 Washington has grown
their capital from $90 million to $300 million; California
grew from $1.8 billion to $40 billion. We’ve grown
from about $100 million to $180 million. If we don’t
have the access to capital, we don’t have the
opportunity to grow. The treasurer plays an invaluable role
in that.
Sen. Ben Westlund
Age: 58
Party: Democratic
Current job: state senator, District 27
Previous jobs: 2006 gubernatorial candidate;
state legislative representative, 1996-2003; business
owner
What
is the most critical economic issue facing the state and
what can the treasurer’s office do about
it?
It’s the lack of capital accumulation or formation.
It’s access to capital for our innovation economy
— clean tech, renewable and sustainable energy,
biotech. It’s a real problem. This is a policy
question as to how we create access. We’re doing some
very innovative things with the Oregon Growth Account, but
I will tell you that in 2001 I helped pass a bill for a
$100 million investment fund separate from the invest
council. There are a variety of reasons that hasn’t
happened, but as treasurer one of my most important
functions would be to create that kind of capital
access.
Other
state treasurers in the U.S. have argued for states to
divest public funds from companies that do business with
terror-designated countries. Divestiture has also come up
with Oregon’s College Savings Network. How do you
find the balance between your responsibility to create a
high return on investment and the idea of socially
responsible investing?
Job No. 1 is preserving the hard-earned retirement dollars
of our public employees. This fund is upwards of 70
billion; it’s the 22nd-largest fund in the nation,
the 41st-largest in world. Let me say it this way: Our
investment division isn’t broke and I don’t
intend to fix it. It is the critical role of the treasurer
to have the steady hand to protect the fund. If
you’re going to do something, you must do it very
carefully.
How
will you learn to manage an investment portfolio worth at
least $75 billion? Who will you turn to for advice?
This is the structure: You have the Oregon Investment
Division that makes recommendations to the Oregon
Investment Council. It’s really the council —
of which there are five individuals and the treasurer is
one — that ratifies the investment decisions. The
treasurer doesn’t sit there and go, “Oh, my
gosh, do I buy a million shares of Coke or short a million
shares of Pepsi?” That’s what the investment
division does and it’s not a casual process they go
through. By the time those recommendations get to the
investment council, they are very well vetted. Due
diligence has been done again and again.
During his tenure,
Treasurer Edwards has been a vocal advocate for specific
issues. For instance, he’s spoken very publicly about
the kicker being a terrible idea. What role do you think
the treasurer should play as an advocate?
I see a primary function of this office is as a public
policy position to advocate issues that are important to
Oregon’s future. That includes tax reform, health
care reform, financial literacy in schools —
they’re all critical components. Look, all treasurers
since 1965 — except for Clay Meyers — have had
extensive legislative experience. Having that experience
means being able to move policy positions whether
it’s to increase our bond rating or increase our
rainy-day fund.
What
kind of advocate would you be when it comes to, for
instance, tax reform?
There’s not going to be reform unless there is the
coming together of a broad coalition, every major facet in
Oregon. My role would primarily come from working with the
constituency outside of the Legislature: big business,
small business, health care advocates, education advocates
— these are the people in the trenches, the folks
that if there’s a change in the tax structure would
benefit.
This
year Oregon regained a high credit rating. Part of that was
beyond the treasurer’s purview — for instance
the creation of a rainy-day fund. But what could you do to
ensure that we keep our rate high?
I’m not going to buy into the premise of the
question. While Oregon’s bond rating has improved, it
does not reflect the financial performance of the state.
We’ve done a dramatic movement in terms of our
debt-to-revenue ratio. One of the things that holds us back
is lack of a meaningful rainy-day fund. It is nowhere near
adequate. We need 10% of the prior biennium’s
appropriation to be in the rainy-day fund for us to have
anywhere near an adequate reserve. That’s not only
for our public services that rely on that fund but for the
bond underwriters.
What
scares you most about this job?
Any treasurer’s fear is a worsening national
economy. That impacts every aspect of the job — it
puts more demands on the investment division, it reduces
available capital for our Oregon growth account, for Oregon
Innovation, for economic development. What it really does
is it raises the cost of government. I’ve seen this
before. I helped Randall get through it when he first
assumed office and I was the co-chair of the budget-writing
Ways and Means Committee. We worked closely together right
in the midst of the worst recession in this state’s
history when revenues fell further and faster than any
state in the nation. You ask what I fear — it was
tough.
In
that situation, whom does a treasurer turn to for
help?
No. 1, it’s the exceptional management that the
office already has in place. No. 2, a treasurer’s
best friends are the principles, prudence and discipline
you learned in your own businesses. I’ve known the
highs and lows of business for 30 years and it’s not
new to me.
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