WASHINGTON — The Treasury Department's new Office of State and Local Finance racheting up its focus on public sector pension systems and has hired a senior policy advisor in this area, Kent Hiteshew said Monday.
Hiteshew also discussed Treasury's efforts to help Detroit and Puerto Rico in a speech at the Council of State Governments regional conference in Baltimore.
The new advisor on pensions will be Melissa Moye, chief investment officer of the Maryland State Retirement and Pension system. She will start at Treasury in a few weeks and will "substantially strengthen our office's understanding of the critical challenges facing a system upon which approximately 23 million Americans depend upon for their retirement security," Hiteshew said in his prepared remarks.
Moye was appointed CIO of the Maryland pension system nearly four years ago, and during her tenure the pension fund grew to more than $45 billion from $35 billion, according to a state release.
"Although we will miss the excellent leadership she has provided the system's investment program over the last several years, we are thrilled with the opportunity Dr. Moye will have to apply her wealth of knowledge and experience at the national policy level," Maryland Treasurer and pension system board of trustees chair Nancy Kopp said in the release.
Hiteshew noted that "state and local government budgets remain burdened by sluggish tax-revenue growth and ongoing spending pressures from Medicaid and pension liabilities," and that growing retiree health care costs also pose a challenge for many governments.
The state and local government office, which Treasury created earlier this year, is to act as a resource for the Obama administration as it examines how to encourage retirement savings and security, Hiteshew said.
Another of the office's aims is to monitor and try to find remedies to help fiscally distressed communities. Hiteshew highlighted some of the ways that the administration has helped Detroit and Puerto Rico.
Treasury has allowed Michigan to use over $50 million of its Hardest Hit Fund allocation to remove abandoned and blighted homes in Detroit. It has also supplemented the technical assistance that other federal agencies have given to help the city. "Going forward, the administration will continue to help Detroit with job training, [information technology] infrastructure improvements and provide other help to attract new opportunities for growth and renewal," he said.
When it comes to Puerto Rico, Treasury is working with the White House to make sure that the commonwealth is taking advantage of the federal funds to which it is entitled to receive, Hiteshew said. He noted that Puerto Rico has been engaging in efforts to deal with its fiscal challenges.
"We believe any approach to Puerto Rico's financial challenges should be managed comprehensively," he said. "This includes addressing the fiscal and operational challenges at the commonwealth's public corporations in an orderly fashion while simultaneously pressing forward on the governor's economic development agenda and reforming the local tax system so it is more balanced and effective."
The state and local finance office will also monitor the municipal bond market. "Issuers have had to enhance their disclosure practices as investors increase their focus on credit fundamentals rather than relying on credit ratings or bond insurance," Hiteshew said. "The keys to a healthy municipal bond market and improved liquidity are greater pricing transparency and more timely financial disclosure."
The office will help Treasury figure out how to improve infrastructure investment. While Congress has recently passed legislation to keep the Highway Trust Fund solvent through May 2015, "more steps remain to strengthen this critical infrastructure program over the long-term," Hiteshew said. He added that the administration is interested in innovative infrastructure financing methods, such as having a permanent program similar to Build America Bonds.
Additionally, the office will look at state and local budgeting and fiscal processes, Hiteshew said. Market participants that want to discuss any matters with the office can email StateAndLocal@Treasury.gov, he said.
