One year in office under his belt, State Treasurer Michael W. Frerichs says he loves his job – despite a prolonged stalemate over the state budget that has many Illinoisans worried about the state's economic viability.
As the state's chief investment officer, Frerichs has no formal role in resolving the budget standoff. His office manages $25 billion and invests money on behalf of the state and local governments. It also administers programs Frerichs said give Illinoisans methods for investing in themselves and their families.
“I think we're making a big difference in people's lives, and it's very rewarding to come in every day,” he said.
Frerichs visited media outlets in Alton and other Metro East towns Wednesday to let Illinoisans know about changes to existing programs and new initiatives.
The treasurer manages two college savings programs: Bright Start and Bright Directions. Both are tax-free as long as withdrawals pay for higher education expenses.
In November, the treasurer's renegotiation of the Bright Directions contract eliminated set-up and quarterly maintenance fees and reduced management fees 43 percent.
“That means more money families are saving is actually going toward their kids' college education than going to some banker's back pockets,” Frerichs said.
Both plans passed 400,000 active accounts this year, and Frerichs wants to see that number grow.
“We have other changes we're going to make to try to increase the number of families that are saving for their kids' college education,” he says.
In a time when agencies are downgrading the state's credit ratings, Bright Directions was upgraded by Morningstar, a college savings plan ratings firm. The plan is one of the two highest-rated advisor-sold plans in the country.
Every year, the Treasurer's Office returns hundreds of millions in last paychecks, forgotten safe deposit boxes and insurance refunds through its unclaimed property division. If items aren't claimed after 10 years, they're auctioned to make room for incoming unclaimed property.
Residents can check on unclaimed property at www.illinoistreasurer.gov.
“We're sitting on a mountain of money, and it would do a lot more good in people's hands than in our vault,” Frerichs said.
Unclaimed property also can be proceeds from life insurance policies. In the last two years, through a third-party auditing process, the state has returned $195 million for beneficiaries.
Three Kemper Corp. companies sued the state to block the auditing process, claiming they're not required to provide access to their records and aren't obligated to consider death benefits as unclaimed unless the company has received proof of death or a payment request.
“It's my job to be an advocate for the consumers of the state,” Frerichs said. “We are going to fight this.”
In July, the General Assembly passed the Achieving a Better Life Experience law. Similar to the college savings plans, the law will help families of children with disabilities save money in tax-advantaged accounts without affecting federal assistance.
Once implemented, the law is expected to help 40,000 Illinois families. The accounts can pay for education, housing, transportation and health care costs.
“A lot of these parents worry about what happens (to their children) when they leave,” Frerichs said. “No one's going to look after them as well as their parents will, but if they can put something aside to give them a little comfort after they've gone, that's something that brings a lot of comfort to a lot of parents.”
The state is developing a program to let employees start retirement accounts. The requirements are that a business has at least 25 employees, has been operating in Illinois for at least two years and does not offer a retirement savings plan.
Illinois would be one of the first states to implement such a program, which Frerichs said is necessary in a nation where analysts predict one-third of retirees will rely on Social Security for 90 percent of their income.
“What that means is they will not be enjoying their golden years,” he said. “They will see a standard of living dramatically decrease. It's a problem for those Illinoisans; it's a problem for our economy.”
More robust saving for retirement also will help the state's financial condition over the long term, Frerichs said.
“This is just a way of giving people the tools to invest in themselves,” he said.
The program is expected to affect 1.2 million Illinoisans. Before it's available, the state needs to find financial managers, record-keepers and others to build the program, expected to be available in two years.
“We need to make sure we do this right,” Frerichs said.
Workers who don't want to wait can take the initiative of setting up an IRA account, he said. One idea behind the retirement program is to remove the apprehension from that process, he said.
“If it comes off of your paycheck before you see it, you don't worry about it and it's painless,” he said.
The treasurer also is updating the state's 30-year-old agricultural investment program. It provides low-interest loans to farmers for operating expenses and capital purchases, like buying equipment.
The program had fallen into disuse because of historically low interest rates and profitable years for farmers. But with commodity prices falling and changes to make loan terms more practical, Frerichs said the program may become more attractive to producers.
“Agriculture is the number one industry in the state of Illinois and we want to be supportive of it,” he said. “We feel when we invest in agriculture, not only do we get a return for the treasury … we help more people create wealth.”
Frerichs, a native of the Champaign County farming town of Gifford, said he believes his role is to point out wise investments, not just from a financial management perspective but from a human resources viewpoint as well. One way he's doing that is publicizing two parts of the budget that are going unfunded: services to help senior citizens live independently in their homes and the Monetary Award Program, which provides tuition assistance to low-income college students.
“They don't have lobbyists; they don't have lawyers to go to court to sue to get this money released,” he said of the tuition grants. “So I decided to take up their cause and travel around to shine a spotlight on some of these stories.
“I see real potential here for things I care about: college education, helping families prepare for their children's future,” he said.
“There are real things we're working on that aren't going to solve our problems tomorrow, but if we start doing the right things today … they will pay off for years to come.”