McCord's 2008 Policy Agenda

As a business professional - not a career politician - Rob McCord will bring a fresh and energetic approach to the State Treasurer's office. McCord believes the treasurer can, and should, actively help Pennsylvanians manage these traumatic economic times. He plans to use his substantial training and experience in the private sector to bring new energy and timely, tested ideas to strengthen our economy, create jobs, protect pensions, and cut waste.

Several of the proposals and programs outlined in this policy agenda can be implemented immediately. Others will require developing partnerships that will allow the treasurer to manage the Commonwealth's assets for the maximum benefit of all taxpayers. In both cases, McCord will make the treasurer's office far more than just a “checkbook” for the Commonwealth. He plans to serve as an active advocate for Pennsylvania's citizens, bringing his years of experience and his passion for evidence-oriented innovation to the job.

The paragraphs below outline McCord's top policy priorities and some ideas for how to help Pennsylvanians address their economic challenges.

Creating Jobs and Increasing Economic Security

McCord will seek investments that create Pennsylvania-based jobs in addition to providing a strong return on investment.

For example, he will work to duplicate the returns and job-creating success of various “green-collar” investments in California and North Carolina. McCord will also work with investment managers who provided innovative urban-development investments that consistently yielded returns in excess of 20% while generating jobs.

In addition, McCord will work to increase access to financial services for Pennsylvania's “unbanked” citizens ? those citizens who do not have access to traditional banks and instead pay predator loan shark and check-cashing fees. He will work to extend financial guidance and encourage personal saving and planning. The San Francisco Treasurer's initiative provides a good model for such a program.

There are also multiple non-profit programs and initiatives that have had success in this service and planning arena. Mindful of this, McCord will seek out partnerships with leaders in the nonprofit sector. For example, he would explore joint initiatives with the Pennsylvania chapters of America Saves and the Heinz Family Foundation's program designed to protect women's retirement security.

Protecting Retirement and Improving Pension Security

As treasurer, McCord will fight to ensure the safety of Pennsylvania's public pension funds. Treasurer McCord will vigorously oppose any move to transition the state to a “defined contribution” plan as opposed to the current defined benefit plan. He will also seek to ensure the stability of employer contributions and will actively address concerns that municipal plans throughout the state are fragmented and lack economies of scale.

In addition to helping ensure the security and safety of our state's public pension funds, McCord will also work to help increase investment returns while reducing risk and seek ways to shore up the retirement security of citizens who are not participating in public pensions.

Backed by years of relevant investment expertise, McCord will advocate increased investment in non-correlated alternative assets - investments that have reduced near-term liquidity but have higher returns and low correlation (or attachment) to stock and bond markets. This would help protect pensioners and taxpayers from volatility while increasing returns. (Recently, the Texas Teachers' Retirement System announced that its allocation towards alternative assets would increase to 29% from 8.5%, and the California Public Employees Retirement System has plans to double its investment in alternative assets.)
McCord will reach out to middle-aged citizens who lack retirement security and work with credit unions, community banks, and proven nonprofit initiatives to help these citizens save and invest inexpensively and profitably.
McCord will also work with labor organizations to provide timely, valuable information that would drive down fees and risk and/or drive up long-term returns, while helping maintain existing policies and commitments.
McCord will develop and offer opportunities for Pennsylvania's numerous, small municipal pension funds to voluntarily opt-in and consolidate into one or more common pools, promoting economies of scale and cost savings.

McCord will also seek to use the power of the treasurer's office to educate underserved sectors of the population on how to plan for a stable retirement. He believes there are effective ways to offer this important service and is encouraged by the success other states are experiencing in this area. For instance, Idaho and Illinois offer a wide array of financial tools to address residents' needs -- from starting a business to effective use of credit.

Improving Transparency and Cutting Waste

The Treasury Department invests more than $12 billion of Commonwealth assets and makes more than 20 million payments worth billions of dollars each year. As a result, the treasurer is literally at the center of the Commonwealth 's fiscal activities and is the custodian of an enormous repository of information related to the management and expenditure of the public's money. As treasurer, McCord will work to release more information about these key transactions.

McCord's goal is to make Pennsylvania a national leader in transparency and in providing public information about payments.

As treasurer, McCord will greatly expand on the recent development of a public, Internet-based contracts database. He will expand the database to provide easy-to-understand information about payments to vendors, consultants, and other third parties. This information will help make agency expenditures easier to track. This expansive new data resource will allow citizens themselves to raise flags about potential waste and abuse. In addition, the unprecedented level of information about state spending may itself deter questionable or illegal payments of taxpayers' dollars.
In addition, McCord will make the state treasurer's office a trusted resource for financial information for Pennsylvania's residents. The department's website will offer helpful primers on fundamental financial topics, such as obtaining a mortgage or other major loans, saving for college, sources of college loans, and planning for retirement and longterm care needs. This information will be supplemented by online calculators and other tools that can help individuals and families gain greater control over their own budgets.

Increasing Professionalism and Integrity

With years of business experience, McCord will not only aggressively increase transparency, he will also attack areas of inefficiency in the treasurer's office.

A McCord Treasury will target key vendors and request preferential, cost-cutting terms in exchange for expedited payments. The net effect will be reduced Commonwealth costs for the same goods and services, saving the taxpayers' hard-earned money.
McCord also plans to aggressively use the treasurer's pre-payment audit authority to help prevent waste and abuse before it happens. To help with this watchdog work, McCord will commission a comprehensive cost-benefit analysis of present internal review practices to ensure that valuable auditing resources are focused on the categories and line items that are most likely to contain errors and waste.
McCord will also consider producing an annual report along the lines of what is now provided by the new Treasurer of Colorado, so that citizens can more easily review the sources and uses of public resources.
As treasurer, McCord also plans to set up online auctions for a portion of state deposits. These auctions will ensure that all banks across the Commonwealth have the opportunity to participate in the state depository system. They will also create efficient marketplaces to ensure that the state is receiving the best possible interest rates. This is a best practice that a number of other states -- including Idaho, Iowa, South Carolina, and Vermont -- utilize in seeking proposals for deposits.

Investing in our Future: Alternative Energy and Conservation

As treasurer, McCord will work to facilitate investment in alternative energy and conservation technology, and he will strive to maintain Pennsylvania's leading edge in environmental technology. Pennsylvania needs look no further than California to see the benefits of this approach. During his administration, former California State Treasurer Phil Angelides launched a “Green Wave” initiative and steered more than $1 billion to innovative, profitable environmental technologies.

McCord plans to embrace projects and investments that contribute to a “triple bottom line:”
1. providing attractive investment returns,
2. creating jobs, and
3. promoting energy efficiency to reduce American dependence on foreign oil.
As treasurer, McCord will work on a bipartisan basis with the legislature and fellow pension board members - and with professional pension-fund staff and consultants - to promote an additional $100MM worth of investment by the Commonwealth's pension funds in proven "clean tech" private equity funds and/or in secure, PA-based project financing for the development of renewable energy technologies, such as solar, wind, and bio-waste recycling projects.
A McCord Treasury will work to ensure that more state investments fully and efficiently register “externalized” costs (costs born by others) and benefits, particularly as these investments relate to the environment. McCord believes that taking these often overlooked costs and benefits into consideration provides a much more accurate understanding of an investment's true value. McCord will study systems used in Florida to quantify investment risks and environmental costs when calculating the “total value” of investments.
McCord will also work to invest in firms that are transparent about their operations and practice sound corporate governance.

Protecting Hard-Working Pennsylvanians from the Credit Crisis

First, with Pennsylvania's large and valuable public pension funds, McCord will push to eliminate bad use of debt/“leverage.” He has long warned against the excessive use of debt in hedge funds.

As treasurer, McCord will fight to reverse bad fee structures that can encourage the unwise use of debt in financial instruments.
Working with investment staff and outside gatekeepers, McCord will comb through track records and work to drop funds that have taken imprudent leverage risks, and he will help deploy stricter rules regarding debt in pension portfolio products. McCord will also use his experience with compensation formulas to help negotiate “claw-backs” tied to administrative fees that often skew compensation.

In addition, McCord is committed to working with the legislature and state agencies to reduce and manage the damage done to college costs and student loan systems by the credit crisis. During these times of immense volatility, McCord believes Pennsylvanians would benefit from far more energetic marketing of the Commonwealth's stable, longterm college savings programs, like NowU.

Rob McCord believes that the treasury department's Guaranteed Savings Plan (GSP) is an invaluable complement to the investment plan for families trying to save for college. During periods of increased volatility in traditional financial markets, the GSP can offer a measure of confidence to parents that tuition increases will not outpace the value of their contributions. McCord will work with the legislature to establish additional safeguards to backstop the GSP and provide added security for mothers, fathers and grandparents saving to insure a better future for their children.

Similarly, McCord will work with the legislature to explore prudent programs that help alleviate the mortgage crisis for Pennsylvanians. As more Pennsylvanians face foreclosures and dwindling home values, the treasurer may be able to work with appropriate partners to provide secure matching capital.

Through the treasurer's role in the Pennsylvania Housing Finance Authority, McCord will explore ways to help working families with mortgage challenges. By utilizing the treasurer's relationship with depository institutions, he can promote risk-sharing pools to facilitate mortgage refinancing on affordable terms based on current home values.

This possible approach could save homes for families and enable banks to avoid the downward spiral of foreclosure, which characteristically depresses the value of nearby properties, increasing their risk of default and the continuation of the foreclosure spiral.