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State treasury in line with prior two quarters

By submitted, 05/7/20 9:29 AM

LITTLE ROCK – The State Treasury earned $23.1 million during the third quarter of fiscal year 2020, which ended March 31, Treasurer of State Dennis Milligan told the State Board of Finance recently. That adds up to $69.3 million for the first three quarters of FY 2020.

“Fortunately, even with the market moving interest rates continuously downward since January of 2019, receipts for the third quarter stayed consistent,” Milligan said, adding that was in line with the previous two quarters of $22.6 million in the first quarter and $23.4 million in the second quarter.

The Federal Reserve cut interest rates down to near zero in March amid global concerns about the coronavirus pandemic, which has and will continue to affect the State Treasury’s receipted earnings.

“Long before the full impact of the COVID pandemic hit, the State Treasury was already seeing a decline in portfolio yields due to falling interest rates,” Milligan said. “The actions of the Federal Reserve in March only accelerated those declines. I mention this because the impact of the COVID pandemic has had and will continue to have a negative impact on the worldwide economy. But I also want to offer some encouragement.”

Interest rates have been this low before under Milligan’s administration.

“When I first came into office in January 2015, rates were pretty much what they are now. Yet we were able to double our investment returns from what they had been previously – by actively managing the portfolio,” he told the finance board. “We have been in an interest rate climate such as this before, and we will come through it again.”

The coronavirus pandemic affected the State Treasury’s short-term portfolio the most, which saw money moved from higher-earning securities into money market and demand accounts, which offer more liquidity but less earning potential.

The short-term portfolio earned $7.7 million during the third quarter, and the long-term portfolio earned $15.4 million.

Milligan expressed cautiousness along with encouragement as the state continues to weather the effects of the coronavirus pandemic.

“As we continue through these uncertain times, I want to reassure you that my office is continuing to fulfill the daily functions of receiving deposits from state agencies, redeeming warrants, distributing funds back to cities and counties, and managing the state’s $4.5 billion dollar investment portfolio,” he said.

“As lower interest rates continue to affect the Treasury’s portfolio in the coming months, especially with regard to our short-term holdings, I feel confident in my investment team’s ability to get us through this financial hardship. As I mentioned earlier, we have been in a similar situation before. We will continue to closely monitor and actively manage taxpayer funds, keeping in mind our priorities of liquidity, safety and returns – in that order.”

To watch a more detailed video of the third quarter investment report, visit https://youtu.be/CU9I3JTlirA. Additional information about the state’s investment portfolio can also be found at https://www.artreasury.gov/transparency/investments/.