Treasury: Pennsylvania’s Profit Center

Treasury: Pennsylvania’s Profit Center

Nick DiFrancesco (ND): Obviously you have a lot of responsibility as state treasurer, how about if you share a little bit with our members about what it is that you do. What are your responsibilities as state treasurer and how do you do your job every day?
Treasurer McCord (TM): My guess is community bankers would have a lot of empathy for the work we do and the roles we play.  Bluntly put, most voters don’t really think about their vote for treasurer. It’s a rather low-attention, but high-power office, which is very interesting to somebody like me who comes out of business and investment.

You really have three business roles in a publicly-elected office such as this. The first is that you’re a CEO of an important organization. Second is that you’re a fiscal watchdog, and then third, and arguably most importantly, you’re a Chief Investment Officer, you’re a CIO. Each role has pretty large implications and I’ve enjoyed playing each role.

First, as a Chief Executive Officer, I take very seriously whenever I affect other peoples’ lives. We have more than 400 employees. We’re down from about 500 employees as the budget has been cut the past couple of years. And we try to be humane about what’s going on there. But I’m the first elected chief executive to try and memorize everybody’s name. I visit the various divisions of Treasury on a regular basis. I talk with people about how their work connects to larger purposes, the money they’re saving, the wealth they’re helping to create. Morale seems to be up; productivity is up pretty dramatically, and that’s a lot of fun.

Another key point I’d make as a Chief Executive Officer is that we run this place as a profit center. We’re independently elected; we need to be independently measured. So the first question for me is, do we earn the money that we cost?  Treasury’s general government appropriation is down from roughly $42, $43 million when I took office in 2009 to about $33 million today. But because of the work we do, we pay for ourselves, arguably, at least four times over before we invest a nickel, each and every year, and that’s been a lot of fun. We’ve driven up productivity in the offices that help pay for all of the other operations. So all of those transactions – roughly $70 billion worth of transactions that we process every year like a bank would process for its client – if we never invested a nickel, all of those transactions would be processed not only for free, but for a profit, given the operations that we run and that I have the honor of running as a CEO.

Just the Bureau of Unclaimed Property generates roughly $100 million a year of positive cash flow. One of the reasons we were able to increase that number, going from $70 million one year to $115 million, is that I, as a former business owner, came in with some empathy for business owners. I said, “Gee, before I started running for this office, I didn’t know there was such a thing as an unclaimed property law. Maybe banks do – with their dormant accounts and safe deposit boxes people so often forget they have – but the average business owner doesn’t.”

So we set out to ramp up compliance with the law. We reached out to employers across the state, conducted webinars, worked with professional development associations, to make sure businesses and other organizations knew they had to report unclaimed property. If you’re a taxpayer, you want everybody to be carrying whatever share of the burden there is, and the beauty of unclaimed property is that it’s revenue that doesn’t flow from taxes and doesn’t flow from debt. So you don’t get any of the normal market inefficiencies that could flow from revenue collection. So we really have a lot of fun with that particular bureau because you either win or you win once you’ve collected the money.  You either get to act like an Eagle Scout and say, “Ma’am you forgot your purse,” and you return money, or – if we cannot locate the rightful owner – it becomes revenue to the General Fund, and it helps to support the Commonwealth, which lowers the cost of government for everyone. We’ve worked extra hard to return money to working families. We find areas of need. Like last summer, after those historic floods, we found people owned unclaimed property in the hardest hit counties, and we returned nearly $400,000. We’ve also worked hard to find money that’s owed back to first responder organizations, volunteer fire companies and other organizations that maybe were stressed by budget cuts or natural disasters. The Unclaimed Property Program has proven to be one way we’re able to get just-in-time revenues to a lot of community leaders.

So, as I said earlier, we pay for ourselves several times over just out of our Bureau of Unclaimed Property. We also save taxpayers a tremendous amount through our Bureau of Fiscal Review. One of the things you want to have when you have tens of millions of transactions being processed is an independent entity that’s on the hook for finding redundant or erroneous payments. That’s what we do. Our fiscal review team typically identifies and stops between $30 million and $40 million in improper payments each year before they go out the door. So Treasury’s paying for itself that way, as well. And that’s before we’ve just provided this fundamental service of processing all of these transactions very efficiently.

So as a CEO, not only am I proud of the work we’ve done, but I’m also proud of the way Treasury’s employees have conducted themselves in these trying times. You’ll remember back in 2009 – when the state’s budget took more than 100 days beyond the June 30th deadline to finalize – many community groups and organizations had to wait for state payments. Our team – once the budget was passed – came in, worked through the weekend, worked through a state holiday to process priority payments very rapidly during the depths of the recession, or just as we were coming out of the recession.

So I love being a CEO who gets to work with such committed people. It’s been fun to have people say, “Gee, I worked in this office for 21 years and I never met an elected treasurer before, let alone had him or her remember my name and ask me questions and know and understand what my specific role was.” So as somebody who’s led businesses, I get a kick out of that.

Read the full interview in December’s issue of Transactions Magazine.  Aren’t a subscriber?  Visit the Transactions page on this website or call PACB at 717-231-7447 to start receiving the magazine.