TEXT BY DIANE MCCORMICK, PHOTO BY PAUL EMBERGER
Rob McCord's wife tells him he looks like an affluent businessman. As a matter of fact, he does. Guy in a suit? Check. Ornate corner office? Check. Raised by a single mom and quick to talk – in detail – about the pain suffered by ordinary families? Whoa there. Who is this guy?
He's Pennsylvania's new state treasurer, responsible for guiding state investments and paying the Commonwealth's bills. McCord has been a venture capitalist and a congressional and think-tank budget policy analyst. He understands big, fat bank accounts. He relishes reading thick reports on the origins of the mortgage crisis. And, he charged top staff with building financial literacy, especially among women. He is, in short, exactly the person you'd want overseeing or advising on $122 billion in state money, because he knows it's not his money. It's ours.
HM:You took office in January. How are you settling in?
It's great. I've been very lucky that there are a lot of smart, dedicated public servants already here. Plus, I've been able to recruit some. I come out of finance, so I have a sense of calling about serving in this particular job at this particular time. I'm blessed to be able to talk to so many smart people. I was raised by a teacher, and any time I can learn, I'm excited. To put what you're learning into practice and really help a lot of people in measurable ways is my idea of a good time.
HM: Is that sense of calling a result of taking office in a recession?
First, there's a sense of calling about the nature of the position. I love policy and politics, and I love business and finance, so treasurer really suited me. I focus on economic security issues, and people are suddenly wildly interested in economic security.
For a while, people could throw money into a 401(k) and not do anything. Now, we need activist management review. We need return on capital to make the state pension funds work, to make other investments work. For your readers who say, “I'm not a state pensioner. Why do I care?” The answer is, do you care about pressure to increase taxes or reduce services? Because in two short years, there could be a calamitous increase in the mandate for employer contributions. We have to start making up ground. That's one sense of calling.
I have a special place in my heart for hardworking people who are playing by the rules and essentially, through no fault of their own, are suffering from acute economic insecurity. I was raised by a single mom. I talked to an awful lot of single moms on the campaign circuit and want to follow through with a “women and money” series. Women are three times more likely than men to drop into poverty for the first time after age 60. They live longer, but also, there are more and more who never married. They were never paid a fair wage – less than 70 cents on the dollar. Women frequently take years out of the workforce doing arguably the most important work of our civilization -- raising great kids. And finally, women are more likely to pour their money, especially retirement savings, into other people's medical emergencies. We're all lucky that women are able to make these sacrifices, but even if they're working full-time, they're not earning as much or chasing the dollar as aggressively.
We are not only working hard to be great stewards. We also, as policy entrepreneurs, should be working to increase economic security.
HM: Is that a luxury of your job – shaping the position since nobody knows what the treasurer does?
Absolutely. You're your own boss, which I've been for all but a year and a half since I was 27. While people don't precisely define my job, they have a general sense that I'm supposed to be the most responsible person when it comes to investments. You're our chief investment officer. You process the money. You're the banker for the state. All of those things are true.
We're active on PSERS and SERS (state employee and education retirement) boards, and they lost $30 billion last year. We're having a mud wrestling match in Harrisburg over a $2.5 billion deficit. In the meantime, not many people are obsessing over that $30 billion loss. I am one of them, but it's a fairly small team. And I can understand that. People think in terms of their specific jurisdiction, and they think in time frames and deadlines. I am not as heavily involved in this year's budget. I am involved in this year's investments, and I am looking at a cliff.
HM: What should people with state pensions be thinking about and planning for right now?
I hate sounding like the three-handed economist, but the answer is certainly that it depends, which is why they need highly customized advice from people they trust. It depends on how old somebody is and how long they expect to work. How secure their job is. How much net worth and financial strength they have. How much financial strength they might have in a support group such as family members.
As a general thing, people are inclined to get too conservative. In 1974, a cover of Business Week argued that people may never buy equities again. Two years after that, the S&P had a 100 percent growth. If you're fortunate enough to put money to work now, not worrying about losses but future gains, the answer still basically comes down to diversification, diversification, diversification.
HM: When you came into office, was the Treasury Department in good shape?
For the most part, yes. But through no fault of my predecessors, we have a disastrous situation with our information technology systems. It's Fred Flintstone technology and the computer that time forgot. It's a mainframe. It's written primarily in COBOL. I'm being told that it's a $20 to $40 million dollar problem. Right now, we have zero dollars in the governor's budget for this. I will try to make the case that you will get a steep return on investment with improved efficiencies, such as exchanging faster payments for reduced bills with some of our bigger vendors. It's like underfunding in air traffic control towers. You do it long enough, it's not a matter of if. It's a matter of when planes hit the ground. The day will come – and I appreciate being quoted on this – that if we don't allocate to this boring area of information technology, then senior citizens and school districts and hospitals won't get vitally needed checks. And there will be no warning.
HM: But how do you start without some sort of disaster as a wake-up call?
We will do a combination of begging the legislature and finding some modest amount of money – a five-percent or seven-percent down payment on a three-year project. We may have to cut some things internally that may be valuable but are not as valuable on a per-dollar basis, but it's making sure the planes don't drop and the checks that people reasonably expect to receive get received.
HM: Are you rebuilding trust in government?
We've had some very trustworthy treasurers. Bob Casey is one I would hold up. People trusted Barbara Hafer. It has to do more with modernization and professionalism. I try to avoid political rhetoric and choose words and ideas that make people think. As for transparency, we're going to improve that. Just posting contracts online is a huge improvement. But guess what? Drumroll please – you have to have modern IT systems to do that. HBG
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