DENISE L. NAPPIER, State Treasurer
Howard G. Rifkin, Deputy State Treasurer
Established – 1639
Statutory authority – State Constitution
Central office – 55 Elm Street,
Hartford, CT 06106
Average number of full-time employees – 144
Recurring operating expenses –
General Fund: $3,770,834
Bond Funds: $3,361,859
Investment Funds: $65,204,739
Second Injury Fund: $7,450,655
Unclaimed Property Fund: $6,657,073
Short-Term Investment Fund: $1,331,352
Capital outlay –
General Fund: $100
Unclaimed Property Fund: $1,328
Short-Term Investment Fund: $349
Total abandoned property receipts: $84,799,705
To serve as the premier Treasurer’s Office in the nation through effective financial management of public resources, high standards of professionalism and integrity, and expansion of opportunity for the citizens and businesses of Connecticut.
The Office of the Treasurer was established following the adoption of the Fundamental Orders of Connecticut in 1638. As described in Article Four, Section 22 of the Connecticut State Constitution, the Treasurer shall receive all funds belonging to the State and disburse the same only as may be directed by law.
Denise L. Nappier was sworn in as the 82nd State Treasurer on January 6, 1999, and elected to her second term in 2002. The first African-American woman elected state treasurer in the United States, first African-American woman elected to statewide office in Connecticut, and only woman elected state treasurer in Connecticut history, Nappier is among Connecticut’s longest-serving state treasurers.
The Office of the Treasurer includes an Executive Office and five distinct divisions, each with specific responsibilities: Cash Management, Debt Management, Second Injury Fund, Pension Fund Management, and Unclaimed Property.
The Treasurer is an ex-officio member of the following boards, commissions and legislatively-mandated committees: Banking Commission, Connecticut Development Authority, Connecticut Health and Educational Facilities Authority, Connecticut Higher Education Supplemental Loan Authority, Connecticut Housing Finance Authority, Finance Advisory Committee, Investment Advisory Council, Connecticut Lottery Corporation, Standardization Committee, State Bond Commission, State Information and Telecommunications Systems Executive Committee, Waterbury Financial Planning and Assistance Board, Connecticut Higher Education Trust Advisory Committee, Student Financial Aid Information Council, and Council of Fiscal Officers.
In compliance with Connecticut General Statutes Section 46a-78, the Treasurer annually submits an affirmative action program to the State Commission on Human Rights and Opportunities. The Office pledges to make every good-faith effort to achieve all objectives, goals and timetables in its affirmative action plan. Contracts, leases and purchase orders of the Treasurer’s Office contain clauses requiring non-discrimination and vendors are required to certify the same. The Treasurer’s Office under this administration has consistently met or exceeded annual affirmative action goals.
During fiscal year 2006, the Treasury achieved a number of substantial goals that will benefit state residents and businesses, including:
Tax Deduction for Connecticut Higher Education Trust (CHET) – The Treasurer’s Office proposed legislation, which was passed into law by the General Assembly in the 2006 legislative session, allowing Connecticut taxpayers an income tax deduction for CHET. The new law will allow Connecticut taxpayers to deduct up to $5,000 for single filers or $10,000 for joint filers per year from their Connecticut adjusted gross income for contributions made on or after January 1, 2006, to CHET accounts.
Short-Term Investment Fund (STIF) Online Account Access – The STIF program launched the first-ever account management system for investors to allow online access to account balances, income distributions, and transaction histories. The system -- called STIF Express – also allows investors to initiate purchases (deposits) and redemptions (withdrawals) via the Internet.
Connecticut Horizon Fund – The Connecticut Horizon Fund, a program designed to identify and provide opportunities to future investment industry leaders, began funding with four fund-of-fund managers in fiscal year 2006. The Fund targets investment management firms that are Connecticut-based, minority or women owned, or emerging, and comprises all asset classes.
Second Injury Fund Debt Elimination – During fiscal year 2006, the Treasurer’s Office used the positive cash flow of the Second Injury Fund to defease all of the remaining debt of the Second Injury Fund (valued at $46.4 million), totally eliminating the debt ten years before its scheduled maturity. This initiative will save Connecticut employers $45 million in future interest costs.
Community Bank and Credit Union Initiative – The Office successfully launched the Community Bank and Credit Union Initiative during fiscal year 2006. The initiative supports Connecticut-based banks and credit unions through the state’s investment in certificates of deposit at the institutions that are awarded the state’s business through a competitive bidding process.
Hartford Climate Change Summit for Insurers - On October 27, 2005, the Treasurer’s Office, the CT Department of Insurance and the CT Department of Environmental Protection held the Connecticut Global Climate Change Summit: Business Risks and Opportunities for Connecticut's Insurance Industry. The Summit, attended by 100 insurance industry leaders, initiated an important dialogue on the impacts of climate change on underwriting, asset management, and operations. The Summit was the first time in the United States that insurance industry leaders gathered in a public forum to discuss climate change.
Asset Recovery from Claims and Litigation - In 2000, the Treasurer initiated a multi-faceted effort to prevent losses due to the malfeasance of others and, whenever possible, to recover lost assets. This effort has included the negotiation of best practices contract terms, monitoring of contract obligations, the filing of claims, and managing Connecticut’s fair share of securities litigation cases.
In the fiscal year that ended June 30, 2006, the Office of the Treasurer recovered $2,015,275.04 from litigation efforts.
§ Class Action Litigation $1,829,940.98
§ Individual Litigation $185,334.06
Cash Management Division
Short-Term Investment Fund - As of June 30, 2006, the Cash Management Division’s Short-Term Investment Fund (STIF) achieved an annual return of 4.38 percent, exceeding its primary benchmark by 37 basis points, thereby earning an additional $18.4 million in interest income for Connecticut’s agencies, authorities, municipalities and their taxpayers during the fiscal year. This is the eighth consecutive year it has outperformed the benchmark by more than 30 basis points. STIF’s calendar year 2005 performance ranked first in the country among 47 government investment pools reported on by TRACS Financial Research, an independent firm that monitors the performance of government investment pools on a monthly basis.
At the end of the fiscal year 2006, STIF had more than $5.4 billion in assets under management. In May 2006, STIF reached an all-time high of $6.29 billion in assets under management. Municipalities opened 16 new STIF accounts, bringing the total number of municipal accounts to 542. Standard & Poor’s reaffirmed STIF’s AAAm rating, the highest rating available, and STIF’s annual report received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association.
As part of the Treasury’s emphasis on improving the services provided to our customers, the Office implemented the first-ever account management system for STIF investors to allow online access to account balances, income distributions, and transaction histories. The system -- called STIF Express – also allows investors to initiate purchases (deposits) and redemptions (withdrawals) via the Internet.
Community Bank and Credit Union Initiative – Pursuant to CGS 3-24k, the Treasury implemented the Community Bank and Credit Union Initiative, which supports Connecticut-based banks and credit unions, with assets not exceeding $500 million through investments in institutions’ certificates of deposit. A competitive bidding process was held in May and again in June 2006, through which $12.5 million was invested with four community banks at an average interest rate of 5.23 percent. Monthly competitive bidding processes will be held.
Cash Management Operations - The Cash Management Division works with state agencies to improve the efficiency of the state’s cash management program by: accelerating state agency receipts via electronic payments and the Internet, streamlining the flow of funds between concentration accounts and individual disbursement accounts to reduce manual processes and increase invested funds, speeding the flow of bank information to state agencies, and consolidating bank accounts to reduce service fees and unproductive balances.
Specific activities and projects during fiscal year 2006 included working with: the Departments of Motor Vehicles, Transportation, Revenue Services, Environmental Protection, Public Health, and Public Safety, the Board of Accountancy, the Office of Policy and Management, and the Judicial Branch to develop the ability to collect fees via electronic checks or credit card payments over Internet-based systems; the Board of Accountancy to procure and implement a lockbox to speed the processing of license renewal payments; all agencies accepting credit card payments to negotiate a new fee structure that will save the state approximately $200,000 annually; Western Connecticut State University and Southern Connecticut State University to allow them to issue vendor payments through the ACH system; and Eastern Connecticut State University and Southern Connecticut State University to convert their disbursement accounts to zero balance accounts with positive pay fraud control.
Debt Management Division
During fiscal year 2006, the Debt Management Division, which manages $14.1 billion in total debt outstanding as of fiscal year-end, issued almost $1.4 billion of new money bonds to fund local school construction, state grants and economic development initiatives, transportation improvements and the UCONN 2000 program. As interest rates continued at relatively low levels during the year, the Division executed an innovative forward refunding of $161 million of Bradley Airport bonds and issued $61 million of UCONN 2000 refunding bonds. Since January 1999, debt refundings and defeasances have produced $495 million in debt service savings.
During the year, the Division executed two successful Internet-based competitively bid bond sales. These transactions allowed the Division to benchmark the pricing of State bonds. The Division also executed four negotiated bond sales that provided first priority access to bonds to Connecticut retail investors. This retail participation helps to lower the overall cost of the State’s debt and one sale brought in the highest level of retail orders in almost five years. The Division also assisted the Capital City Economic Development Authority (CCEDA) in the issuance of an additional $15 million of the Parking and Energy Fee Revenue bonds, backed by State contract assistance, to provide additional funding for the Adriaen’s Landing project.
The Division was actively involved with Treasury administration, the Office of Policy and Management and the Legislature on several initiatives including: development of the most significant transportation legislation in over 20 years, providing up to $2.3 billion in additional funding; modifications to the municipal finance statutes regarding the issuance of pension obligation bonds and the funding of Other Post Employment Benefits; providing for the repayment of all remaining Economic Recovery Notes with surplus funds; study of the potential issuance of pension obligation bonds for the Teachers’ Retirement Fund; and a strategic analysis of the long-term Clean Water Fund capacity which will provide important input for the new Clean Water Task Force to consider as it develops recommendations regarding the future utilization of the program to meet water quality goals.
Several steps were taken to strengthen Division administration including new systems, staffing and contracting with professionals:
Connecticut Retirement Plans and Trust Funds - As of June 30, 2006, the Connecticut Retirement Plans and Trust Funds (CRPTF) had $22.9 billion in assets under management. The Fund also achieved a one-year annualized return (gross of fees) of 11.20 percent, placing the pension fund in the 42nd percentile of the Trust Universe Comparison Services (TUCS) universe, a database of plan sponsor information of public funds with assets of greater than $1 billion. This indicates that CRPTF outperformed 58 percent of other public pension plans with assets greater than $1 billion.
During FY 2006, the Pension Management Division implemented a number of new investment initiatives.
Corporate Governance / Proxy Voting - In fiscal year 2006, the Treasurer’s Office engaged with more than 30 companies on key corporate governance issues concerning long-term pension performance, which included annual election of members of the board of directors, climate risk, global labor standards, executive compensation, expensing of stock options, board diversity, shareholder communications with board members, and the untenable situation in the Republic of Sudan.
One particular area of concentration was executive compensation, in which the Office sought better disclosure of executive compensation, including retirement benefits and stock options, and the alignment of pay with performance. In addition to filing several shareholder resolutions, comments were submitted to the Securities and Exchange Commission in response to their proposed rule that would expand required disclosure of compensation agreements with upper management of companies.
In the area of climate risk, the Office continued to take a leading role in the Investor Network on Climate Risk, focusing on an implementation strategy for an action plan adopted at the Second Investor Summit on Climate Risk, co-chaired by the Treasurer at the United Nations in May 2005. On October 27, 2005, the Treasurer’s Office, the CT Department of Insurance and the CT Department of Environmental Protection held the Connecticut Global Climate Change Summit: Business Risks and Opportunities for Connecticut's Insurance Industry. The Summit, attended by 100 insurance industry leaders, initiated an important dialogue on the impacts of climate change on underwriting, asset management, and operations. The Summit was the first time in the United States that insurance industry leaders gathered in a public forum to discuss climate change. The Office also took the lead on behalf of a coalition of investors in efforts to engage members of the Exxon Mobil Board of Directors in a discussion of Exxon Mobil’s challenges and opportunities related to climate risk.
During 2006, the Treasurer’s Office proposed, and the General Assembly adopted a law requiring the Connecticut Retirement Plans and Trust Funds to review Pension Fund investments in companies doing business in the Republic of Sudan. Under the new law, the Treasurer has the authority to engage those companies and potentially divest holdings in those companies if their business is contributing to the government’s perpetuation of genocide in Sudan.
Unclaimed Property Division
During FY 2006, the Unclaimed Property Division achieved several key milestones in reuniting individuals, businesses and organizations with their unclaimed assets.
Second Injury Fund (SIF) Division
During fiscal year 2005, the Second Injury Fund eliminated its long-term debt, originally projected to be paid out in 2016. The Treasurer’s Office used the cash flow of the Fund to defease long-term debt of $46.4 million in bonds that remained outstanding from the original debt. This initiative will save Connecticut employers $45 million in future interest costs. The Second Injury Fund continues to reduce its unfunded liability to pay future claims for injured workers. At the end of fiscal year 2006 the Fund’s unfunded liability was $449.2 million, down from $838 million in 1999.
The Fund dramatically reduced the rates to be charged to Connecticut businesses in fiscal year 2006 to the lowest levels in more than a decade. The new rates charged to businesses, through assessments for insurance companies representing employers, were reduced 38.5 percent and self-insured employers rates were reduced by 27.2 percent, which will save Connecticut businesses $31.7 million annually. The assessment rates charged to businesses cover the costs of injured worker claims.
Pursuant to Public Act No. 05-199, effective July 1, 2006, the Fund’s assessment bases will be changed for both insured and self-insured employers. This resulted from a unique roundtable discussion and subsequent agreement that emerged between the Fund, insurers and self-insured employers.
Connecticut Higher Education Trust (CHET)
The Treasurer is trustee to Connecticut’s 529-college savings program, CHET, which features low fees, federal and state tax exemption on earnings for qualified withdrawals, and a wide range of investment options to accommodate different risk tolerances. CHET reached 50,226 accounts, with total assets of $693.54 million at the close of the 2006 fiscal year, compared with just over 4,000 accounts and $18 million in assets when Treasurer Nappier took office in 1999.
The CHET program continues to provide an affordable college savings option with its low $25 minimum opening balance requirement, or $15 if an individual signs up for payroll deduction. CHET continues to have among the lowest program management-related fees of 529 plans nationwide.
During fiscal year 2006, several new and significant enhancements were made to the CHET program. Connecticut taxpayers will now be able to deduct up to $5,000 for single filers or $10,000 for joint filers per year from their Connecticut adjusted gross income for contributions made on or after January 1, 2006, to CHET accounts. In addition, program fees are being lowered from an average of .70 percent of the average daily net assets to .65 percent. the fee for the Principal Plus Interest option will remain .01 percent. In addition, CHET now offers two new investment options, including a 100 percent Equity Index Fund and a 100 percent Fixed Income Fund, thereby offering customers five different investment vehicles.
Financial Education / Individual Development Account (IDA) Program
Treasurer Nappier is committed to using the Office of State Treasurer as a catalyst to advocate financial education and expand economic opportunity, and is working to encourage partnerships between state agencies, community organizations and the private sector.
One program spurred by the Treasurer’s Office was the establishment of Connecticut’s Individual Development Account program, which allows working poor Connecticut families to save to purchase a home, continue their education, or start up a small business. There are now at least 20 IDA Programs operating throughout the state, serving over 1,000 participants.
Other initiatives conducted during fiscal year 2006 included the fourth annual Money Conference for Women, which was attended by over 600 women and featured opportunities for participants to engage in one-on-one consultations with financial planners free-of-charge. New conferences for adults included the Enterprising Women Financial Conference and Marketplace, which was held in collaboration with the Women Business Development Center in Norwalk, and the Latino Money Management Conference held in collaboration with the Latino and Puerto Rican Affairs Commission.
The Treasury also worked with a broad range of credit and homeownership counseling agencies, housing authorities, neighborhood organizations and community development organizations in developing programs on personal financial management and education programs on predatory lending practices. This work resulted in the introduction of the new “Don’t Borrow Trouble” and “Credit Smart” initiatives, and an expansion of the popular “Credit When Credit is Due” and “Borrow Wise” programs.
During fiscal year 2006, the Office also increased focus on financial literacy programs targeted to young people and was involved in the formation of the “CT Jump$tart for Youth Financial Literacy” coalition, a state affiliate of the national “Jump $tart” coalition. The state’s second annual Youth Financial Education Conference was held in the spring of 2006 and featured workshops on personal budgeting, credit use, auto finance, and saving and investing. The conference was attended by nearly 400 high school students from throughout Connecticut.