Intersections: A Monthly Go-To for Reliable Facts and Analysis About California's Debt, Investments and Economy

Vol. 1, No. 5, Published September 9, 2015

Debt Issuance, Investments and Treasury Activities

Debt Issuance: $42.7 billion during January - July 2015; all state and local issuances reported as of August 24

Debt Issuance

California State and local governments issued a total of $42.7 billion in debt during the first seven months of 2015, a 25 percent increase from the same period in 2014, when $34.2 billion in debt was issued, according to data received by the California Debt and Investment Advisory Commission (CDIAC) as of August 24.3 (See Figure 9.)

The Federal Reserve has been signaling the markets for months that as employment and the U.S. economy improve, it will be willing to raise interest rates. The increase in debt issuance so far in 2015 is undoubtedly being driven, at least in part, by that awareness. Moreover, as the economy improves and people go back to work, governmental revenues tend to rise and make public-sector managers more confident to take on long-term repayment obligations.

A total of $3.8 billion in State and local debt issuance was reported for July 2015, a 58.7 percent decrease from July 2014 ($6.5 billion). (See Figure 10.)

Of the $3.8 billion issued, $ 2.3 billion was issued by local entities, while $1.5 billion was issued by the State and its agencies or related entities. (See Figure 11.)

More than $1.0 billion in taxpayer money saved from seven refinancings orchestrated by Treasurer Chiang during February - August

So far in 2015, the Treasurer has carried out seven different refinancings. In the August refinancing that was just completed, taxpayers will see more than $270 million in savings over time. The State will continue to refinance its long-term debts as long as interest rates remain favorable.

For the period from July 16 through August 15, a total of $ 5.8 billion in debt final sale reports were received by CDIAC. (See Figure 12.) These are the top five areas of volume within the reported final debt sales:

  • College, University Facility: $1.6 billion
  • K-12 School Facility: $1.3 billion
  • Multiple Capital Improvements, Public Works: $769 million
  • Redevelopment, Multiple Purposes: $483 million
  • Cash Flow, Interim Financing: $437 million

K-12 school facilities often dominate this data. However, in August the California State University System refinanced a large portion of its outstanding debt in order to reduce its interest costs. College and university facilities lead this ranking due to that transaction.

3 Issuers have 21 days from sale of the debt to report issuances. Since some data is reported late, the Treasurer's Office regularly updates monthly totals as more information becomes available.

Figure 9: Cumulative California Public Debt Issuance (In Billions)

Line chart comparing cumulative California Public Debt Issuance for 2014 and 2015.

Source: California Debt and Investment Advisory Commission

Figure 10: California Public Debt Issuance, July (In Millions)

Column chart comparing short-term debt, long-term refundings, long-term new money, and total debt for 2014 and 2015.

Source: California Debt and Investment Advisory Commission

Figure 11: State* Vs. Local Debt Issuance, July (In Millions)

Column chart comparing state vs. local debt issuance for June 2015

* State issuers include the State of California, its agencies, commissions, authorities, departments and The Student Loan Corporation.

Source: California Debt and Investment Advisory Commission

Figure 12: Total Reports of Final Sale Received

7/16/2015 Through 8/15/2015, By Purpose (In Millions)

Column chart showing total reports of final sale received, 6/16/15 through 7/15/15

Source: California Debt and Investment Advisory Commission

Read more about debt issued so far this year. See the calendar.

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Investment balance: $65.3 billion. Pooled Money Investment Account total as of July 31

The Treasurer�s Investments Division manages the State�s excess or idle cash.

The Treasurer invests taxpayer money through the Pooled Money Investment Account (PMIA). This is a commingled pool with three primary sources of funds: the State�s general fund, special funds held by State agencies, and money deposited by cities, counties and special districts in the Local Agency Investment Fund (LAIF).

As of July 31, the PMIA balance was $65.3 billion, with an average effective yield of 0.320 percent and an average life of 240 days. (See Figure 13.) In addition, the year-to-date average PMIA balance was $67.1 billion.

The Treasurer�s Office anticipates that the investment returns for the PMIA will continue to follow the market as shown in Figure 14.

Because these funds may be required on very short notice, the investment objectives for the Pooled Money Investment Account are safety, liquidity and yield, in that order of importance.

The year-to-date earnings rate for the PMIA is 0.320 percent, which reflects the prudent investing of a short-term portfolio in this unprecedented low interest rate environment of the last seven years. As the Federal Reserve begins to raise interest rates, the PMIA is positioned to follow those moves.

Figure 13: Pooled Money Investment Account Stats as of July 31, 2015

Average effective yield: 0.32 percent. Pooled Money Investment Account as of July 31

Ending Portfolio

$65.3 billion (See Figure 15 for details.)

Average Workday Investment Activity

$1.198 billion

Average Effective Yield

0.320 percent

Average Investment Life

240 days

Local Agency Investment Fund Ending Portfolio

$20.3 billion (2,477 participating agencies) (See Figure 16 for details.)

Read more about the Pooled Money Investment Account

Figure 14: Average Monthly Yield Comparison

July 2010 Through July 2015

Line chart comparing average monthly yields for PMIA, S&P GIP, and Fed Funds for June 2010 through June 2015

Source: State Treasurer's Office

Figure 15: PMIA Portfolio Composition – 7/31/15

Pie chart showing PMIA portfolio composition as of 6/30/15

Source: State Treasurer's Office

Figure 16: Local Agency Investment Fund

Participation as of 7/31/15: 2,477 Agencies

LAIF participation as of 7/31/15: 359 bonds = 15%; 53 counties = 2%; 475 cities = 19%; 1590 special districts = 64%.

Source: State Treasurer's Office

*Includes regular and trustee bond accounts.

Read more about the Local Agency Investment Fund.

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Deposits = $92.3 billion; disbursements = $96.0 billion during July

Centralized State Treasury System Activities

The Treasurer�s Centralized State Treasury System provides banking services for the overwhelming majority of State departments and agencies.

The system handles the flow of more than $2 trillion per year in cash funds.

During July, deposits totaled $92.3 billion, while disbursements totaled $96.0 billion. (See Figure 17.)

These amounts include all federal, State and local funds flowing through the Centralized Treasury System.




Figure 17: Deposits and Withdrawals By Month, July 2014-July 2015 (In Billions)

Source: State Treasurer's Office

The system also determines the amount of idle State funds available in the Pooled Money Investment Account for investment by the Treasurer�s Investment Division. (These investments were discussed in the Investments section and are reflected in Figure 15.)

During July, total new and rollover investments reached $11.6 billion. (See Figure 18.)

Figure 18: Total Investments By Month, July 2014-July 2015 (In Billions)

Source: State Treasurer's Office

Transactions processed: 6.2 million checks and other items presented by banks in July

Each day, the system also processes hundreds of thousands of State transactions -- including department checks, State Controller�s Office warrants, Women Infant Children (WIC) food instruments, Employment Development Department unemployment and disability checks - submitted by banks and other entities for payment.

During July, total items processed reached 6.2 million. (See Figure 19.)








Figure 19: Number of Items Processed, July 2014-July 2015 (In Millions)

Source: State Treasurer's Office

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