Posted: April 18, 2013
A CONSTITUTIONAL SHOWDOWN FLARES OVER THE STATE'S MONEY
By Celia Cohen
There was calm for 30 years over the way the state invests its money, a dearly needed calm when it began, but there is calm no more.
It is so utterly shattered that the state treasurer is being accused of acting like the Sussex County sheriff and summoning do-it-yourself constitutional powers.
Already the attorney general has been dragged into the fracas, and the General Assembly and perhaps the Supreme Court may not be far behind. In this tiny state where everybody in government knows just about everybody else, it is quite the un-Delawarean display of fractiousness.
This bad blood has arisen between Chip Flowers, the first-term Democratic treasurer, and a little-known panel called the Cash Management Policy Board, which oversees the investment of billions of dollars of the state's money.
The board has been around since the early 1980s. It was vitally needed at its inception.
Beforehand the state was required to keep all of its money in the late but unlamented Farmers Bank. When the bank imploded from mismanagement in the mid-1970s, it very nearly took the state with it, and the state spent millions and millions to keep it alive. The state was finally shed of its obligations to the bank by 1981 and free to invest elsewhere.
After such a scare, the state craved security. It conceived the Cash Management Policy Board, its membership carefully crafted with four government officers -- the treasurer as an independent elected official, the secretary of state and the finance secretary representing the governor, and the controller general representing the legislature -- and five investment professionals.
It was understood that the board's unofficial motto was "never again." It was also understood the board had an unspoken charge to keep the treasurer, whoever it was, from going rogue with the state's money.
"It's not a slush fund for the state treasurer," as Glenn Kenton, who was present at the creation as the Republican secretary of state, famously once said.
The years passed, as did the state treasurer's office from Tom Carper, a Democratic treasurer who became governor and senator, to Janet Rzewnicki, a Republican treasurer, to Jack Markell, a Democratic treasurer who became governor, to Velda Jones-Potter, a Democratic treasurer appointed to serve out Markell's term, and all was calm, all was right.
Not anymore. In no time at all after Flowers took office, he and the board regarded one another as infringing on their authority.
It has escalated and escalated, and by a meeting Wednesday morning at Buena Vista, the state conference center near New Castle, it was open season.
The friction was particularly noticeable between Flowers and two board members who have been there from the start. They are John Flynn, the board chair who is a retired management consultant and used to be the chief operating officer for Wilmington in the 1970s, and David Marvin, who used to manage DuPont's pension fund and now runs a global equity management firm.
The immediate provocation was a report from Flowers' office in February. It suggested the board was an encroachment upon his constitutional authority.
"The Board must operate within the confines of the law," the report said. "Most, if not all, of the states except Delaware have eliminated boards similar to the Board as a violation of the constitutional powers of a state treasurer."
It was too much for Marvin. He defended the board's body of work in an analysis he called "Reflections," and soon the discussion got hot. Some selected exchanges:
"You have a treasurer who is a constitutional officer," Flowers said.
"That's the argument of the Sussex County sheriff. We're all constitutional officers," said Jeff Bullock, the Democratic secretary of state.
As if the tension was not high enough, Flowers held up a copy of Marvin's "Reflections" and declared, "This is the last time I want to see crap like this."
"This is not respectful," Bullock said.
Eventually there was something they all could agree on. They decided to ask for an advisory opinion from the attorney general on the constitutionality of the board. It was accompanied by dark mutterings about going to the legislature to rewrite the law to clarify everyone's role or getting the justices on the Supreme Court to settle it.
"There are no divine rights here that I'm aware of," Bullock said.
Some 30 years since the board began, this is the storm after the calm.