Malone ranger

Part 4

by Michael Crowley

For Malone's potential rivals in the governor's race, it would be a mistake to get complacent over his recent lottery troubles. Come campaign time, he'll have plenty in his record as treasurer to brag about.

The way Malone tells it, he's been the lottery's Richard Simmons -- working off its excess fat, cutting its diet, making it more dynamic and active.

The facts tend to back him up. The budget for the Office of the Treasurer is down 52 percent -- and while Senate President Birmingham protests that's because the legislature has chopped Malone's budget, on average Malone has returned, unspent, about a million dollars per year. Since 1990, treasury staff has been reduced from 325 employees to about 135. At the lottery, same kind of story: patronage or not, overhead and payroll are sharply down.

Beyond whittling away at spending, Malone has done an impressive job of pushing the treasury to its maximum potential. Whereas Bob Crane was happy just to be there, Malone has worked hard to prove his executive creativity.

Although his budget has shrunk, Malone has used the leverage of the treasury -- mainly through its vast pension-fund investments -- to institute programs that embody the "doing more with less" doctrine of conservative activism he'd like to implement as governor.

One of them, the "American Dream Mortgage Program," (Malone's program names all have that campaign ring) grew out of the pension fund's purchase of mortgage securities. By making a special arrangement with the federal home-loan programs Fannie Mae and Freddie Mac, Malone says, he arranged cheaper loans that led 3000 families to buy homes.

Elementary-school kids learn about money management by opening small bank accounts through "Savings Makes `Cents,' " a program that embodies a clause of the 1993 education-reform bill that exhorts state officers to get involved in education. Run by one full-time treasury staffer, the program relies heavily on the cooperation of local banks. With its small scale and feel-good goal, the program is almost Clintonian.

Outsiders have taken notice of Malone's work. Last year the Center for Policy Alternatives, a left-leaning policy think tank in Washington, honored Malone as a public-policy "pathfinder."

"He has been a leader in the country in figuring out how state retirement money can do well for retirees but still do well for citizens by creating economic opportunity," says the CPA's Rich Ferlauto, who singled out Malone's pension-fund investments in low-income housing in the South End.

Just this week, Malone lobbed a political grenade into the middle of the debate over financing for the Big Dig, proposing to invest $2 million of the state's pension funds in the project -- a politically brilliant move to circumvent what had seemed an inevitable toll hike. But the idea carries a fiscal risk by postponing the payoff of the state's hefty long-term pension liabilities. Malone argues that pensions have been so profitable under his tenure -- growing over 12 percent a year since 1991, faster than the stock market -- that the quick fix is justified. Either way, it is a vivid example of how Malone has been able to twist his mandate in creative ways to score political points.

Some of the uses Malone has found for his office, however, come across as overly gimmicky. A caption over his smiling picture on a treasury brochure kindly entreats, "Please help me return any money that may be yours." (Who wouldn't vote for a guy who got them a check out of the state's arcane abandoned-property law?)

More . . .

Michael Crowley can be reached at mcrowley[a]phx.com.