Lawmakers Meet With Group That Controls State’s Portfolio

Source: Delaware State News

DOVER — Lawmakers on the Joint Sunset Committee are considering increasing financial disclosure, prohibiting political contributions and fostering transparency for board members overseeing the state’s $2 billion portfolio.

During a rescheduled meeting for the nine-member Cash Management Policy Board Wednesday, both the board’s chair John Flynn, a consultant in healthcare business, and State Treasurer Chip Flowers, the only elected member of the board, presented separate reports for the board’s regulatory review, that offered slight consensus after months of contention.

“The treasury has no issue having an oversight board,” said Mr. Flowers during the hearing. “We just want to make sure there have to be rules.”

Mr. Flowers and the board, which includes three members of Gov. Jack Markell’s administration as well as five other gubernatorial appointees appointed by the governor and confirmed by the Senate, have been at odds since his election in 2010. Most recently, the governor supported legislation which clarifies policy and investment practices of the board and redefines the treasurer’s role on the board.

Mr. Flowers maintained that Senate Bill 151, which was passed by the House and Senate and signed by the governor on Valentine’s Day, fosters “unintended consequences”.

His “honest way amendments”, introduced as lawmakers were working the bill, would improve the board, he said, and include increased financial disclosure, prohibitions on political contributions to elected officials, increased public oversight, more elected officials on the board and stricter term limits.

“I think the board has to have more than one elected officials, we need members of the General Assembly serving on board,” Mr. Flowers said, for the best interest of the board, which only meets twice a year.

“I think if we are going to entrust $2 billion to a group of individuals there has to be some kind of standard, you cant manage $2 billion twice a year.”

Longtime experience in the field should not be the only deciding factor when it comes to selecting board members, he sad.

“The notion that we need to keep the same people on the board because of some longtime experience…I encourage turnover. We need more elected officials. I enjoy being in the paper everyday, but I’m tired of carrying the water, it’s lonely.”

He implored the ten-member bipartisan committee halfway through the two and a half hour meeting, “Come on the board, join the fun. We will give you some tootsie rolls or something.”

Sen. Dave Sokola, D-Newark, disagreed that General Assembly members should elected to the board.

“We [legislators] aren’t required to have financial expertise,” Sen. Sokola said. “A number of us have, but we are not required to have that. Some people develop expertise being in a certain position.”

By telephone conference, Mr. Flynn reflected on the true purpose of the cash management board, which was formed in the 1980s in the wake of a financial crisis with Farmer’s Bank, that had at the time held all of the state’s investments.

“We had too many eggs in one basket,” said Secretary of Finance Tom Cook, one of the mandated board members from the governor’s administration. Secretary Cook said the board is similar in structure to the Delaware Economic and Financial Advisory Council, which meets throughout the year to report the state’s revenue projections.

“DEFAC works because we have number of members from the private sector and they are able to tell us what is going on in the ground,” Mr. Cook said. “It is this private sector expertise that is needed in order for us to do this.”

Mr. Flynn said the board has a responsibility to maintain the state’s funds and assets with minimal risks.

An independent investment analyst would be welcome to consult with the board, he said, but at the time only Mr. Flowers has a financial adviser, Credit Suisse, separated from board proceedings.

“The treasurer brought in an independent adviser, but the reality is the independent adviser is not an adviser to the board and we’ve been restricted in our ability to talk to Credit Suisse.”

While an independent adviser to the board would be useful, Mr. Flynn was lukewarm on the topics of increased financial disclosure and an increased elected official presence on the board.

Every three years the board members do go through financial disclosure reports upon their appointment or reappointment, he said. If they would be asked to have annual reports, he suggested all other boards have similar protocol.

After the presentations, Joint Sunset Committee Chairwoman Sen. Nicole Poore, D-Middletown, was visibly uncomfortable and concerned with the status of the board members.

“It’s a little frustrating up here and not seeing a collaborative effort in simply because you are dealing with our money,” Sen. Poore said.

She addressed an issue of transparency, particularly in regards to meeting minutes. Often times, minutes are not recorded until much later, she said, which is problematic.

Board member Secretary of State Jeffrey Bullock agreed.

“I think its just a practical matter, the board does need some guidance as to where our staffing comes from,” he said.

At the end of the day, the problems come down to a simple matter or personality differences, Joint Sunset Committee Co-Chair Rep. Gerald Brady, D-Wilmington, said after the hearing.

“If it’s not broken, why fix it,” said , after the hearing. The cash management board has been under the same leadership for the past 30 years, has kept a continuous Triple-A bond rating and there have been no recorded violations.

“This is just a management policy board.”

However, he said sunset committee members do support increasing the financial disclosure requirements, political donations and transparency of board members. Term limits is a lost cause.

“As far as term limits I don’t see a consensus on that,” he said, but supported restricting the board members ability to make political donations.

“In this climate of pay-to-play, you certainly don’t want to be seen opposing any corrective measures of that when you are dealing with someone who has access to funds.”

The Joint Sunset Committee has until May to craft a report to the General Assembly that may include some of those recommendations.

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