Treasurer Moore Warns High Inflation Harms Government Funds
State Treasurer Riley Moore today announced the West Virginia Board of Treasury Investments, which manages short-term operating funds for the state and local governments, surpassed $9 billion in assets under management at the close of the recent fiscal year – a new record high.
“With the state running healthy budget surpluses, a continued inflow of stimulus funds, and an influx of new business from local governments that are trying to maximize returns in order to mitigate inflation, our Board of Treasury Investments continues to set new records for the amount of assets it manages,” Treasurer Moore said. “We are proud to continue managing these public funds in a responsible and effective manner.”
The Board of Treasury Investments, which is chaired by the State Treasurer, is responsible for managing what is typically referred to as the Consolidated Fund, which contains the short-term operating funds from various state and local government agencies. They invest these funds in various money market and bond pools, providing the agencies a vehicle to invest their operating funds in interest-bearing accounts while preserving the liquidity needed for day-to-day operations.
In July 2021, the Fund held a then-record $8.1 billion in assets under management. By the close of Fiscal Year 2022, which ended June 30, the Fund exceeded $9.23 billion. The balance originally stood at $2.2 billion when management of the Fund was first transferred from the state Investment Management Board to the BTI in 2005.
The Board had actually expected the Fund’s amount to level off or even decline somewhat during the 2022 fiscal year as stimulus funds and Roads to Prosperity bond proceeds were spent down. However, the state’s significant budget surpluses, along with a second receipt of American Rescue Plan Act funds, combined with greater investments from county school boards and local governments led to the increase.
State agency investments with the Board increased $1.1 billion year-over-year, while investments from local governments increased by $48.4 million.
Board of Treasury Investments Executive Director Kara Hughes said school boards and local governments have been more interested in investing with the BTI as its short-term money market rates have risen exponentially as the Federal Reserve has raised rates. The BTI’s main daily money market rate increased from 0.0605% last June 30 to more than 2.36% last week.
“Potential investors are starting to take notice as we have seen an influx of calls from local governments wanting to take advantage of higher yields,” Hughes said. “Private banks are swimming in cash due to billions of dollars in stimulus funds issued to families and small businesses during the pandemic. Most banks have little reason to raise rates to attract new deposits. This has put the BTI at a competitive advantage to the private sector.”
Treasurer Moore said this is also a sign local government financial managers are trying to offset the effects of generationally high inflation.
“Inflation doesn’t only hurt families and businesses, it actually hurts government agencies that are trying to be conservative with their spending habits,” Treasurer Moore said. “A 9-percent inflation rate means our $9 billion Consolidated Fund would lose $810 million in purchasing power in one year. That $810 million could pave a lot of roads in our state.
“This is why it’s imperative for the President, Congress and federal policymakers to stop their reckless spending and enact policies that truly rein in inflation,” Treasurer Moore said. “While we do a good job managing our state funds, we simply can’t do enough to protect our taxpayers’ dollars when inflation is soaring above 8 and 9 percent. Federal leaders must act to get inflation under control.”
The state Board of Treasury Investments continues to receive high marks for its management of state funds. S&P Global Ratings in May reaffirmed its highest possible rating (AAAm) for the BTI’s money market pools, acknowledging the funds are highly stable and protected from risk.
The Government Finance Officers Association has also awarded the BTI with its Certificate of Achievement for Excellence in Financial Reporting 15 consecutive years.