Dan Proft welcomed Mark Glennon, founder of the government-accountability website Wirepoints, for their regular weekly conversation. Glennon praised Santelli as an unusually authentic and technically sharp commentator who combined a trader’s background with genuine skepticism of central planners, and suggested, half-jokingly, that Illinois State Treasurer Michael Frerichs could use a Santelli-style outside auditor to examine the state’s investment practices.
The conversation shifted to Glennon’s latest reporting on the roughly $41 billion in public funds managed by the Illinois treasurer’s office, a pool of money Glennon said he first began writing about a decade ago when it stood closer to $10 billion. He highlighted a recent authorization directing about $300 million from that fund to an AFL-CIO trust nominally intended to finance affordable housing, which he described as effectively a benefit to organized labor rather than a targeted investment in Illinois, noting the trust’s returns run only around 2 percent annually, far below what an investor could earn simply by buying Treasury bills.
Glennon explained that the $41 billion is drawn from more than 800 separate state funds that have accumulated over decades, most of which are pooled together and invested according to limits set by the Illinois General Assembly. He said lawmakers have layered on broad social-justice mandates, including a sustainable investments law that keeps the treasurer’s office committed to environmental, social and governance investing years after much of the financial industry moved away from it, a policy he said has weighed down returns. The overall portfolio is currently generating an annualized return of about 3.7 percent, a figure Glennon said trails what could be earned in short-term Treasury securities and falls well short of the S&P 500’s roughly 13 percent compounded return over the past decade, though he stopped short of recommending the state shift the entire fund into equities.
Glennon noted the $41 billion balance is relatively stable rather than seasonal, meaning only a portion needs to be kept liquid for emergencies while the remainder could reasonably be invested for longer terms and higher returns. He pointed to other states as a comparison, noting that Wyoming manages its public funds much like a sovereign wealth fund for long-term growth, while Colorado, investing conservatively, still maintains an average investment duration of five years compared with Illinois’s roughly one year. Proft and Glennon agreed that even modest improvements in the fund’s rate of return would translate into significant savings for taxpayers, given the size of the pool involved.