TOPEKA — Kansas Treasurer Steven Johnson expects the combination of stable economic conditions and unprecedented state government cash reserves to produce interest earnings of about $300 million on short-term investments before the year’s end.
That windfall would be derived from otherwise idle funds that earn in the neighborhood of 5% interest, which would add to treasure members of the Kansas Legislature and Gov. Laura Kelly would have at their disposal when the 2024 session began in January. The latest projection was state lawmakers would end up with $3 billion in cash on hand with about $1.5 billion in a special rainy-day reserve fund.
“It has been even more important this year than a year ago or at other times to pay attention to where that money is sitting and what it can do for the state,” said Johnson, a Republican from Assaria elected to the post in November. “We should make just over $300 million in interest on the float as it passes through our hands.”
Johnson said on the Kansas Reflector podcast that he appreciated an investment approach represented by the simple acronym “SLY,” which stood for the priorities of stability, liquidity and, finally, yield.
The state’s 3% unemployment rate was good news, Johnson said, and it appeared the state’s economy was generally working well despite concern about inflation.
“It doesn’t mean that there are things we could do better (and) doesn’t mean that there aren’t good people who don’t have the right job, but as on the whole we’re able to be productive,” he said.
Close election
Johnson, who had an investment management background and engaged in farming in Saline County, represented a rural district in the Kansas House from 2011 to January.
In August, Johnson won an extremely close GOP primary against state Sen. Caryn Tyson of Parker. He earned 219,449 votes or 50.05% to Tyson’s 218,975 or 49.95%. In the subsequent general election, Johnson defeated Democratic nominee and incumbent Treasurer Lynn Rogers by 120,000 votes.
He said more than a decade of service on budget, tax and pension committees in the House was important preparation for work as state treasurer. In addition to working on management of state surplus cash, the state treasurer had responsibility for oversight of college and technical education savings accounts, a portfolio of unclaimed property and served on the board of trustees of the state pension system.
“I can’t imagine coming in cold without the knowledge of the cash flow from the appropriations and tax committees, some understanding of the liability of the pension before going on to the pension board,” Johnson said. “All of those were so helpful.”
During the 2023 session, lawmakers assigned the state treasurer the task of selecting an organization capable of administering $2 million set aside to support women complete a pregnancy or with child adoption services. The contracting work would typically be handled by the Kansas Department of Administration, but the GOP-led House and Senate decided to funnel the cash through the office of a Republican state treasurer.
“Glad to help the Legislature with that alternative-to-abortion bill,” Johnson said.
ESG and more
The Legislature also considered — but didn’t approve — a bill that would have required Johnson’s staff to assume oversight of millions of dollars that would have been allocated to children attending private schools. House and Senate leadership weren’t in favor of those resources moving through the state Department of Education.
Johnson said he didn’t object to a mandate the Kansas Public Employees Retirement System not rely on ESG measures when determining where to invest billions of dollars in pension capital. ESG refers to corporate environmental, social and governance considerations that corporate boards would consider when making business decisions. Conservative legislators, including those in Kansas, have sought to thwart ESG.
Johnson said concern about direction of institutional investing escalated when the hedge fund Engine No. 1 won seats on the Exxon Mobile Corp.’s board in a quest to compel the energy giant to alter business strategy in wake of global warming and climate change. The state treasurer said KPERS had to be mindful of fiduciary obligations to seek the best return with the lowest risk for retirees.
