Source: https://opinions.attorneygeneral.delaware.gov/2013/11/26/13-ib09-112613-attorney-general-opinion-re-cash-management-policy-board/
Timestamp: 2019-04-24 14:40:12+00:00

Document:
2. Does the power and authority include decisions regarding asset allocation between short term and intermediate term investments, and decisions regarding asset allocation among fund managers?
In response to the first question, the CMPB has the sole legal authority to make investment decisions with respect to the management of Delaware’s cash portfolio, and the State Treasurer is subject to the CMPB’s directives. As to the second question, the CMPB’s authority extends to decisions regarding asset allocation between short term and intermediate term investments, as well as decisions regarding allocation among fund managers.
Based upon our review of colonial enactments, statutory and common law as it existed in 1792 (when the State Treasurer first became a constitutional office), and statutory enactments leading up to the adoption of the 1897 Delaware Constitution, we conclude that the express and inherent constitutional powers of the State Treasurer do not include the power to make investment decisions regarding State funds.
The Delaware Constitution of 1831 included several changes with respect to the State Treasurer. In this iteration of Delaware’s Constitution, the provision appointing the State Treasurer was moved to Article II, dealing with the legislative branch. In addition, the 1831 Constitution provided for the biennial (as opposed to annual) appointment of the State Treasurer.7 No other changes were made with respect to the State Treasurer or the treasury.
Though the State Treasurer, as a constitutional officer, has certain inherent constitutional duties and powers, such powers do not include the ability to make decisions with respect to the investment of the State’s $2 billion cash portfolio. That power rests solely with the General Assembly as the appropriating authority under Article VIII of the Delaware Constitution12 and has been subsequently delegated by statute to the CMPB.
Relying upon Christopher v. Sussex County and based upon our review of colonial enactments, statutory, and common law as it existed in 1792 and statutory enactments leading up to the adoption of the 1897 Delaware Constitution, we conclude that the “substance” of the State Treasurer does not include the core duty or power to determine how State funds are invested.17 Rather, the State Treasurer’s inherent constitutional powers are limited to the receipt, care, and disbursement of State funds.
In 1982, in the effort to discharge its statutory mandate, the CMPB adopted and promulgated a “Statement of Objectives and Guidelines for the Investment of State of Delaware Funds” (the “Guidelines”). Then State Treasurer Thomas Carper, with the consensus of the CMPB, retained the services of Peat, Marwick, Mitchell and Company (“Peat”) to assist in, inter alia, drafting investment policy guidelines in accordance with the CMPB’s statutory directive.31 The Guidelines have been in place since that time, with various modifications as approved by the CMPB. The Guidelines include detailed investment objectives and maturity restrictions for each “investable” account, including the State’s cash and liquidity (short-term) accounts and the State’s reserve cash (intermediate) accounts.
While the General Assembly has explicitly granted expansive authority to the CMPB as the administrative agency empowered to make investment decisions, it has simultaneously expressly limited the authority of the State Treasurer. In 1981, the General Assembly enacted Section 2716(e)(1) of Title 29, which states in relevant part that “[t]he investment of money belonging to the State shall be made by the State Treasurer in accordance with policies established by the Board and subject to the terms, conditions and other matters, including the designation of permissible investments relating to the investment of the money belonging to the State ….” Last year, the General Assembly reiterated this restriction with the insertion of the following epilogue language in the fiscal year 2013 budget bill: “[F]unds under the custody of the State Treasurer shall be invested consistent with [the CMPB] guidelines.”35 As a substantive measure enacted by the General Assembly in an appropriations bill, the epilogue language has the full force and effect of law.36 Section 2716(e)(1) and the 2013 epilogue language explicitly direct the State Treasurer to invest State funds only in accordance with the CMPB investment policies and the Guidelines.
The CMPB has the sole legal authority to make investment decisions with respect to the management of Delaware’s cash portfolio, and the State Treasurer is subject to the CMPB’s directives. Further, the CMPB’s authority extends to decisions regarding asset allocation between short term and intermediate term investments, as well as decisions regarding allocation among fund managers. That being said, nothing in this opinion or in the current law removes or reduces the State Treasurer’s constitutional or statutory mandate to supervise the day-to-day operations of the Office of the State Treasurer with regard to the receipt, care and disbursement of State funds.
1 The words “power” and “authority” are often used interchangeably in Delaware case law, see, e.g., Coyle v. Gray, 30 A. 728, 734 (Del. 1884) (“The Legislature can divest the Council of any and every power and authority it possesses.”), that said, the terms do have slightly different meanings. Generally, “power” refers to the inherent right to perform an act while “authority” means the responsibility to act conferred by statute. Stoltz v.Wilmington Trust Co., 1992 WL 127516, at *5 (Del. Ch. June 9, 1992). This opinion discusses the State Treasurer’s constitutional powers and the CMPB’s and State Treasurer’s statutory authority.
2 The State’s cash management portfolio consists of the short term and intermediate cash reserves managed by the CMPB according to CMPB Guideline Section B. 1.
3 Del. Const. of 1792, art. VIII, § 3.
5 Del. Const. of 1792, art. II, § 15.
7 Del. Const. of 1831, art. II, § 16.
8 Del. Const. of 1897, art. III § 21 (“The terms of the Office of the Attorney General, the Insurance Commissioner, the Auditor of Accounts and the State Treasurer shall be 4 years. These officers shall be chosen by the qualified electors of the State at general elections, and commissioned by the Governor.”).
9 See Del. Const. of 1897, art. II, § 24. (“The State Treasurer shall settle his or her accounts annually with the General Assembly or a joint committee thereof, which shall be appointed at every ninety legislative day session.”).
11 Del. Const. of 1897, art. VIII, § 6(a).
12 See gen. Del. Const. of 1897, art. VIII; Stiftel v. Malarkey, 384 A.2d 9, 27 (Del. 1977) (“Nowhere is legislative power clearer than in the General Assembly’s traditional power to control the purse.”).
13 Opinion of the Justices, 358 A.2d 701, 702 (Del. 1976) (stating that the duties of the State Treasurer are not constitutional).
14 Christopher v. Sussex County, 2013 WL 5517070, at *5, *16-17 (Del. Oct. 7, 2013).
17 While two courts from other jurisdictions have held that a state treasurer, as a constitutional officer, has inherent constitutional powers related to receiving, safekeeping and disbursing public funds, no court, to our knowledge, has extended those powers to include decision-making authority concerning the investment of public funds. See State ex rel. Mattson v. Kiedrowski, 391 N.W.2d 777, 782 (Minn. 1986) (“Functions relating to the receipt, care and disbursement of state monies define the treasurer position and separate it from the other executive offices of state government established in our constitution.”); People ex rel. Nelson v. West Englewood Trust & Sav. Bank, 187 N.E. 525, 531 (Ill. 1933) (“[T]he power and the duty of receiving and safely keeping the public funds . . . are inherent in [the county treasurer’s] office and in no way depend upon the authority of the General Assembly.”). Further, at least one court has expressly rejected the argument that a state treasurer has inherent constitutional power to manage state funds. See West Virginia Trust Fund, Inc. v. Bailey, 485 S.E.2d 407, 424 (W. Va. 1997) (rejecting argument that West Virginia Trust Fund Act impermissibly interfered with the state treasurer’s duty to manage the state’s pension and workers’ compensation funds).
18 See Debates of the Constitutional Convention of Delaware, 283 (1853) (reflecting the view of former Governor David Hazzard that the State Treasurer is a creature of the General Assembly and should be appointed by that body).
19 2 Del. Laws, ch. XXII, § 2.
20 2 Del. Laws, ch. XXII, § 6.
21 2 Del. Laws, ch. XXII, § 9.
22 See, e.g., 2 Del. Laws, ch. LVI, § 17 (1780); 2 Del. Laws, ch. LXXXV b., § 2 (1781); 2 Del. Laws, ch. CVII, §§ 9, 13 (1784); 2 Del. Laws, ch. CXXXVIII b., § 12 (1786).
23 5 Del. Laws, ch. CCXL.
24 6 Del. Laws, ch. CXCIX.
25 Del. Const. of 1792, art. II, § 15; Del. Const. of 1831, art. II, § 15; Del. Const. of 1897, art. VIII, § 6(a).
26 4 Del. Laws, ch. CXCVIII, § 3.
27 Stiftel v. Malarkey, 384 A.2d 9, 27 (Del. 1977).
28 By statute, the State Treasurer is the custodian of all money belonging to the State and is statutorily required to invest daily all money received, except money deposited in any pension fund of the State. 29 Del. C. § 2705(a). State money must continue to be invested until the State Treasurer requires a disbursement authorized by law. 29 Del. C. § 2705(b). There is no explicit grant of authority to the State Treasurer to make investment decisions. See 29 Del. C. § 2716(e)(1).
29 As previously noted, for several years Farmer’s Bank was the sole depository of state funds. See note 24, infra. During the mid-1970s, the Bank experienced financial difficulties, placing the State in serious financial jeopardy. 63 Del. Laws, ch. 142 § 2.
30 29 Del. C. § 2716(a) (emphasis added).
31 See State of Delaware Cash Management Policy Board Annual Report for the Fiscal Year Ended June 30, 1982 (January 6, 1983).
33 See Ross v. State, 990 A.2d 424, 428 (Del. 2010).
34 Atlantis I at 713.
35 78 Del. Laws, ch. 290, § 100.
36 Turnbull v. Fink, 668 A.2d 1370, 1378 (Del. 1995).

References: v. 
 v. 
 § 3
 § 15
 § 16
 § 21
 § 24
 § 6
 v. 
 v. 
 v. 
 v. 
 v. 
 § 2
 § 6
 § 9
 § 17
 § 2
 § 12
 § 15
 § 15
 § 6
 § 3
 v. 
 § 2705
 § 2705
 § 2716
 § 2
 § 2716
 v. 
 § 100
 v.