A Chat with Your State Treasurer, Retired Order of Standard Oil Employees, Sacramento, California, October 10, 1970

I A CHAT WITH YOUR STATE TREASURER BY IVY BAKER PRIEST STATE TREASURER OF CALIFORNIA PRESENTED OCT. 10, 1970, BEFORE THE RETIRED ORDER OF STANDARD OIL EMPLOYEES, SACRAMENTO, CALIF. --THANK YOU FOR THAT KIND INTRODUCTION. IT SEEMS ESPECIALLY APPROPRIATE FOR ME TO BE BACK HERE AT CAL EXPO RIGHT NOW. IF YOU WILL PARDON A PERSONAL REFERENCE, WHEN I WAS HERE IN AUGUST THE HORSES WERE RUNNING--AND NOW I IN A ¥HORSE RACEU FIND MYSELF OF ANOTHER KIND. HOWEVER, THERE ARE TWO MAIN DIFFERENCES: IT TAKES QUITE A BIT LONGER THAN JUST TWO OR THREE MINUTES TO LEARN WHO THE WINNER IS IN MY KIND OF RACE--AND THE OTHER DIFFERENCE IS THAT THERE IS NO PAYOFF FOR THE SECOND PLACE FINISHER! IN ACCEPTING YOUR INVITATION TO PARTICIPATE IN THE ANNUAL STANDARD OIL "FAMILY GETTOGETHERG EVENT, AS I UNDERSTAND THIS OCCASION IS TODAY I WAS MUCH IMPRESSED BY THE FACT THAT THERE EVEN IS SUCH AN ORGANIZATION. I DOUBT THAT MANY CORPORATIONS HAVE ACTIVE ALUMNI GROUPS SUCH AS THE RETIRED ORDER OF STANDARD OIL EMPLOYEES -- OR R 0 S E FOR SHORT • 6. THE VERY FACT THAT THIS ORGANIZATION EXISTS I IS A TRIBUTE, THINK, NOT ONLY TO YOUR FORMER EMPLOYER BUT TO YOURSELVES. IT SPEAKS WELL FOR YOUR MORALE AND FOR YOUR CONTINUING INTEREST IN A VARIETY OF ACTIVITIES WHICH YOU CAN SHARE IN THIS WAY NOW, I'D LIKE TO DISCUSS BRIEFLY TWO MATTERS OF DIRECT INTEREST TO EVERY RETIRED PERSON. THESE CONCERN THE RECENT DEVELOPMENTS IN THE FIELD OF CONSUMERISM, AND THE STATE OF OUR ECONOMY IN THE FIGHT AGAINST INFLATION: --THEN I'LL CONCLUDE BY EXPLAINING SOME OF THE ACTIVITIES OF THE STATE TREASURER'S OFFICE. FIRST, CONSUMERISM. MORE AND MORE THESE DAYS, MANUFACTURERS AND RETAILERS ARE , 7/ REALIZING THAT GIVING THE CUSTOMER HIS MONEY'S WORTH IS JUST PLAIN GOOD BUSINESS. THAT SEEMS OBVIOUS TO ALL OF US AND CERTAINLY LONG OVERDUE. HOWEVER, THERE ALWAYS HAVE BEEN SUCH POLICIES IN EFFECT AMONG MOST REPUTABLE BUSINESS /t), CONCERNS--IT'S JUST THAT LATELY THE CONSUMER MOVEMENT HAS BECOME MORE ORGANIZED, MORE EFFECTIVE AND MORE OUTSPOKEN. THE FORTUNATE RESULT HAS BEEN THAT BUSINESS AND INDUSTRY ARE OPENLY RESPONDING TO THE PRESSURE AND PUBLICITY WITH MORE ACTIONS TO IMPROVE PRODUCTS, SERVICES AND CUSTOMER RELATIONS. ANOTHER NOTICEABLE DEVELOPMENT HAS BEEN A STRENGTHENING OF GOVERNMENTAL SUPERVISION AND REGULATION FIELD. IT ALWAYS IS THE IN THIS / IRRESPONSIBLE ACTION OF A FEW IN ANY SEGMENT OF OUR SOCIETY THAT MAKES GOVERNMENT INTERVENTION THROUGH THE PASSAGE OF NEW LAWS A NECESSITY. A SPOKESMAN FOR THE U.S. CHAMBER OF COMMERCE REPORTED RECENTLY THAT CONGRESS HAS ENACTED 27 MAJOR CONSUMER LAWS AND AT LAST COUNT THERE WERE SOME 600 CONSUMER BILLS ON 153 DIFFERENT TOPICS STILL BEFORE CONGRESS. IN THE COMING YEAR, CONGRESS IS EXPECTED TO MOVE INTO SEVERAL NEW AREAS OF CONSUMER Ii / LEGISLATION AMONG THE PROBABll··KEY ISSUES ARE PRODUCT SAFETY, A CLOSE LOOK AT MEDICAL DEVICES TO CUT DOWN ON THE QUACKERY THAT CAUSES SO MUCH WASTEFUL SPENDING AND EVEN LOSS OF LIFE, A BILL TO COMPEL SUPERMARKETS I TO POST UNIT PRICES SO THAT THE SHOPPER CAN FIGURE OUT HOW TO GET THE MOST FOR HIS MONEY, AND SOME KIND OF LEGISLATION REQUIRING BETTER WARRANTIES ON SUCH THINGS AS HOUSEHOLD APPLIANCES AND AUTOMOBILES. EVERY ONE OF US IS A CONSUMER EVERY DAY OF OUR LIVES, SO ANY ACTIONS ON THE PART OF GOVERNMENT OR BUSINESS TO GIVE US MORE FOR OUR MONEY CAN ONLY BE CONSIDERED AS STEPS IN THE RIGHT DIRECTION. THEY ARE ESPECIALLY IMPORTANT FOR THOSE LIVING ON LOW FIXED INCOMES. --TURNING TO THE U.S. WHAT'S AHEAD FOR ECONOMY, THE NATION'S LARGEST BANK IN A REPORT JUST PUBLISHED FORESEES 1971 AS A YEAR OF SOMEWHAT IMPROVED BUSINESS CONDITIONS OVER THOSE OF THIS YEAR. THE BANK OF AMERICA PREDICTS THAT MODERATE PROGRESS WILL BE MADE / IN HOLDING INFLATION DOWN BUT THAT OUR NATIONAL AUTHORITIES WILL CONTINUE HAVING TO WALK A TIGH OPE BETWEEN THE TWIN PITFALLS OF BUSINESS SLUMP AND RUNAWAY INFLATION. IF IT IS ANY COMFORT THE BATTLE AGAINST INFLATION /, IS WORLD­ WIDE, NOT JUST OUR PROBLEM. BUT AS YOU WELL KNOW, ANY INCREASE AT ALL IN PRICE LEVELS ALWAYS HURTS PERSONS LIVING ON FIXED INCOMES THE HARDEST. U CERTAINLY · I DON'T KNOW WHAT THE ANSWERS ARE, NOR DO THE NATION'S TOP ECONOMISTS AGREE AMONG THEMSELVES TO ANY SIGNIFICANT EXTENT. HOWEVER, JUST SIMPLE ARITHMETIC WARNS THAT If INFLATIONICONTINUES AT THE RATE OF 4 YEAR, ALL OF INCOMES 40 T ULL 5 PERCENT A 'AVE TO HAVE 50 PERCENT MORE THAN ;;_;L, THEY ARE NOW AT THE END OF 10 YEARS JUST TO STAY EVEN. TWO PARTIAL REMEDIES TO THAT DISCOURAGING OUTLOOK COULD BE A RENEWED EFFORT TO HELD FEDERAL AND STATE AND LOCAL GOVERNMENT SPEND I NG DOWN TO r ABSOLUTE MINIMUMS, AND THE BUILDING INTO EVERY POSSIBLE PRODUCT A LONGER USEFUL LIFE SO THAT PLANNED OBSOLESENCE NO LONGER EATS AWAY AT OUR POCKETBOOKS. OUR SPENDING MONEY GOES FAST ENOUGH WITHOUT ANY ADDED THAT! INDUCEMENT LIKE --NOW LET ME TURN TO AN OVERALL LOOK AT THE PRIME FUNCTIONS OF THE STATE TREASURER'S OFFICE. IN DOING SO, HOWEVER, IT IS NECESSARY TO CLEAR UP A COMMON MISCONCEPTION OF WHAT OUR OFFICE IS NOT. FOR INSTANCE JUST THE OTHER DAY A VERY IRATE MAN CALLED ME FROM LOS ANGELES TO COMPLAIN AT GREAT LENGTH AND IN NO UNCERTAIN TERMS ABOUT HIS LATEST TAX BILL. IT TOOK ME AT LEAST FIVE MINUTES TO GET THROUGH TO HIM THAT HIS OWN COUNTY ASSESSOR'S OFFICE OR HIS COUNTY BOARD OF SUPERVISORS WAS THE PROPER PLACE TO WHICH TO DIRECT HIS REMARKS. TO SET THE RECORD STRAIGHT 7, -- ALTHOUGH PROBABLY NOBODY IN THIS AUDIENCE NEEDS IT -- THE STATE TREASURER'S OFFICE HAS NO CONNECTION ..... WITH THE STATE BUDGET OR WITH COLLECTING TAXES OR SETTING TAX RATES. THE ONLY BUDGET WITH WHICH WE ARE INVOLVED IS THE ONE FOR OUR OWN SMALL STAFF OPERATIONS. I SAY #SMALL" WHEN I MEAN A TOTAL OF LESS THAN 60 FULLTIME EMPLOYEES. CONSIDERING THAT THE STATE TREASURER'S OFFICE HANDLES A CASH FLOW EACH YEAR OF MORE THAN,82 BILLION THROUGH OUR BANKING SYSTEM, THAT'S A MIGHTY SMALL STAFF INDEED FOR SUCH A HUGE VOLUME OF MONEY. BY WAY OF COM PAR I SON, /I 82 BILL I ON IS CONSIDERABLY MORE THAN THE ENTIRE GROSS NATIONAL PRODUCT OF A COUNTRY LIKE ITALY, BASED ON 1969 FIGURES. A MOMENT AGO I USED THE PHRASE If BANK I NG SYSTEM ". PERHAPS THAT IS THE BEST TERM TO DESCRIBE WHAT OUR OFFICE DOES AS THE STATE OF CALIFORNIA'S BANK. I CONSIDER MY ROLE AS CHIEF BANKER FOR THE STATE BOTH A GREAT RESPONSIBILITY AND A GREAT HONOR. , OUR TREASURY RESPONSIBILITIES ARE BASICALLY THESE TO SAFEGUARD BILLIONS OF DOLLARS WORTH OF SECURITIES ENTRUSTED TO US, TO ACT AS THE STATE'S OFFICIAL BOND SELLER, AND TO INVEST ALL AVAILABLE FUNDS TO BEST ADVANTAGE SO THAT THEY WILL EARN THE MAXIMUM INTEREST FOR THE3$, PEOPLE OF CALIFORNIA WE HAVE ABOUT SEVEN BILLION DOLLARS WORTH OF SECURITIES UNDER OUR PROTECTION AT ANY GIVEN TIME. WE KEEP VERY LITTLE CASH ON HAND SINCE WE HAVE BETTER USES FOR THAT, AS I WILL EXPLAIN. --INCIDENTALLY YOU MAY BE o? SURPRISED TO LEARN THAT THE MEN WHO WORK IN OUR UNDERGROUND VAULT HAVE DISCOVERED A NEW USE FOR SPRAY STARCH -- THE SAME KIND YOU USE AT HOME FOR YOUR IRONING. OFTEN THE THOUSANDS OF BONDS THAT COME TO US FOR STORAGE AND PROTECTION REACH us SO WRINKLED AND DOG-EARED THAT THEY WILL NOT LIE FLASO THE VAULT EMPLOYEES JUST SPRAY THE WRINKLED BONDS WITH STARCH AND PROCEED TO IRON THEM VERY NEATLY INTO PROPER SHAPE! AS THE STATE'S OFFICIAL BOND cJ (e, I SELLER, WE MARKET GENERAL OBLIGATION BONDS TO PROVIDE THE MONEY NEEDED FOR SCHOOL BUILDINGS, NEW STATE PARKS, FARM AND HOME LOANS FOR OUR MILITARY VETERANS, FOR THE STATE WATER PROJECT, AND FOR OTHER 7. PURPOSES--ALL OF WHICH FIRST WERE APPROVED IN STATEWIDE ELECTIONS. THE VOLUME OF BOND SALES TO MEET THESE NEEDS USUALLY AVERAGE ABOUT 500 MILL I ON PER YEAR, WH I CH IS MORE THAN ANY OTHER STATE SELLS ON A SUSTAINED BASIS. . J YOU WILL RECALL THAT FOR SOME 15 MONTHS UNTIL PROPOSITION 7 WAS APPROVED LAST JUNE, WE WERE LARGELY UNABLE TO SELL OUR BONDS BECAUSE ABOVE INTEREST RATES HAD RISEN CALIFORNIA'S LEGAL LIMIT. · J'. FORTUNATELY THE VOTERS ON JUNE 2ND AUTHORIZED A MORE REALISTIC CEILING AND SO THE INTERESf TREASURER'S OFFICE HAS BEEN ABLE TO RESUME ITS NORMAL BOND-SELLING ACTIVITY. . S I NeE THEN WE HA VE SOLD 1/ 500 MILLION WORTH OF SECURITIES AT FAVORABLE RATES WELL BELOW THE NEW SEVEN PERCENT INTEREST CEILING. CONSEQUENTLY, STATE FINANCIAL SUPPORT FOR LOCAL SCHOOLS CONSTRUCTION, FOR THE STATE WATER /, PROJECT THE CAL -VET FARM AND HOME LOAN PROGRAM AND THE STATE PARK SYSTEM HAS BEEN RESUMED. LET ME EXPLAIN --AT THIS POINT, ABOUT INTEREST RATES. OF WHAT THE STATE'S REGARDLESS LEGAL RATE CEILING MAY BE, THE ACTUAL RATE I ' I WE PAY ON A BOND ISSUE IS DETERMINED THROUGH COMPETITIVE BIDDING. JUST AS THE STOCK MARKET AND ITS INDIVIDUAL ISSUES CHANGE FROM HOUR TO HOUR, SO DOES THE BOND MARKET CHANGE FROM DAY TO DAY. THE ACTUAL RATE BID BY A SYNDICATE ON ANY GIVEN BOND ISSUE DEPENDS ON A GREAT MANY FACTORS. e THESE INCLUDE GENERAL BUSINESS CONDITIONS, THE LONG-RANGE ECONOMIC OUTLOOK, AND THE SUPPLY OF OTHER BONDS GOVERNMENT AND ON THE MARKET. CORPORAT BOTH ALREADY OUR CREDIT RATING , AS A STATE ALSO IS ONE OF THE MOST IMPORTANT FACTORS. ON A MULTI-MILLION DOLLAR ISSUE EXTENDING OVER A MATURITY PERIOD OF 30 TO 50 YEARS, A DIFFERENCE OF ONE-QUARTER OF ONE PERCENT IN THE BID RATE CAN MEAN EITHER HUGE EXTRA INTEREST COSTS OR CORRESPONDING SAVI GS • SO IT IS VITAL THAT YOUR STATE TREASURER AND THE ADMINISTRATION I I I AS A WHOLE DO EVERYTHING POSSIBLE TO MAINTAIN CALIFORNIA'S AAA CREDIT RATING. BY ACCIDENT. IT WAS NOT ACHIEVED JUST AS RAPIDLY AS THE BOND MARKET CAN ABSORB NEW ISSUES AT MINIMUM COST TO THE STATE OF CALIFORNIA, WE PLAN TO OFFER MORE OF OUR BONDS AND TO KEEP ON DOING SO UNTIL ALL THE AGENCIES WHICH DEPEND HEAVILY ON THAT TYPE OF 71 FINANCING FOR THEIR MAJOR PROGRAMS HAVE CAUGHT UP WITH THEIR NEEDS. IT CERTAINLY IS ONE OF OUR MOST SENSITIVE AND IMPORTANT TASKS TO KNOW WHEN TO GO TO MARKET, TO KNOW HOW GREAT A VOLUME IT CAN ABSORB AND WHAT THE MATURITY PERIODS SHOULD BE TO ATTRACT THE BEST BIDS. OUR STAFF MAKES A CAREER OUT OF KNOWING JUST SUCH DETAILS AND THEY DO A FINE JOB. THE THIRD MAJOR TREASURY FUNCTION I MENTIONED IS THE INVESTMENT OF TEMPORARILY IDLE STATE FUNDS. THIS IS MADE POSSIBLE BY THE FACT THAT THROUGHOUT THE YEAR, REVENUE FLOWS INTO THE TREASURY RATHER UNEVENLY, AND SO DO THE BILLS: THE RESULT IS THAT IS FOR SHORT PERIODS THERE USUALLY MORE CASH ON HAND THAN IMMEDIATELY NEEDED. OUR SKILLED INVESTMENT STAFF USES THAT BRIEFLY IDLE MONEY TO MAKE MONEY--FOR YOU AND ALL THE sr. PEOPLE OF CALI FORNIA--BY INVESTING IN SHORT-TERM FEDERAL STATE AND CALIFORNIA MUNICIPAL SECURITIES, AND IN TIME DEPOSITS IN SELECTED CALIFORNIA BANKS. SOMETIMES THESE SHORT-TERM INVESTMENTS ARE FOR AS LITTLE AS JUST ONE DAY, BUT WHEN YOU ARE DEALING IN MILLIONS OF DOLLARS, ONE DAY CAN MAKE A DIFFERENCE OF SEVERAL THOUSAND DOLLARS IN EARNING WE TRY TO KEEP THESE INVESTMENTS TURNING OVER RAPIDLY SO THAT WE RECEIVE MAXIMUM RETURN CONSISTENT WITH SAFETY. S3. EVERY PENNY'S WORTH OF INTEREST FROM OUR INVESTMENT PROGRAM REPRESENTS JUST THAT MUCH LESS IN TAXES WHICH HAVE TO BE LEVIED TO OPERATE THE STATE GOVERNMENT--SO YOU CAN SEE THAT THE TREASURy/S INVESTMENT ACTIVITIES ARE ONE PROGRAM WHICH MORE THAN PAYS ITS OWN WAY. I AM PROUD TO REPORT THAT IN THE FISCAL YEAR JUST ENDED, WE WERE ABLE TO EARN MORE THAN MILLION IN THIS WAY. flOO IN EACH YEAR SINCE I HAVE BEEN IN OFFICE THOSE INVESTMENTS HAVE SET A NEW EARNINGS RECORD, BOTH IN DOLLARS AND IN THE INTEREST RATE RECEIVED. AND WITH THAT, I THINK IT'S TIME TO REMEMBER THESE WORDS OF WISDOM FROM AN ANONYMOUS WRITER: HOH LORD FILL MY MOU1H WITH WORTHWHILE STUFF--AND NUDGE ME WHEN I'VE SAID ENOH!n THANK YOU VERY MUCH. +#