Public Treasurer’s Investment Fund
Saturday, March 29th, 2008
One of the main functions of the State Treasurer’s office is managing the investments of the Public Treasurers’ Investment Fund (PTIF). The PTIF has operated in its present form since the early 1980s. It has become the primary investment vehicle for most public treasurers in the state.
The PTIF operates similar to a money market fund. Its investments are short-term in nature with an average maturity of less than 60 days in today’s market environment. Participants are able to transfer money into or out of the fund daily. All General and Education Fund moneys of the state are invested in the PTIF. In addition, all of the counties, higher education institutions, school districts and most cities, towns and special service districts in the state participate in the PTIF. In all, more than 450 government entities participate in the PTIF.
The balance of the PTIF has peaked at more than $11.0 billion in the past several months. All the investments are limited to those authorized by the Money Management Act. The PTIF is attractive to public treasurers for several reasons. First, public treasurers are able to benefit from the investment expertise of the State Treasurer’s office. Second, they receive same day liquidity but are able to take advantage of extending out the yield curve to enhance their return. Third, aggregating the investments of all public treasurers allows everyone to enjoy economies of scale by purchasing investments in larger block sizes thereby minimizing transaction costs.
For the fiscal year that began July 1, 2006 and ended on June 30, 2007, the PTIF earned more than $480 million of investment income for its participants. This represents $480 million available for appropriation that did not come from taxpayer pockets in the form of taxes or fees. This helps keep taxes down. Of course, this amount fluctuates because of the relative level of interest rates. Recent interest rate cuts by the Federal Reserve Bank will directly impact the interest earning of investments in the PTIF.
In future blogs, I’ll discuss some of the challenges that local government investment pools, similar to the PTIF, are facing in very tumultuous credit markets.