Almost halfway into his first term as Illinois treasurer, Michael Frerichs is fitting into his role like a glove as he moves into managing the state’s investment portfolio. The treasurer’s office has the heavy responsibility of managing about $25 billion of the state’s investments. What does this mean for Illinois residents?
The task of the treasurer’s office is not to pay bills owed by the state — that is the role of the Illinois comptroller’s office. Although both have much to do with taxpayers’ money, the treasurer’s office finds ways of smartly investing in order to receive returns, while the comptroller’s office deals with paying bills owed to agencies and state vendors.
“We’re the chief investment officer. We try to make investments for the long-term to get a good return but without any certainty, not knowing when we need to have money available and how much and what kind of funds might be rated to pay some of these bills — we couldn’t make as many long-term investments as we would like, which means we sacrificed returns,” said Frerichs. For every $1 spent to run the office, the office nets $28 for the state’s residents.
Born and raised in downstate Illinois, Frerichs hails from the small farm town of Gifford.
“My family were all farm people — dirt farmers. They didn’t own the land. When my father turned 18, his father told him, ‘Jim, we can’t support you, so you have to get a job.’ He started driving trucks — a Teamster. My mom’s family was into farming,” he said. “Neither parents went to college, none of my four grandparents went to high school. They had to drop out in 6th, 7th grade to work on the farm. It was a big thing growing up.”
But with the encouragement from his teachers, and determined to be the first from his family to attend and graduate from college, Frerichs was accepted to Yale.
“I fought with my dad. I took out a lot of student loans and paid them back over time.”
He graduated and spent two years in Taiwan where he taught English to young students. Returning home, he launched his own technology business, elected to the Champaign County Board and served as Champaign county auditor.
In 2007, as a Democratic, Frerichs was elected to the Illinois Senate, representing the 52nd District, which covers the East Central district— Champaign, Danville, Georgetown, Gifford, Rantoul, Thomasboro and Urbana.
He is all too familiar with dealing with bipartisan dealings in Springfield and says the budget stalemate is making it very difficult for state agencies across the board.
“For a year and a half, we’ve gone without a real budget in place. That’s never happened before in Illinois. This is unprecedented. There’s some people that’s come in with an ideological agenda and they’ve refused to compromise. That makes it really tough for government to work.”
Frerichs’ office has diligently worked with banks and other neighboring states to drive down interest rates for families investing in college savings for their children.
“One of my goals was the amount of fees families were paying for college education. We just think if you want to improve the state, if you want to improve people’s livelihoods, you need to give them an opportunity to better themselves, you need to set expectations to put them on that pathway to success.”
Another helpful attribute is the “cash dash” website, which gives residents easy access to check on unclaimed property and money owed to them.
Since taking over as the chief finance officer of the state, he has integrated the staff to resemble the diversity of the state. It was also important to translate this to the financial institutions Illinois worked with as well.
“They didn’t look like the rest of the state. Total assets, brokered through MWVD firms. Before I came in, it was 1.4 percent in total. A year later, we’re at 60 percent. Now how is this possible? Because we established a person whose job it was to go out to invite people to bid for our work.”
Working with certified Minority, Women, Veteran and Disabled (MWVD) firms was the challenge. After years of many being turned down for contracted work and resources provided, Frerichs’ team decided to turn this around. In fiscal year 2016, nearly 60 percent of the office’s investment assets were brokered through MWVD firms. The rise of assets brokered by these firms rose from $925 million in 2012 to close to $25 billion in 2016 —about $2 billion a month.
The Illinois treasurer’s office has made some considerable strides in its efforts to bring more resources to both businesses from hosting the first Diverse Manager’s Forum attracting businesses, to network and share information on the pension funds that exist.
“We invest in pension funds and corporate boards. We’re working with other state treasurers to put pressure on these boards. If we’re investing our pension funds in your corporation, you ought to diversify your boards. We don’t do it because it feels good, we do it because research has shown when you get people from different backgrounds with different ideas talking together on boards, you’re likely to make better financial decisions.”
For more information on the MWVD contract opportunities, college savings and the cash dash program, visit: http://www.illinoistreasurer.gov/