National Outlook 2023: Opening keynote: Common sense leadership, managing for the long term

Treasurer Goldberg will be introduced by Tim Sullivan, Managing Director, Head of New England Region and Housing Finance at UBS Wealth Management Americas. 

Transcription:

Tim Sullivan (00:09):

Good morning. Thank you! On behalf of UBS, appreciate the opportunity to be here and it is with great pleasure that I introduced our keynote speaker this morning, Massachusetts Treasurer Deborah Goldberg. Through the years I've gotten to know Treasurer Goldberg by many roles and titles. First and foremost, she's my neighbour and she began her career in public service as the chair of the select board in our hometown of Brookline Massachusetts. During her tenure, she made important progress on a wide variety of issues ranging from policy budgeting to affordable housing. Two things near and dear to my heart all well maintaining Brookline's prize, AAA rating. I also got to know Treasurer Goldberg as a colleague. During my time in Massachusetts government I had the treasurer has broad oversight over state debt detriment practices, and I remember one particular meeting in her office at the State House that stood out for me.

(00:54)

We had to discuss it somewhat thorny at the time, political public finance issue. And I remember her attacking it with absolutely no regard for the political ramifications. She was focused entirely on what's the right thing to do here, and it was incredibly refreshing. I think that's been the hallmark of administration and she has used her post to advance policies that break down barriers and create economic opportunities and empowerment for everyone. Now, as Massachusetts Treasurer, her local success has led to national recognition. She recently served as president of the Bipartisan National Association of State Treasurers and Justice past December, was honored by the Bon Buyer with the Frida Johnson Award for trailblazing. Women in public finance, shouldn't go here, but I still contend that the Massachusetts deal should have won deal of the year. It was the largest social bond I'm playing to the crowd in the room right now.

(01:43)

It was the largest social bond in Muni history and I think it exemplifies the treasurer's leadership in esg. I would note Massachusetts was also the first Muni issuer to issue a green bond. So Massachusetts has I think, significant credibility in this space. Treasurer Goldberg is a graduate of Boston University, Boston College Law School and Harvard Business School, and her husband went to Northeastern. So my Boston reference here, the Bean Pot is well covered. Coming up here it's my Boston reference for the day. Prior to her career in public service, the treasurer worked in retail operations, buying and consumer affairs at the stop and shop companies. It's a business. Her family grew from a small grocery store in the north end into a company with 50,000 employees. So she brings a depth of experience that ranges from business to local government to state and National Finance. She has built an exceptional team of the Treasurer's office and she's a national thought leader on public finance issues. So please join me in welcoming my neighbor, my former colleague, my treasurer, and our keynote speaker, Massachusetts Treasurer, Deborah Goldberg.

Deborah Goldberg (02:53):

So that kicked it off pretty well. So I'm going to share with you a little anecdote. Tim from your, Tim, you left, oh, sorry. Thank you for your introduction and you did team me up this past week. I was on a show that's usually a pretty prickly show to appear on, called On The Record, which Tim is aware of as anyone else who lives in Massachusetts. And one of the stump questions was, well, you went to BU, you went to BC and you went to Harvard. Who are you rooting for in the bean pot? And I said Northeastern, but Tim seemed to know the punchline. My husband went there, who's right here in the front? So in other words, I never lose.

Deborah Goldberg (03:43):

Well, thank you all for being here today and welcoming me so warmly. Two weeks ago I had the honor of being sworn in as the Massachusetts State Treasurer and Receiver General for a third term and am now the second longest serving treasurer of Massachusetts since a great guy named Bob Crane. Bob was in office for 27 years and being the competitive person I am, it looks like I'll need to be around for about 20 more to beat his record. It's doable. We have longevity in my family. So now I know that you are here today to look for answers of what is the national outlook for the coming year. You have economists and experts who will give you many scenarios about what may or may not happen and give you varying ideas of how to proceed, but I would like to share my own perspective.

(04:46)

As you heard, I come from a long line of practical business people, grossers as a matter of fact, and one thing I can assure you of with absolute certainty is that our national economic outlook is completely uncertain. So if you go with that and do what we do in our office, you'll find that your strategies will be successful. As I often tell pension fund managers, investment committee members and others, I evaluate the economy through the lens of a grocer, a retailer, what is selling and in what segments is it selling and where in the country is it selling or not? It is this kind of common sense approach that I have brought to the treasurer's office. I believe that no matter what your business or field is, if you build a culture and cohesiveness that fosters collaboration and resiliency, it is those qualities that allow you to think long-term and develop policies and strategies that help you ride the ups and downs.

(05:59)

I don't think like a politician when it comes to running our office, nor do I think in four year phases. Election year is just simply an added layer of work to do. From the beginning I said to our people, we are like a family just in a large organization that has different subsidiaries. Can you imagine new treasurer comes in and goes, oh, you're in a subsidiary. They had never heard that word before and I'm always thinking about what we can do to ensure our work is sustainable over time. This is the kind of thinking that came down generationally from my family. I grew up in a business where it is what I call, there was no separation of church and state. The mission was to be number one in our market region while making sure that everyone was taken care of, which meant our shareholders, our people, our customers, and our communities.

(07:06)

This business model was successful over decades adapting to changes in the marketplace and overcoming fluctuations in the economy, but the mission always remained the same. It's about people was the mantra. We had a hundred percent health insurance, not only for full-timers, but for part-timers too. Multiple generations of families working at the company at the same time, one of the first charitable foundations for a corporate entity in the country and a belief in being an engaged partner within the local communities and states in which we operated. We run our office today in this same vein, not as a political operation but with a heart and soul that I learned from my family's example. I never saw Treasury as a set of separate agencies and departments, even though at a glance we appear to be 13 desperate areas that seem to have very little to do with each other.

(08:15)

True. We have the traditional cash and debt management and unclaimed property, but what does the lottery have to do with the Pension Fund or the Alcoholic Beverages Control Commission and the Massachusetts School Building Authority, veterans benefits and Clean Water Trust? We have a common mission and everyone understands their role to help create economic stability and economic security and opportunity for every Massachusetts resident and it consistently remains the same. Our culture and common mission have created cohesion and promote success in both up and down times. We have developed sustainable processes and strategies working beyond the bounds of term limits and political ideology. We began this during our 2014 transition ensuring that the word was out that we were looking for a highly accomplished and diverse workforce, and in fact, we do have the most diverse workforce in state government by a long shot. I also understood that my human resources director would be one of my most important hires in executing my mission and culture.

(09:43)

I've always known and the studies have confirmed that organizations that have more women, more people of color, and those with disabilities are more creative, more innovative and more profitable. That is why one of our pensions proxy voting guidelines is that we do not vote for a board that doesn't have 35% women and 35% people of color, 35% women and 35% people of color, we are leading on that in the country. We believe that diversity of opinion and life experience are a greater reflection of a company's stakeholders and customers and that by voting so we will positively impact the more than 11,000 companies we invest in. I tasked our HR director and her team to work with my deputies. Two of them are here today and chief of staff to do an internal wage audit and rectify any and all salary discrepancies, also to reevaluate classifications and job descriptions, create transparent pay scales and develop team building programs.

(11:04)

We instituted 12 weeks paid parental leave for women and men for biological adopted and foster children. Flex time and after ROE was overturned paid leave for reproductive healthcare, we also began monthly celebrations of different heritages cultures and religions, which continue to this day. And on day one, we also launched the Office of Economic Empowerment run by a deputy treasurer, the first of its kind in the country, and to ensure that we could deliver its programs and tools to every age and group all over the state. We opened to 501C3 to fund them through public-private partnerships. Teamwork is one of our key success factors. We have regular deputy treasurer and department head meetings to ensure that everyone is aware of and vested in each other's challenges and success. We started an enterprise wide mentoring program and have implemented a state treasury achievement and review system that promotes goal setting, communication and feedback.

(12:22)

We have not only been fortunate to attract great talent, we have retained it a very important word today. In fact, the overwhelming majority of treasuries, top leadership, deputy treasurers and department heads started with me eight years ago, and by the way, none of them are dismissed until the end of my last term just saying that Jim McDonald, wherever you are, he's only been with the treasurer's office 47 / 48 years. We're getting close. 49 in today's world. That's pretty amazing. I share all this because I believe this is why we have been and will continue to be effective in both good and more difficult times. Our innovative leadership and disciplined management helped us get through one of the biggest challenges to date the COVID 19 pandemic. And as president of the National Association of State Treasurers at the time, I didn't get to do any of the fun trips or be given the president's suite with the great views, but I did get to be on the phone at least once a week if not more.

(13:38)

And I observed firsthand what most states were going through and had a lot to compare us to. My office pivoted immediately to remote work wherever possible, even when many, not only in our state but nationally had not even recognized the extreme of what was happening. We provided employees with the tools and resources necessary to get the job done while keeping them and their families safe. This quick action was instrumental to maintaining continuity in our workforce and ultimately to delivering results. And our strong relationship with the governor added to our capacity to be effective. It showed that despite coming from different political parties, we could have a great rapport fostered through a shared commitment to get things done for the people of Massachusetts. Our cohesiveness within treasury, along with the governor's administration and our legislative partners resulted in some terrific accomplishments. Notably, and I'm glad you mentioned the AAA bond rating in Brookline.

(14:54)

Picture being from the communist state of Brookline except for Tim, and you are starting a town meeting by telling them you do, we do nothing that hurts the AAA bond rating. Well, I brought that mantra into state government and consistently emphasize the importance of the state's stabilization fund, which wasn't in such great shape back when I arrived, which kind of astonished me, which now will, by the way reach a historic high of 8.4 billion this fiscal year. But it took a collaborative effort across party lines and branches of government to accomplish the decision to defer spending to a future rainy day. Even while it was actively raining with COVID would not have been made without collective understanding of its importance for the long term economic health and stability of our state. Again, common sense and managing for the long term in unclaimed property, which was already one of the most innovative and nimble in the country.

(16:09)

Tim, I don't know if you've checked your name lately, but we have a new list out pre covid. We had already transferred operations to the cloud. This allowed us to return property at a record pace In many cases, this was a much needed source of income to people furloughed or out of work At that time, the amazing ability of my cash management team to work literally around the clock and on short notice was an amazing help. Our strong fiscal policies and having plentiful cash on hand allowed us to secure critical personal protective equipment and machines for our medical professionals and first responders. And I'm sure everyone here in this room remembers it was basically a bidding war to get things because there was no cohesive federal attack on these issues. Our A B C C team, you might remember I mentioned I regulate alcohol. I don't drink it, I just regulate it.

(17:18)

Our A B C C team became an integral part of covid enforcement while also proposing guidelines and emergency changes in the law to support local government, local restaurants and businesses while simultaneously ensuring public safety. And the office of economic empowerment rose to the challenge. Our in-person financial literacy programs for women, seniors, veterans service members and their families and high school students all had to be suspended at a time when there was heightened financial insecurity. Programming was moved online and geared toward addressing compelling needs as examples. We began Money Talk Tuesdays to discuss the most pressing matters people were experiencing. Literally, you would have retirees w worried that they weren't going to be getting their retirement checks. Funding for our women's empowerment series was redeployed into a grant program for women running small businesses in gateway cities to help keep them afloat. And we began an online financial education program for all state employees.

(18:39)

What had begun with two pilot programs and several public-private partnerships during my first term grew into our baby steps savings plan, the first seated savings plan for college and or vocational technical training for babies born or adopted in our state. We kicked off in January, 2020. Great timing. Yet by quickly adapting outreach and education online, we now have one of the highest uptakes in the country with almost 23,000 kids in their families saving for their future education. Perhaps one of the best examples of where talent and commitment to excellence meets creativity and collaboration is with our treasury's debt management team. They're constantly hard at work managing the state's debt portfolio. As you just heard from Tim this past year, we completed the largest bond deal in the history of the Commonwealth. Took my punchline, Tim, a 2.7 billion social bond that fully repaid the federal dollars that funded unemployment benefits during the pandemic.

(20:02)

And by the way, with respect to Kevin's comment about taxable deals, ours was a taxable deal that should have put us over the top in getting bond deal of the year. How do you like that? In retrospect, <laugh> this deal took two years of working with the legislature, the Office of Administration and Finance, the Office of Labor and Workforce Development and many outside partners. The deal was also the first unemployment insurance financing to address costs arising from Covid 19. And as you heard, it received the environmental, social and governance deal of the year from bond buyer. And despite not getting deal of the year, it was the largest social deal ever. And we thank you for that acknowledgement. We do, honestly, speaking of ESG and I know that will be a topic later today, ESG is simply a label that describes what governments and savvy successful businesses and investors have been doing all along.

(21:17)

I could jump back into the eighties and seventies common business practices that would fall in those buckets. If your state today is being bombarded by hurricanes, tornadoes, wildfires, floods, freezing cold this coming weekend or extreme heat, these have enormous costs associated with them. Not just impacting the financial stability of the state, but individuals, companies, businesses, resources, understanding that these issues are realities of the world we live in and assessing and preparing for those risks is again, common sense. I don't know why that's so political. The Treasurer's office has issued 6.7 billion of labeled E S G financing across its various credits, issuers, and the Commonwealth has demonstrated E S G leadership for other issuers in state and nationally. Like everyone. We have certainly experienced market volatility over the past year, but I am happy to report that investor demand for our bonds remain strong. It must be because we have common sense.

(22:47)

Our bond deals are just one example of our commitment to E S G Mass Prim, our pension fund whose board I chair has worked collaboratively to de-risk the portfolio with great results. The carefully design portfolio now sits at approximately 92 billion. Despite a challenging market and persistent geopolitical and economic crisis continuing to outperform its peers and its benchmark, part of its work has included an effort to more comprehensively assess risks that may not necessarily show up on a balance sheet. To make sound successful investments we must have the whole picture. PRIM is partnered with M I T Sloan School enabling the fund to be among one of the first investors in the world to utilize more reliable E S G ratings to design and implement more impactful investment programs. A newly created standing ESG committee will enhance this work tasked with creating an investment framework that will comprehensively account for these types of risks.

(24:02)

This will improve the fund's ability to deliver long-term results for beneficiaries. Not only is the fund forward thinking on these kind of risk assessments, but also takes the same kind of thoughtful analytical approach to ensuring investments with diverse managers. We presently have 9 billion with the goal of having a minimum of 20% of the fund invested with women, people of color and those with disabilities under what we call the future initiative, which is specifically designed to reduce barriers between mass prim and emerging diverse managers. We are now working with five managers of managers to select a portfolio of emerging diverse managers for our respective asset classes. So I have not covered, believe it or not, all the ways in which our approach has been effective, but I don't think you want to hear from me all the way till tomorrow. So even D E I, by the way, which has become so important in today's work was incorporated into our way of doing business from the beginning.

(25:17)

We simply didn't have the label today. My op office operates in a hybrid work environment. We bring teams together in person on a regular basis, which is allowed for creativity and collaboration while still maintaining the balance that today's workforce has come to expect. I don't have to tell you that in today's labor market, our ability to be this fo forward thinking has added to our talent retention and attracting new employees too. We strongly feel that our management approach, culture and mission are the key factors that allow us to succeed in dealing with crisis and uncertainty, which seems to be the norm that we're all living in today. So I hope that this spirit of common sense and collaboration will take root across the country, particularly as we face these uniquely challenging times as we look forward to the coming year, it would appear the conflict in the Ukraine has no clear end date, although inflation appears to be cooling and gas prices have declined to a degree. Although I remember stand, you had to be in line in the 19 1970s with the last number on your plate. See some people remember that too, to even get gasoline.

(26:52)

Many of our economic challenges persist and you'll deal with a lot of those today with a split Congress, potential spending cuts or even what is concerning to states clawbacks of unspent ARPA funds along with the debt ceiling debate. These principles of common sense and leading that way are even more relevant today. So I hope hearing about our way of doing business is informative and intriguing. And again, thank you for welcoming me. Now, was I supposed to take any questions? And by the way, I kept right to the, I got the Oscar-winning music at the Frida Award

Deborah Goldberg (27:53):

In December, so I was very cognizant of the timeframe that I had today. Any questions at all!

Audience 1 (28:10):

Good morning. Rodney Jones national Capital Resources, Boston and Philadelphia firm. What would be your management approach to the impending energy issues in New England Massachusetts being a major part of that in the rising kilowatt, the cost per kilowatt is just out of the question and rising rapidly.

Deborah Goldberg (28:31):

What would be my management approach? So you're asking me about a field I don't know all that much about, but again, I mean in my management approach to everything is to get everyone in the room and sort of sort it out in order to figure out what's the best thing for the consumer. I think that one of our challenges is that each individual local community in many cases are trying to make their own decisions about what they're going to be doing. And then there are a lot of players for-profit and nonprofit in this space. So I do think that state government who's always does have a role around this, needs to engage before things get out of control and also do so in a smooth way. I know there's a lot of talk about the aging pow power plants in Massachusetts and we've gone through eras where nuclear power was greatly feared while at the same time there are others who believe, and I've done some research now you're taking me back to when I was in law school. That's a while ago. But I did research on actually the positive aspects of nuclear power if you're staying on top of it. So for me it would be to, I study everything you heard what my baby step savings plan, I did four years of pilots, so I would study it, then I would bring who I think needs to be in the room and then we need to be thinking about what's best for the people and the businesses in Massachusetts.

(30:12)

The question was about management approach, not the answer to the problem. So thank you. Anyone else?

Audience 2 (30:26):

Johns Folio with Northern Trust. So you talked a lot about sustainability and the long term and I just wondered if you could talk about climate change a little bit more for investors in your long term bonds. What kind of key vulnerabilities do you see that the Commonwealth has and what's being done to make it more resilient, which is another word you used a lot.

Deborah Goldberg (30:46):

Well, I actually feel the Commonwealth is very, out there on working towards these goals. We just had a bill past the mass state legislature that will allow a, as a pilot, a range of communities to go completely electric. We have programs that we're moving directly into using all electric vehicles and understanding the challenges. If you have all electric vehicles, how do you charge them if you're on the highways? And so we're down to the nitty gritty. There is a climate plan that's been adopted. I know for a fact our new governor is very, very on top of this and has in put in some fabulous climate people in charge of the work for our state. They just began a week ago. So I'm feeling that the balance is hard and change takes a while. I asked my HVAC people personally, how hard is it going to be to convert my house over?

(32:01)

And they said, well, you just redid your whole system so easy. So that's the good news. And I think that Massachusetts is in a good place because we're not a state that's in climate denial. And we are well aware of the challenges that we have. We understand the rising sea levels, we understand the what was once upon a time year. Storms are about every two months. And so I think that I can speak to and what I've said even to the rating agencies is that I'm planning on being there a long time when they look at governors coming and going, you have me. And so this approach, this understanding and working collaboratively with the administrations is going to continue for as long as I can foresee. I think that's all she wrote. Unless you have one person has really a compelling question and it can't be, what do I think about Tom Brady and whether or not the Red Sox are going to improve this year. I'm a seasoned ticket holder and I'm really concerned, but Yankee fans don't take that as gospel because you never know what the Red Sox are up to. Yes. Last question.

Audience 3 (33:30):

Thank you. Good morning, man. Madam Treasurer. My name is Sunjay, sort of independent. I used to work for investment bank in Nigeria and adjustments to the us. So I wanted to find, I know you manage or you chair the board for the pension fund of the Massachusetts. I live in Boston by the way. Brookline actually.

Deborah Goldberg (33:43):

Where? What street?

Audience 3 (33:45):

24 Jamaica Road!

Deborah Goldberg (33:49):

Got, oh, I know exactly where that is. Yeah, right. One of my board members on the Massachusetts School Building Authority lives on Jamaica Road. Interesting. He lives across from a park, by the way.

Audience 3 (33:59):

Same thing. So I was going to ask the board of the pension fund board since you manage, just give us a bit more information around how the diversity of managers that you use how in terms of fund management. Thank you.

Deborah Goldberg (34:15):

So we found that given when I arrived, and we have a very diverse board. And in fact by statute there needs to be two people of color on the board, and that's out of nine. It doesn't require women. Interestingly, maybe we could get that statute change, but right now, believe me, there are a lot of them. But the Future Initiative was developed in order to break down the barriers that could institutionally exist due to needing to view a team that had experience together. So you could have very bright people who had been at prominent firms who then go off on their own and start a new fund, but because they didn't have a track record, they didn't fall into the investing pools that we were looking at. So that's why we got together with a fund with manager of managers who are mentoring and developing almost, if you look at it, it's like an incubator because I'll tell you something interesting.

(35:27)

We just approved this week a group who is a diverse firm who initially had come into the manager of managers, but they were weak in certain areas. And so the manager and of managers along with us help recommend what areas they were weak in and had them go out and hire the people they needed. And then we invested with them. Now, that process wasn't a lengthy process because we've been only working with the Future Initiative for about a year and a half. So they did the hiring and they got the money, and so that's how it works. And it's broken into several different asset classes then. So I hope you all have a really good day and that when you leave here this afternoon, you'll have absolute certainty about everything that you need to know, knowing that tomorrow, who knows? So thank you.