Lunch Keynote

Transcription: 

Deborah Goldberg (00:09):
Hi everybody. So I'm a mom first, so keep on eating. That's always a good sign. I want you to be happy and feel good, and I have to get this out of the way before I even begin. Go Red Sox, beat New York. I won't tell you what we really call the New York team. I won't say it, but it happens to be Skankies. My brother, he works sometimes in New York, so you can blame him. But anyway, thank you John and everyone here for your warm welcome. In truth, I want to warmly welcome you to my town of Boston, and it really is. If you've been here for multiple generations like my family and I, it's a small town, and yet we have big work and do lots of fabulous things. Particularly after the past year, I've often been asked how we are preparing for uncertain economic and political times: federal funding cutbacks, tariffs, market reactions, and more.

(01:17):
Not exactly sure we realized just how volatile it would be. However, our strategies always work, and the answer is this: We have always been prepared because we look towards the long term. We operate under the assumption that the one thing we know for sure is that there is always uncertainty, and if you think that way, you always plan that way. At Treasury, we have developed sustainable processes and strategies working beyond the bounds of term limits. I am the second longest-serving treasurer in the history of the Commonwealth, and the person before me actually left in what year? Jim McDonald, 1990, 1991. So that gives you an idea. I'm way ahead of the curve, and so we work beyond term limits, political ideology, or volatile markets. This afternoon I'd like to talk a little bit about the challenges we're facing, but more importantly about the strategies we're using to meet this moment.

(02:37):
At a glance, Treasury seems to be 13 disparate departments that seem to have very little to do with each other. True. We have the traditional cash and debt management and unclaimed property, but what does the lottery and the Pension fund have in common, or the Alcoholic Beverages Control Commission? In fact, if you had a beer today, we regulated it, but what do they have to do with the Massachusetts School Building Authority, Veterans' Benefits, or Clean Water Trust? What we have is a common mission, and everyone understands their role to help create economic stability, economic security, and opportunity for every Massachusetts resident, and this mission consistently stays the same. We have not wavered.

(03:37):
I believe no matter what business you're in, if you build a culture and cohesiveness that fosters collaboration and resiliency, it is those qualities that allow you to think long-term and develop policies and strategies that help you ride the ups and downs. Case in point: the stabilization fund. If you've heard me speak at all over the last 10 years or even longer—because candidly, when I became a member of what was called the Brookline Board of Selectmen, one of the first things I started talking about was the rainy day fund. As chair, I would begin every budget meeting by saying, "We do nothing that harms the rainy day fund," and that is a critical piece of success. So I had been adamant about building up our reserves to position the Commonwealth to be financially secure no matter what the future may bring.

(04:47):
When I arrived in January of 2015, candidly it was at a woefully low level of $1.2 billion. I honestly was a little surprised, and of course, even before I was sworn in, I spoke at the investor conference in December of 2014 and focused on the rainy day fund. Through collaboration with our legislature and the governor's office, the stabilization fund now sits at $8.63 billion, and I am sure that is very comforting to our debt team. I know we worked hard at that and we earned an upgrade by doing so. One of the best examples where talent and commitment to excellence meet creativity and collaboration is our debt management team. I happen to be looking at someone in the back of the room right now. They are constantly hard at work managing the state's debt portfolio. This creativity has led to an early adoption of green bonds, pioneering an investor website and conference, which I've seen many of you at, and successful bond deals, including taxable ones.

(06:12):
It's great to have an oversubscribed taxable bond deal. Like everyone, we have certainly experienced market volatility over the past year, but I am happy to report that investor demand for our bonds remains strong. The debt team works alongside the governor's office on key infrastructure initiatives like the environmental bond bill that was filed last June. This legislation, also known as the Mass Ready Act, includes nearly $3 billion in bond authorizations to strengthen infrastructure and protect Massachusetts communities against increasingly extreme weather events. The Mass Ready Act establishes a resilience revolving fund to offer low-interest loans to improve stormwater systems and reduce flood risk, while also preserving access to safe drinking water, maintaining the quality of our waterways, providing necessary habitats for wildlife, and supporting PFAS mitigation projects. Again, given what's happening at the federal level, you can see how forward-thinking this approach is. We are also looking forward to implementing the Governor's Transportation Bond bill passed in August, which will help address the critical need for repairs and upgrades to the state's infrastructure, including deteriorating roads and bridges. The bill unlocks over $1 billion in funding, which will keep our citizens safe while supporting economic vitality in our communities. Hopefully, if you have been riding around Boston, you'll feel the same as I do: it will ease traffic congestion.

(08:11):
In case it wasn't clear from all this talk of bond bills, we really value our relationships with the legislature. My debt team ensures that our partners in the legislature are up to date on the complexities of debt management by providing trainings on "Bonding 101" and maintaining an open line of communication. All of this would not be possible without my deputy treasurer and debt manager, Sue Perez. Let's give her applause now as we warm up to this evening. Her commitment to saving the Commonwealth money and getting the very best for the people of Massachusetts is why she will be inducted into the Bond Buyer Hall of Fame. I, for one, couldn't be more proud. And because she's not busy enough, Sue also runs our Clean Water Trust. The Clean Water Trust acts as an infrastructure bond bank, financing essential projects that enhance ground and surface water resources, ensure the safety of drinking water, protect public health, and help develop resilient communities in a state with aging infrastructure and rising environmental and public health challenges.

(09:43):
Access to below-market-rate financing makes a critical difference for funding improvements to water infrastructure while reducing the overall budgetary impact on communities and ratepayers. In fiscal year 2025, the Trust provided $867.1 million in financial commitments through grants or low- or 0%-interest rate loans, which support numerous projects that will bolster economic growth by supporting an estimated 5,203 construction and engineering jobs. I am particularly proud of our effective use of federal and state funding, including the Bipartisan Infrastructure Law and American Rescue Plan Act resources, which has amplified our impact. These significant investments all occurred against a backdrop of increasing fiscal and regulatory challenges at the federal level. The reintroduction of Congressionally Directed Spending, or CDS, has had a negative impact on the funding the trust receives. An additional concern is the cost of multi-year carryover projects, which take financing away from new projects. With only one year of funding remaining available through the Bipartisan Infrastructure Law, the Trust and the Massachusetts Department of Environmental Protection have had to heavily restrict the amount of new funding offered. To me, that's personally a heartbreak because I know at the end of the day we're talking about people's health. This situation is driven by increasing project costs and larger, more complex projects that are vital to public health and the environment, requiring funding across multiple years. These factors require careful capacity planning to ensure the trust can sustain its impact while balancing ongoing commitments with new needs.

(12:06):
Despite these challenges, we remain committed to leveraging federal and state resources to maximize benefits for Massachusetts communities. As we look ahead, we know we will need to explore innovative strategies to overcome funding limitations, but I have every confidence that we will do so. The trust is focused on continuing disciplined financial management practices to ensure the long-term viability and success of its mission to deliver essential cost-effective water infrastructure investments in the Commonwealth. Now to the Massachusetts Pension Reserve Investment Management, or as we like to call it, Mass PRIM. It is responsible for the management of our Pension Reserve Investment Trust. Through our superb staff and our pension fund board, which I chair, we have generated strong risk-adjusted returns, supporting the Commonwealth in meeting its pension obligations and alleviating potential taxpayer burden. When I arrived in December 2014, the fund value was $59 billion. Even though we have had several up and down markets in these 10-plus years, today our carefully designed portfolio now sits at about $115.4 billion, give or take a few dollars, despite challenging markets and persistent geopolitical and economic crises.

(13:52):
Very importantly, it continues to outperform its peers and its benchmark. PRIM is also at the forefront of sustainable investing with our first-of-its-kind Stewardship and Sustainability Committee. This approach to stewardship is forward-thinking and innovative while remaining anchored to our fiduciary duty of ensuring the long-term value of the PRIT Fund. The committee has engaged in a research-based, data-driven approach to identify stewardship priorities. These priorities, which include climate transition planning, fair pay, sustainable forestry, and transparency, are areas of high potential risk mitigation and value creation within the PRIT Fund. Despite opponents labeling this work with politically charged buzzwords, to me it's straightforward. This is simply common sense. I'm an old grocer, and grocers just seem to understand common-sense business approaches. For every successful savvy business person, this is what they always have done; to ignore what's going on around you is foolhardy.

(15:29):
Consequently, this committee and its work is a common-sense approach to investing. Not only is the fund very forward-thinking on these kind of risk assessments, but it takes the same kind of thoughtful analytical approach to ensuring increased investments with diverse managers. We presently have $15 billion, representing more than 13% of our portfolio, with a long-term goal of reaching a minimum of about 20% of the fund invested with women, people of color, and those with disabilities under what we call the FUTURE Initiative, which is specifically designed to reduce barriers between Mass PRIM and emerging diverse managers. We are now working with managers of managers to select excellent investment opportunities for our respective asset classes. This work positions PRIM as an industry leader as we continue to generate steady returns. So what are our challenges moving forward? We'd have to be here all day if I were to list them all. Let me start with what's most obvious. We are a national leader in public education, research and development, venture capital investment, and have the highest percentage of jobs in high-tech industries, all of which are direct targets of the federal administration.

(17:12):
Fact is a fact. To maintain our leadership in these industries, our governor, Maura Healey, has pulled together an initiative: the Discovery Research and Innovation for a Vibrant Economy. Good news is it's got a catchy name, DRIVE, so we can capture all that drive. I am engaged with the governor's team, industry, and government leaders to implement a strategy aiming to hold steady Massachusetts' world-renowned research and innovation economy and create thousands of new jobs. DRIVE seeks to attract private investment and preserve research jobs. With federal funding drying up for hospitals and higher education institutions, the state must step in to maintain its competitive edge. This initiative is just one example of the strong leadership here in Massachusetts that helps tackle these challenges head-on. What you see here is we don't just sit back and let things happen to us. We immediately kick in and figure out a solution.

(18:27):
Together, we are all working overtime to keep our economy stable and protect our residents. We are fortunate to have a state government that all pulls in the same direction. We strongly feel our management approach, culture, and mission are the key factors that allow us to succeed in dealing with the crisis and uncertainty which seems to be the norm. In conclusion, I want to recognize the active role that all of you as leaders in public finance, government, and investing play in continuing to innovate so we can collectively move the needle forward towards an economy that works for everyone while weathering the storm of these uniquely challenging times. We're in it together, and we will persevere. There will be a few bumps in the road, but you have my commitment because, as I informed a lot of people recently, I'm not going anywhere. I'll be here. There you go. I'm happy to answer most questions, except I really can't tell you how the series will go. I'm just praying. My dad, of blessed memory, was known as the shaman of Red Sox Nation, so I think it's fair that he called the Yankees the Skankies. Any questions? I have a bright light in my eyes, Jim, so I can't see anybody, but anybody can yell out.

(20:14):
Did I leave you breathless? Nothing, Jim, anything? Well, my husband's sitting here in the front. Michael, do you want to ask me what time dinner is? You can ask him when was the last time I cooked him dinner. Yes, thank you.

Audience Member 1 (20:49):
So I know you were a leader in the National Association of State Treasurers. Is there one issue in particular, during these volatile times, that all state treasurers are focused on, or is it just every man for himself at this point?

Deborah Goldberg (21:06):
I was very fortunate when I was there; there was still complete bipartisanship. What I've sadly seen in the last couple of years is a divide growing, which I think is really tragic because NAST was always a place—I mean, the treasurer of Indiana and I were very close friends. We even joked when she was thinking about running for Congress and I for 30 seconds thought I might want to be in Washington, but I banged my head against the wall and realized that was not the case. I get things done. It's true. I'm hoping that we are trying to keep it together. I would say that there are initiatives that we all agree with. There is a bill in Congress which would allow unclaimed property to return assets; there are small funds being held out there, $10,000 or $20,000, that we would be great at returning to people who don't realize they have these small retirement funds.

(22:21):
We've been pushing for this since 2017 or 2018, and everyone's on board that NAST should take this over, that we've got the capacity and the ability, that unclaimed property works, and that the federal government should just turn over all these assets to us. So that's one thing I can think of. We're all on board on tax-free munis. Nobody disagrees on that one, except once in a while some crazy Congress people who think that's going to generate income. We were all very nervous, obviously, that they would try to use that to fill some of the gaps in the big bill—I won't use descriptive phrases with it. I think you'll start to see evolution when everyone gets to see what the lack of Medicaid dollars does to them locally. You may start to see some movement from Red State treasurers towards thinking that maybe cutting Medicaid was not such a great idea, or at least creating insurmountable requirements to get Medicaid.

(23:33):
I remember back when the "Contract with America" was what everybody talked about and Newt Gingrich, and it felt like the world was coming to an end and people were divided. I'm hoping and waiting for the moment when people begin to realize that the cost of everything—for example, 100% on drugs that don't have generic options yet—is a major issue. There are a lot of people whose lives these drugs save, and that is not a partisan issue. As for tariffs, I think long-term people are going to catch on to what tariffs mean. As a grocer, I do know how to reduce prices in the supermarket. In fact, in 1964, my mother did it; she was president and chief operating officer of Stop & Shop. So I know about how you create a mix internally in a store and how you work margins. Grocery prices have not come down and there are all sorts of other things that I think will start to bring people back together if given the opportunity and leadership taking them there. Any other questions? Well, we're here to succeed in Massachusetts and I hope I gave you a quick portrait of how we're going about it. Thank you all for joining us, and I look forward to seeing you tonight because we're going to honor a very special person.