Members of the Joint Finance-Appropriations Committee were dismayed by state Treasurer Ron Crane’s explanations this morning of a scathing state audit that found his office’s investment decisions cost state taxpayers more than $10 million, with more to come. “I don’t think I got an explanation from the treasurer,” JFAC Co-Chair Dean Cameron, R-Rupert, said afterward. “I don’t fault him for making the decision at the time and purchasing mortgage-backed securities,” though Cameron said some might. “Where I have heartburn is the transfer of the mortgage-backed securities at face value.”
“From all we can tell, that was an intentional strategy in order to minimize the risk and hold the rating up on the LPIG fund,” Cameron said. “Unfortunately, then the idle pool fund gets to bear the brunt of these investments. He knew at that time that those investments had degraded, and their performance was poor. I had hoped that there was some logical reason that he decided to make the transfer, and there may be, but I haven’t heard it yet.”
Transferring the funds from one pool to the other at face value, rather than market value, caused the loss, according to the audit. “Are there appropriate safeguards that could be put in place to protect the taxpayer, to prevent these kinds of decisions in the future?” Cameron asked. “It calls into question … one person overriding protocol.” Even with changes Crane said he’s made in his office, Cameron said, “If one person can override the decision of many, that’s still a problem.”
Sen. Shawn Keough, R-Sandpoint, JFAC vice-chair, said, “I found the audit disturbing.” She said she believes the Legislature needs to look into an oversight board for state investments under the treasurer’s office, similar to the Endowment Fund Investment Board that oversees investment of the state’s endowment funds. “I think that would be beneficial to whoever is in the office as treasurer,” Keough said.
Crane refused to answer questions from reporters as he left the budget hearing, saying questions should be submitted in writing.