Luncheon: Q&A with CA Treasurer Fiona Ma

Transcription:

James Reynolds (00:10):

Need to be back here. It's been a while since I've been at a Bond Buyer conference. I used to go to quite a few and it feels really, really good to be in the room with you today. I have to say that I'm humbled with what I'm doing over the next few minutes, having an opportunity to speak with the person that I think is one of the most dynamic leaders in the country. Treasurer Fiona Ma, when I first met the treasurer, I looked up her background and we had coffee one morning several years ago, maybe seven years ago or so, and I looked at the margins that she beats her opponents by in a race and I said, oh, you don't just beat people, you slaughter them. I mean, she really wins by great margins. So I want to just say one, thank you treasurer Ma for taking the time today for this discussion. Thank you,

Fiona Ma (01:22):

Thank you, thank you, thank you. And to my good friend Jim. He doesn't come to California and the Bond Buyer conference, so that's why I said, how would you like to do a fireside chat with me? And he's like, amazing. But I think one thing we have in common is we both play sports and super competitive, probably like most of you here in this room. But I would say the one thing that shaped maybe why I love politics is selling Girl Scout cookies. Super competitive. I always wanted to be the top cookie seller. And when you sell cookies, you have to go door to door and then you have to sell the cookies, then you have to deliver the cookies, you have to take the payment, and then you see your neighbors the rest of the year until it's cookie time again. And that's kind of how it is in a campaign. So there you go. That's the secret.

James Reynolds (02:14):

I have a sneaky suspicion that if Fiona had knocked on my door selling Girl Scout cookies, I probably would have a house full of Girl Scout cookies, right by the time she left. So let's get going. Okay. Board of supervisors, general assembly, board of equalization, state treasurer. So many people know you by your offices and maybe folks know you tangentially, but it's obvious you've got a commitment to public service just by just the offices that I've read. Can you talk to us about just what makes you tick? What makes you go that drive that love for these things?

Fiona Ma (03:03):

Yeah, so growing up, the oldest child of immigrant parents, my dad wanted us to be one of the lead professions, a lawyer, engineer, accountant, or a doctor. I'm an Accountant. My brother's an engineer, my sister's a doctor. We were just missing a lawyer in the family. So being good at math, my parents wanted me to be an accountant. There's two things in life that are for certain, right? Death and taxes. So like a dutiful, oldest daughter, I went down that path and after I graduated, I took a job here in San Francisco in the real estate tax group, but really didn't like being in the office. I'm not an office person and I don't like having a 15th of the month deadline every month. So I would always want to go out of the office. And after five years, I started my own practice and I became president of the Asian Business Association.

(04:03):

And that's where I got into the MWBE space is helping more women and minority, small businesses get more contracting opportunities. And that's really my first exposure to public service. The fact that I was a CPA, I could help clients, I did a lot of pro bono work and taxes, and I just loved helping people. And that's kind of what I still do to this day is my phone is always off the hook. People need help getting through to the franchise tax board, they need their cannabis license, whatever. And so I'm always trying to fix problems. And then now as a state treasurer doing economic development, I oversee affordable housing tax credits and bonds, hospitals, children's hospitals, all of the charter school financing, public transportation, green energy, advanced manufacturing, small businesses. I have four savings programs and I sit on CalPERS and CalSTRS, so anyone that needs or wants money should come see me. And I think that's how we got together.

James Reynolds (05:15):

That's true. That's right. It is. You mentioned one thing that I remember when I sat down with you. I'm from Chicago, and you guys may know I'm Chairman, CEO and Founder of Loop Capital, which was started in Chicago, but in Chicago there was a diversity in everything. Nothing moves in Chicago without the city council. The mayor saying, I want to know who the Hispanic firms are. The black firms are. The women businesses are. Nothing moves if you can't answer that. And so when we were sitting down having coffee several years ago, you talked to me about your goals for the state, and I shared with you, I said, things don't seem to work like that in California, certainly not at the state level. And you talked to me about the things you wanted to accomplish as treasurer, and that was one participation of minority women-owned firms. I had one of my bankers pull the data of where the state of California was with lead managers in these categories before you got there. And since you've been there and it's up over 50%, just about double where you allow women minority owned firms to run deals. Talk to me about how and why you did that.

Fiona Ma (06:50):

Yeah, so like I said before, I started in the MWBE space and then California passed Prop 2 0 9, about 1999 or 2000. And so Prop 2 0 9 says essentially the state of California government cannot discriminate or pick certain groups in the housing space contracting as well as education. And so they essentially want us to be colorblind. However, we all know that we are not a colorblind society. And so because of my background when I was on the board of supervisors, I convened an 18 month process to change all of our MWBE statutes, regulations, et cetera. And then it's always been top of mind. And instead of calling us MWBE, we call it small business, disabled business, whatever the terminology is, but it starts at the top. When Willie Brown, everybody knows Willie Brown, when he was mayor of San Francisco for eight years, he set goals, minority participation goals, women, et cetera, on all of his department heads, and he held them accountable after Prop 2 0 9, we couldn't really do that anymore. So it was just we think things aren't fair and we're going to try, but we can't actually set those goals. So that's why California is a little bit more difficult to be able to level the playing field. We're not able to keep statistics anymore the way other states do and the federal government.

James Reynolds (08:40):

But you somehow got it done.

Fiona Ma (08:43):

Well.

James Reynolds (08:44):

Okay.

Fiona Ma (08:45):

Starts at the top leadership right?

James Reynolds (08:47):

Alright. Lemme ask you this. You're the primary banker for the fifth largest economy in the world. I think sometimes it vacates between fourth and fifth depending upon what you and other countries are doing. Can you share just a few global achievements that you are particularly proud of during your tenure as treasurer?

Fiona Ma (09:11):

Okay, because we have a housing crisis and I allocate the tax credits and the bonds. Before I started back in 2018, I talked to many of the folks in this community, stakeholders and they had a whole list of things that were wrong with the regulations. I think Ben Barker's here as well, who has been doing business with the state for decades. Then the bond allocation committee and the tax credit allocation committee, my staff sits on the same floor, but they weren't talking to each other. We had two different executive directors. Regulations weren't aligned, terminology, deadlines, all of that. So I decided that we should perhaps have one executive director that oversees all of it and got a lot of pushback for that because you used to have two staff members and then now want to combine it into one but not pay them anymore because in government it doesn't really work that way unless you allocate a new position.

(10:19):

So my executive directors have really been doing two people's jobs on essentially the same salary, but they are committed to this process of more efficiency, transparency, and getting more applications out the door. This governor Gavin Newsom gave us an extra 500 million state low-income housing tax credits for the last six years, and that means they had to be coupled with the bonds. And that has made our bonds competitive for the first time in decades. But my SLAC committee, when I first started, we had three employees that have never really been in the competitive process. They could barely do an Excel spreadsheet. And I was like, what is going on? So we had to spend a lot of years trying to hire the right people. And now I think our agencies are both working in tandem, working together. We're rolling out more applications than ever before. And then the federal government gave us two rounds of disaster tax credits.

(11:25):

This is during COVID. Okay, disaster tax credits new, and if we did not roll them out, they would not give us the extra tranche. But I went to the office, I had a whole bunch of people that came in every day and we did not miss a deadline. We got it out thanks to Mike Thompson, Congressman Thompson, and because we were able to roll it out quickly, Congressman Jimmy Panetta gave us another round of federal tax credits to rebuild in those fire devastated areas. So I think my team now is a weld oil machine, affordable housing, clearly I'm a real estate tax accountant. Housing is a priority here. And finally, I believe that our agencies are part of the solution. When you get your application to our office, we want to allocate, we don't want to ding you for not checking a box or not receiving a fax page back then.

(12:26):

And we have bent over backwards for supplementals, for extending deadlines, anything to keep this process moving. So affordable housing clearly. Then I have four savings programs, one for retirement, one for education scholarship, 5 2 9, one for people with disabilities and another one for youth that have lost their parent or guardian due to covid and or longtime foster youth. And my parents started saving for me and my brother and sister since we were born and we did not have student loan debt. We had extra money to either pay for a higher education, start a business or buy a house. And so I decided to buy a two unit building, which we all know builds equity. And I think my savings programs are something that I am pushing all the time, and especially financial literacy, because kids these days, we don't have a mandatory course right now, but we will starting next year. And when young people go to college and they're offered a free credit card, it's not free. Someone needs to pay it back, and then if they don't want to tell their parents and they take another credit card to pay back that credit card and it just keeps getting worse. That was my sister, so that's why,

James Reynolds (13:49):

That was me too. To be honest with you, I can't say,

Fiona Ma (13:52):

See, that's why I'm doubling down on financial literacy.

James Reynolds (13:55):

I remember back when I was a freshman in college for some of the old timers in here like me, you'd get these gas station cards in the mail, credit cards, mobile shell, and I had a car as a freshman and I got these credit cards and I couldn't understand why they sent them to me. I didn't even have a job. And I said, boy, I can get gas with these cards, and I would just go get gas and fill up my car and son of a gun. I actually had to pay it back and that's when the problem started. So yeah, I could see. Well, let's kind of stay on that theme for just a second. I think you were hitting on cow kids Hope Cow Able, cow savers. Are you, and those are very important programs, and I know there's so many things that the people that you want to reach with these programs sort of get distracted. Are you able to get the word out you want to and promote them like you want to? And what's the progress of them from your barometer?

Fiona Ma (14:58):

Well, each one is a little different. So scholarship 5 2 9, which is the one most people are probably the most familiar with, it's a voluntary program and it's usually for folks who are working class who have financial advisors and they set them up in these savings plans. Then the governor and legislature gave us 2 billion for free money for any first through 12th grader on free and reduced lunch. They could get $500 if they are a foster youth, another 500. And if they are homeless, another 500, this is free money, but people don't trust free money from the government anymore. So they're like, what's the catch? You're giving me free money? Then we send them letters and they think it's a scam, so then they throw that letter away. So that has been the hardest program because we have over 2 million young people that qualify, and I think we've only signed up, I don't know, 300,000 just because there's so many programs at the schools.

(16:08):

So the principals, superintendents are kind of busy. Maybe it's mentioned in a newsletter, but then it's forgotten. And so that is a tough thing to do is give out free money to families that are low income. Cal Savers is our retirement savings plan. If you're not offered a retirement plan at your workplace and you hire one or more employee, you must sign up with our Cal Savers program. And again, when there is no stick people, some people do it, some people don't. And then as soon as you have an enforcement mechanism and you are assessing fees and penalties, then people start paying attention. And then the last one is our Hope program for kids who lost a parent or guardian due to covid or those in long longtime foster youth, they will be eligible for $4,000. So that's going to be our next challenge is to convince these young people, Hey, this is free money for you. So the target audience is just very, very different and getting the word out that it's either good for you, they may or may not want to do it, but when they have to pay a penalty, then they start to do it. Right.

James Reynolds (17:27):

Got it. Madam treasurer, I think I would probably get slapped in the head given this audience of public finance professionals, if I didn't throw in a couple of bond oriented questions. Is that about right folks? Okay, I see a lot of nods. So here we go. The state has a lot of bonds on the November ballot, including 10 billion for climate purposes and 10 billion for education. You want to share your views on some of these authorizations, what you think.

Fiona Ma (18:01):

Yeah, obviously it's about capacity. How much capacity should the state of California take on given our budget now, our office, my deputy John Sheldon is here. We do give an estimate to the governor in terms of how much debt we think new debt we should be taking on, and that gives him the impetus on whether to sign certain bond bills, getting to his desk or not. Now these are initiatives on the state ballot, so it's a little different. Either they get signatures, the mandatory signatures or two thirds of the legislature and the governor have to sign off. So on these two bonds they did the legislature. So one is for school bonds and the other one is for climate bonds. Sometimes the treasurer doesn't take positions because we have to issue the bonds, but I also feel I am also a voter and a constituent, and I do care about these. So I am supporting both of those bonds on the November ballot just because the infrastructure needs are so great and our general fund just is never going to be able to pay for it, and therefore, are we going to pay for these large projects bonds?

James Reynolds (19:30):

And the interest rate environment is attractive for doing so. I think you won't get a lot of pushback from this room if you issue more bonds. So, okay. I just want to ask another bond oriented question, proposition five, which would lower the threshold for local geo bonds to 55% similar to the hurdle on school districts. Do you think prop five will pass?

Fiona Ma (19:57):

Yes, we are a very democratic leaning state. We have over two thirds of the legislature that are Democrats. All eight statewide elected officials are Democrats. I do believe that prop five will pass. Okay.

James Reynolds (20:16):

Lemme ask you another global question and a state like this in an election year like this, with the diversity of this state, I mean this state is different than just about every other state in the US. When you just kind of look over the landscape of California, particularly from the lens that you have, which is probably one of the best lenses of anyone, given your background and how much you've been involved in shaping policies from the local level up to the state level, just thinking about it, what do you see going forward are the greatest challenges and opportunities for California over the next few years?

Fiona Ma (21:04):

Okay. Well, clearly the budget is a challenge. We had two amazing years during covid. The first year was a 46 billion surplus. The next year was about a 96 billion surplus historic surpluses. Then the year after COVID, we faced a 46 billion deficit. We're doing a little bit better than expectations, but we're going to still have a deficit for the next couple of years. So that's one of the biggest challenges. Second is insurance. We have had lots of fires and floods, and we didn't raise the insurance rates. So many of the insurance companies left the state or are not writing new policies. So until we get that back in order, can't buy or sell anything without insurance these days. And for bankers, some of the bankers require certain insurance if you're going to continue to have their loan. So insurance I think is another major challenge. Opportunities. People want to come to California for the most diverse state.

(22:19):

We speak 78 languages. This is the land of opportunity of the American dream, and you can achieve the American dream here. So lots of investors want to come. The problem is where do they go? Because not all cities and counties are the same here in California. I would say right now the best county to do business in is San Bernardino County. They are growing Bright Line West is coming, the Barstow inner gateway is international gateway is coming to Barstow. They all pretty much get along. They're not all suing each other, not a lot of NIMBYs. And I would say that area is definitely growing. So that's kind of my job, is to be a matchmaker. When people want to come here, they want to open up a manufacturing site, they want to expand. I try to keep them here instead of encouraging them. They always want to move to another state. And I always say cheaper is not always better. You can move to a cheaper state in terms of income taxes, but are your employees going to go with you? Young people don't necessarily want to move to Texas or Florida. They want to stay here. So that's kind of my job is to encourage everyone to stay here, pay a little bit more in a weather tax, and hopefully we can help you be successful in terms of where you're going to locate your office or your manufacturing or your warehouse here.

James Reynolds (24:00):

So here's my question. One of the last ones, and for some of you, they've asked the treasurer and I to speak for about 30 minutes or so, and we'll save some time for some Q&A. So think about questions while you have madam treasurer here. You got her. And as you can tell, she's a straight shooter. But just looking at the lens you've had now when you finish up this term, it'll be eight years from the lens of a fiscal steward, a fiscal agent, a finance professional as treasurer of the state. Now you're talking about lieutenant governor with an entirely different perspective on the state and areas of responsibility and influence. It would feel like given all the things that you have done leading up to treasurer, you're consistently up to the task even though they're different things. Just talk to us a little bit about how you view the Lieutenant Governor's job should you win it and kind, what are some of the key things you want to accomplish in that role?

Fiona Ma (25:21):

So the Lieutenant Governor sits on the UC, CSU Community College boards, the Coastal Commission, state lands and chairs, the California Economic Development Council. This governor Gavin Newsom delegated pretty much most of the international affairs to the Lieutenant Governor Eleni Kounalakis. And so I've been doing a little bit more in terms of meeting with different delegations, especially those that want to come here to California. Today was Portugal a couple weeks ago. It was Latvia. And so it's great to kind be in the mix of other countries who want to come to California because they see all of these opportunities. I lost track of your question again.

James Reynolds (26:14):

Yeah, as, oh

Fiona Ma (26:15):

Yeah, Lieutenant Governor,

James Reynolds (26:16):

Lieutenant governor. How are you going to approach this role?

Fiona Ma (26:19):

Yeah, so education is important to me and so many others. So I look forward to trying to figure out how to keep the university's higher education systems in good financial shape. So the UC system, we have endowments. We have an amazing manager that manages all of the funds. They're able to enter into public private partnerships, so they're able to invest and also get the benefits from that. And then the community colleges are under Prop 98, so they also get funded. And California's general fund is 50% goes to K through 14 education. So the community colleges are doing okay. They used to be commuter schools, now they are turning into specialty institutions. And many people want to go to learn about AI or autonomous vehicles or cybersecurity, and they're having to travel, but there's nowhere to live on these community college sites. So we're going to embark on building more housing and faculty housing, student housing, and faculty housing on community college sites, I think is the prime area. And then the CSUs are kind of squeezed in the middle. They don't have big endowments. They're not able really to enter into these public private partnerships. They don't have fancy sports teams. And so how do we keep the CSU system viable and desirable is I think going to be one of my priorities. I like to fight for the underdog. That's kind of my thing.

James Reynolds (28:11):

That's true. I think that's why your friend of mine, Jim's underdog and she likes, I want to ask you just one more, just hearing you answer that question made me think about this before we go to the audience. I've just come back from Tokyo with our governor, JB Pritzker. It's my second time with him. I've gone there with our mayors, Lori Lightfoot in Chicago. I went with Mayor Daley, I went with Rom Emanuel. And in Illinois, we kind of understand most of the world views the United States from the coasts, west coast, east coast, and they forget about us in the middle. And so we really fight hard for international companies to buy businesses in the state, open offices in our state. I know a couple times that I've reached out to you on the phone. You're like, Jim, I'm in Asia. Or Jim, I'm in Korea. Or Jim, I'm someplace. Reaching out to the global part of the world has been important to you. How as Lieutenant Governors, I know usually a governor does that. How are you going to be reaching out to a lot of the world to have them come to California? How's that going to be a priority with you, and how are you going to prioritize that activity?

Fiona Ma (29:38):

Well, we're kind of lucky. Eventually the delegations want to come to California.

James Reynolds (29:44):

They do. We have to work harder in Illinois, I got to tell you.

Fiona Ma (29:46):

For Disneyland or Napa or just to come to California. So they'll usually either come first or last, and then they will go to Las Vegas and they may go to Washington DC and New York, but maybe we need to put Illinois on there.

James Reynolds (30:05):

You didn't say Chicago, did you? We'll go on that.

Fiona Ma (30:10):

If I know some of the things that you're all working on, then I can maybe refer people out to Chicago.

James Reynolds (30:16):

We'll have a sidebar on that, then we'll do that.

Fiona Ma (30:18):

Yeah, and that's what I think. I mean, I'm close with your treasurer, Michael Ferric, and when there's questions or best practices of what other states are doing or how you are attracting certain businesses, redevelopment efforts, that's when we can collaborate and either learn from each other or say, if you don't want to be here in California, maybe you should go to Illinois or Chicago. Right? Because you're all getting into this specialty or because we want people to stay in the United States. That's ultimately.

James Reynolds (30:51):

That's right. Okay. I think we have spoken for that amount of time. We'd like to open it up for those in the audience that might have a question for the treasurer. So I think there's microphone set up, so if anybody would like to feel free to, I don't think I've ever seen shy public finance bankers with not want to ask questions to someone that, okay, there we go. I think that's a Chicago woman back there.

Audience Member 1 (31:25):

Chicago one.

James Reynolds (31:26):

That's Coolidge.

Audience Member 1 (31:28):

Hello treasurer. Thank you for being here as the new head of public finance at Oppenheimer looking to get your thoughts around, we're not a minority firm, but we do have great diversity in our ranks. Is that something that you also consider from your banking teams?

Fiona Ma (31:47):

I think we consider everything as a whole because you all are super competitive, and we only have finite resources in terms of when we are underwriting bonds. And so if it gets to a tiebreaker, then we start going down the list. Have you bid on our competitive sales, for example, how many employees do you have in the state of California? So then that may be the tiebreaker, but for the most part, we work with all of your companies every single day. And the more touch points that you have with our office, keep us up to date on what's going on. Come in with good ideas, show us what you want to show us that differentiates yourself amongst the other ones. That always helps.

James Reynolds (32:45):

Well, the audience may be cogitating a question. I can't let you go without asking you this. We have an election coming up and the candidates couldn't be more different and the stakes couldn't be much higher. And I know you're particularly close to one candidate from here. Talk to me about how you're seeing things from your perspective.

Fiona Ma (33:13):

So California, we're like the ATM state. People come and take money from us, but we don't determine the outcome for the presidential elections. And so we are very nervous out here. We don't know what is going on in these states. It used to be five states, could be the swing state. Last night I heard, oh, it's probably going to be Pennsylvania and we're going to wait two and a half, three days until Pennsylvania counts all its votes. So I don't know what is going on, but clearly the whole world is watching what happens in the United States because we have been such a big ally to so many nations and countries. We're the first largest economic power. So everybody is concerned, more concerned, I think, than some of us here in California. I was asked on a panel in Latvia like, well, what's going to happen if someone gets elected?

(34:17):

And I said, well, I mean we're in California. We're so far from Washington DC that we're going to do what we do. We're the fifth largest economy. We're going to figure it out. And if we have to fight the federal government, we will fight. When someone got elected, he wanted to take all of our high-speed rail money away. It was about a billion dollars that was allocated in a prior administration. So we had to go to court and sue and we won. So that money is still going to go to that project. So that's what I would say. Even though we are one of 50 states, we still act like our own nation state in a sense. And so please come to California, look to us for leadership. We are open for business and regardless of what happens, we are going to continue to maintain our ranking in the world economy.

James Reynolds (35:15):

Well, I think one of the beauties of whatever happens is the states are states and states don't necessarily have to be under the full dictatorship of the federal government. So we have our states' rights. Exactly. Well, that's it for us. Madam treasurer, our time is up. Can we give madam treasurer?