As the Coconino County Treasurer, it is my most solemn duty to safeguard our public funds and advocate for the taxpayers of our county. In doing that, my colleagues and I must consider a wide variety of risks associated with our investments. The reason to examine and act upon these risks which can range from supply chain disruptions, corporate fraud, and to a failure to plan is simple: We are working on behalf of our taxpayers and retirees to ensure we see returns on the money they have entrusted with us over the long-term.
Unfortunately, this crucial, long-understood investment practice has become deeply politicized over the last couple of years. Across the country, states including Arizona have seen a wave of legislation designed to prevent treasurers, like me, and other financial officers from incorporating proper risk analysis management into our decision-making processes. Already,
states are finding these policies to be evidently more costly to taxpayers and beneficiaries. Texas, for example, has seen an estimated loss of $668 million in economic activity and $37.1 million in reduced tax revenue. A law in Oklahoma has cost the state $184 million, according to a study conducted by University of Central Oklahoma. So far, Arizona has not faced these consequences thanks largely to Gov. Katie Hobbs, who has made the responsible decision to veto such legislation. Despite this, those seeking to politically manipulate investment decisions remain persistent. Gov. Hobbs and voters themselves may need to act once again to protect the independence and responsible management of our public funds and local governments.
The first example of said legislation is Senate Bill 1013. At first glance, the bill seems reasonable enough: it demands that all public fiduciary officials solely prioritize the financial performance of their investments. This is exactly what we do. However, as one digs into the details of the bill, they quickly realize that its goal is accomplished quite the opposite. If passed, this bill would explicitly ban us from considering several large scale social and environmental factors like climate change in investment decisions. The proposal reflects a severe misunderstanding of investment and finance. Social and environmental issues have historically affected financial impact on portfolios, operations, and supply chains regardless of political climate.
Should our beneficiaries and taxpayers really be left holding the bag when drought inevitably ravages crop yields, or when a company faces scandal over child labor? All because some politicians told us to ignore those very real risks. That is an irresponsible way of managing public money. Should Arizona lawmakers pass the bill, I strongly call on Gov. Hobbs to veto it. A second proposal HCR 2040 would have even greater ramifications for local government in Arizona. HCR 2040 is so bizarre that it is difficult to even describe. It would prohibit government officials from spending any money to plan for a wide range of issues, many of which aren’t even on the public policy radar. For example, government officials would not be allowed to advance any effort to replace animal protein with insects or to limit the number of articles of clothing any resident can buy. But here’s what makes the proposed resolution dangerous: buried between those unorthodox, uncontroversial ideas are additional prohibitions on government efforts to cut down on traffic, reduce pollution, or prepare to confront warming temperatures. While this would complicate my work by preventing fiduciary officers from getting the information we need to reduce risks to their portfolios, I’m even more alarmed by the implications stretching across governmental bodies. By my read, it would be against the law for local officials to do transportation planning. It would make it difficult for a fire district to prepare for periods of extended heat when fire danger is at its highest. Crucial parts of government would be unable to function. Unlike SB 1013, passing HCR 2040 would bypass Gov. Hobbs and go directly to voters later this year. I am writing today to inform you about its alarming implications in the hope that you will vote to defeat it. It’s striking that these two policies, supported by the same people, contradict each other in important ways.
HCR 2040 is unrealistically afraid of local government overreach that it feverishly imagines forced dietary changes or clothing confiscation in seeking to undermine the government’s ability to function. Yet SB 1013 seeks to expand government power by controlling investment decisions to prop up riskier practices. Both views are wrong-headed.
Local governments should be able to determine what’s best for their communities whether it be expanding bus systems, preventing fires, or mitigating floods. Fiduciary officers should be entrusted to assess investment options on their merits without the interference of state lawmakers. Treasurers and other financial officers across the state must urge Arizona policymakers to protect our freedom to consider all risks in investment decisions.
Sarah Benatar is the Treasurer of Coconino County, Arizona. Copyright © 2024 BridgeTower Media. All Rights Reserved.
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