DOVER, Del. (AP) - The state Senate on Thursday unanimously approved legislation asserting that an unelected board dominated by political appointees, not Delaware's elected treasurer, has authority over the state's $2 billion cash investment portfolio.
The bill, which now goes to the House, is an attempt to resolve an ongoing power struggle between Treasurer Chip Flowers and other members of the Cash Management Policy Board.
Flowers blasted the legislation at a news conference on Wednesday, but Thursday's vote signaled a reconciliation of sorts between him and fellow Democrats who control the Senate.
Even before the vote was finished, Senate Majority Leader David McBride walked across the floor to shake Flowers' hand and tell him "Thank you." Senate President pro tem Patricia Blevins then walked over and hugged Flowers.
Before passing the bill, lawmakers eliminated a provision exempting the board from Delaware's Administrative Procedures Act. The APA specifies how state agencies can exercise their powers, and the public transparency under which they must operate.
Flowers said afterward that he agreed with lawmakers that the bill does not take away any of the treasurer's powers, but simply clarifies the law regarding the role of the board in overseeing the portfolio.
Flowers also said lawmakers had assured him that many of the concerns he has expressed about the board will be addressed later by a joint legislative committee that conducts periodic efficiency reviews of state agencies and boards.
Among the issues that Flowers wants the legislative review committee to consider is whether board members should be required to file financial disclosure statements, as other public officials do. He also has suggested that board members be subject to term limits, and that they be prohibited from making political donations to the governor, treasurer, and the two leaders of the House and Senate.
"This is a very positive step in the right direction," he said after Thursday's vote.
Flowers had sounded a much harsher tone a day earlier, blasting Gov. Jack Markell's administration for pushing the legislation. He also raised concerns about conflicts of interest involving the board's political appointees because of campaign contributions and ties to financial institutions that hold the state's money.
Since taking office in 2010, Flowers has clashed repeatedly with other members of the board, a nine-member panel consisting of the treasurer, three other state officials and five gubernatorial appointees.
Secretary of State Jeffrey Bullock said at a Senate committee hearing Wednesday that Flowers has wanted to be more aggressive with fund allocations in an attempt to get higher yields for the portfolio, which holds money used to pay the state's bills.
"The other members of the board did not agree with him," Bullock said. "We said no, and the treasurer said 'You can't say no.'"
In 2012, Flowers quarreled with the Markell administration over his hiring of Credit Suisse to review the portfolio. Markell's office subsequently had language inserted into a budget bill prohibiting the treasurer from retaining banking or investment services without the consent of the board. The bill also required that funds in the treasurer's custody be invested consistent with board guidelines.
In an effort to resolve the power struggle, the board last year sought an opinion from the attorney general's office. The attorney general's office ruled that the board has sole legal authority to make investment decisions, and that the treasurer is subject to its directives. The attorney general's opinion also said the board's authority extends to decisions regarding asset allocation between short-term and intermediate-term investments, as well as allocations among different fund managers.
Flowers said Thursday that the attorney general's opinion did not address the key issue of what discretion he has if asked by the board to do something with which he disagrees.