EDITORIAL: Endorsement: Elect Eleni Kounalakis California's next treasurer

May 21-Getting your Trinity Audio player ready...

California's next treasurer should expect to inherit the most financially volatile environment since the Great Recession.

The state faces long-running structural shortfalls. Growing federal deficits will likely drive up the state's borrowing costs. Counties are scrambling to fill gaps in once-federally funded services. And tax revenues are unnervingly dependent on the stock performance of AI companies whose business models are still evolving.

These are just a handful of the challenges termed-out Treasurer Fiona Ma's successor must confront, to say nothing of hundreds of billions worth of unfunded state employee pension obligations and the endlessly escalating costs of wildfires, storms and droughts wrought by a changing climate.

Treasurers are not policymakers. But as the state's chief bankers and asset managers, it falls on them to convert California's capital into policy payoffs.

Of the six candidates running to replace Ma in the June 2 primary, Eleni Kounalakis is the most qualified.

Kounalakis' background, which spans state politics, international affairs and private industry, is well suited for the job.

As lieutenant governor since 2019, the 60-year-old San Francisco Democrat has already been operating at the highest levels of state government, including as Gov. Gavin Newsom's lead representative for California's economic interests abroad.

Before that, she was the U.S. ambassador to Hungary in President Barack Obama's administration.

During the prior two decades, she helped lead her family's Sacramento-based land development firm. Given the state's constant need for more housing, her experience planning, financing and building homes at scale might be the most persuasive part of her resume.

Clear command

In an interview with our editorial board, Kounalakis demonstrated a clear command of this office's responsibilities - from bond issuances and housing tax credit programs to state employee pension governance and infrastructure finance.

As lieutenant governor, a role that entitled her to seats on key state lands and public universities committees, Kounalakis used her position to advance worthwhile environmental and education priorities, including banning offshore oil drilling and opposing tuition increases.

If elected treasurer, Kounalakis told us her agenda would include maintaining conservative debt ratios; streamlining bond financing and revising the state's low-income housing tax credits; protecting the state's employee pension systems - CalPERS and CalSTRS; and expanding state-run college-savings programs and low-income workers' retirement programs.

Kounalakis acknowledged that if an investment "poses clear long-term financial and systemic risk, it may be appropriate to reduce exposure or divest, but only when grounded in rigorous financial analysis and aligned with our fiduciary duty. ... I do not support sacrificing returns for purely symbolic purposes."

We urge her to stick to her word.

Kounalakis' opponents offer only pieces of the picture.

State Sen. Anna Caballero is Kounalakis' most serious challenger, if endorsements and campaign war chests are any guide. Based in Merced, Caballero, 72, has significant legislative and executive experience. She was mayor of Salinas and a state assemblywoman. And as the secretary of Gov. Jerry Brown's Business, Consumer Services and Housing Agency, she oversaw a $27 billion, 16,000-person bureaucracy.

Caballero told our editorial board she would use state bonding authority and tax credits to build more housing, hospitals and clean energy projects, all with union labor.

Caballero's approach reflects the mindset of a longtime legislator, not a financial operator. Public policy is her bread and butter, but probably not public finance. In conversation with us, she did not have the same command of this job's core responsibilities as Kounalakis. The contrast might reflect the two Democratic women's divergent educations: Caballero has a law degree; Kounalakis, an MBA.

Tony Vazquez is currently a member of the California Board of Equalization, a position providing significant insight into tax collection and property assessment. The 70-year-old Democrat is a former public school teacher in L.A. County and the ex-mayor of Santa Monica, where he now lives. In answers to our questions, Vazquez said he would use the treasurer's seats on the state's two largest pension boards to more-than-double those funds' investments in California.

Fiduciary first

The job of the treasurer is first and foremost fiduciary. Vazquez's emphasis on directing funds toward in-state priorities in service of a pre-ordained arbitrary investment target - 4% - jeopardizes that responsibility. Beyond that, we're not convinced his experience in local government and tax administration fully prepares him for the scale and complexity of this job.

Los Altos-based Jennifer Hawks' qualifications for this position are hard to discern. Of the two Republican candidates for treasurer, Hawks is the most serious contender, in large part because she has received the endorsement of the state GOP. In public statements, Hawks provided straightforward, non-ideological explanations for what ails state finances.

However, she failed to complete our editorial board's questionnaire. Her public biography states that she is a retired businesswoman who has not held elected office. The details of her business background are not listed on her campaign website nor are they easily identifiable from media reports.

We cannot take a leap of faith on someone whose biography is a mystery.

Fortunately, we don't need to. The current lieutenant governor's record in business, politics and diplomacy is public and extensive. There are few blanks to fill in. The challenges awaiting the next treasurer require a tested policy and economic operator.

Bay Area voters should elect Eleni Kounalakis.

To read our endorsements in other critical races on Bay Area voters' June 2 ballots, please visit mercurynews.com/opinion/endorsements/.

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