Idaho state Treasurer Ron Crane, the target of a highly unfavorable legislative audit last week that said he’s lost the state’s taxpayers more than $10 million through “inappropriate” transfers, is making his budget presentation to the Joint Finance-Appropriations Committee this morning. The mood is tense. JFAC finished its previous item nearly 20 minutes early, meaning they were ready for Crane early; he wasn’t there. The committee sat waiting quietly for him to arrive for about 10 minutes.

He told the lawmakers he’s requesting a 13.7 percent increase in his budget for next year, but he said the increase “will result in additional interest earnings that will more than offset that increase.” He also addressed the audit, defending his moves and saying, “Managing the state of Idaho’s finances for maximum gain carries all the same risks and rewards as your 401K retirement fund and your individual stock portfolio. After all … all invest in the same markets.” He said, “While our investments experienced the same roller coaster ride that yours did, we chose to ride out the storm. Had we sold our assets at the time, we would have experienced a far greater loss than $10 million.” He said his office “actually made the state a … profit of $122,000 … after we sold the assets in 2013.” He also disputed the audit’s finding that state taxpayers stand to lose another $17 million because of his moves. “These are not losses until we sell those assets. Especially considering that they are moving in the right direction … they continue to perform,” he said. “The suggested potential loss of $17 million is now down to $14 million and it continues to improve daily.”

Crane said he believes his office has done an “excellent job” of navigating “turbulent economic waters, and we will continue to do so. .. We have mitigated any losses with portfolio gains.” He also said he’s beefed up oversight of investment decisions in his office since 2009, when one investment manager made recommendations to him, and he “had no reason” to question her recommendations. Now, he said, there are professionals including two CPAs involved. “When a decision is to be made, it is referred to this group,” Crane said. “If it involves any exception to the investment policy, it must be approved by me.”

Sen. Dean Cameron, R-Rupert, JFAC co-chairman, said he wouldn’t fault Crane for an investment strategy of “riding out the storm.” “I guess the part of the audit that I didn’t hear you address was the decision to transfer those mortgage-backed securities from the local government investment pool to the idle pool fund, which as I understand it, was contrary to your office’s protocol, so somebody, presumably you, had to make that decision. … I think that’s the part that gives me heartburn, was the decision to transfer money from the LGIP fund to the idle pool fund, and to transfer it at face value, instead of at market value.”

Crane responded, “That was six years ago. I would refer you to the audit, my response to the audit. In there we put a lot of detail as to why that transfer took place and what the process was.” When Cameron pressed Crane, asking if he’d make the same transfer again, Crane said, “We fully expected all those investments to perform. And they continued to perform after that. It was only in hindsight looking back that we could say, ‘Oh yeah, that was probably a bad investment. … Only looking back, which is always 20-20 hindsight, we could say that wasn’t a particularly good investment, but we didn’t know that at the time.”