Report: State Investment Earnings Lagged

CLEVELAND (AP) - Investment of state government money has cost Ohio $51 million to $141 million over the past three years in missed earnings when compared to states with similar investing outlooks, a published report said Friday.

A Plain Dealer analysis found that earnings on Ohio's $6.9 billion portfolio underperformed low-risk counterparts: treasury funds of neighboring and similar-size states and Ohio's four biggest counties.

State Treasurer Joseph Deters, a Republican running for re-election, disputed comparisons to the portfolios of other states and Ohio counties as likening "apples to Chevrolets."

"It is very difficult, because all states have different liquidity needs and different investment parameters, to compare trends state to state," he said. "Even more importantly, yield's nice -- but it's not my job."

He told the newspaper that he promised voters he would safeguard their money and has spearheaded an investment policy he called "the most risk-averse in state history."

Deters could not be reached for further comment by The Associated Press early Friday before regular business hours. A message seeking comment was left at his office in Columbus.

Between fiscal years 1999 and 2001, the state account that handles tax collections and state bill payments averaged returns of 5.25 percent, based on figures provided by Deters' office.

Using the same calculation, Pennsylvania's most comparable treasury fund returned 5.50 percent; New York 5.92 percent; and Florida 5.93 percent. Indiana's and California's returns also exceeded Ohio.

Ohio State University Finance Professor G. Andrew Karolyi said looking at yield, sometimes called rate of return, was a reasonable way to gauge how things are going in general with a portfolio.

Karolyi reviewed state and county fiscal information gathered by the newspaper and said things could be going better for Ohio's portfolio.

Karolyi said Deters' decision to move Ohio's money from longer-term investments into shorter-term ones might explain the lower yields.

The decision caused Ohio to fall victim to "a huge number of interest-rate cuts" in 2000 and 2001, Karolyi said.

Deters said state investment earnings hit nearly $1.4 billion since he took office in 1999 and a record-setting $400 million last year. Because the size of the treasury is nearly always expanding, however, interest income would be expected to rise, too, the paper said.

Deters said that in consultation with financial consultants he shortened the fund's maturity in response to various concerns, including a potentially costly school funding dispute.

Cuyahoga County Treasurer Jim Rokakis, a Democrat, got a 5.7 percent return on investments from 1999 to 2001, county figures in Cleveland show.

In Columbus, Republican Franklin County Treasurer Wade Steen's portfolio averaged a 5.64 percent return between 1999 and 2001. In Dayton, Montgomery County Treasurer Hugh Quill, a Democrat, made 5.44 percent. Hamilton County Treasurer Robert Goering, a Republican, averaged 5.61 percent in Cincinnati.

(Copyright 2002 by The Associated Press. All Rights Reserved.)