Phoenix, Arizona (January 22, 2019) – An Arizona legislator has introduced a bill this week to de-risk the state’s financial holdings with a modest allocation to physical gold and silver in the state’s reserve fund.
Introduced by Representative Mark Finchem (R-Tucson), the Arizona Sound Money Stabilization Act (HB 2500) requires that at least 10% of Arizona’s Budget Stabilization Fund be held in the monetary metals in a secure depository. The bill reads, in part:
2. Shall hold at least ten percent of the monies in the budget stabilization fund in specie, or in refined gold or silver bullion that is graded at least .999 pure, or in any combination of specie and refined gold or silver bullion that is graded at least .999 pure.
b. the specie and bullion held pursuant to subsection a of this section must be held in a level iii rated secure depository facility designed for precious metals storage and constructed with a minimum underwriters laboratory rated class two vault door. The specie and bullion must be fully insured and physically segregated from other assets held in the secure depository facility.
c. for the purposes of this section, "specie" means either:
- coins having precious metal content
- refined gold or silver bullion that is stamped or imprinted with its weight and purity and that is valued primarily on its metal content, not its form.
Arizona’s Budget Stabilization Fund has almost $500 million in assets.
In 2017, Rep. Finchem successfully passed the ground-breaking House Bill 2014, a measure which removed all income taxation of gold and silver at the state level.
Gold and silver do not have the default or loss of purchasing power risks that bonds carry. Most importantly, physical gold and silver held in a depository carry no counterparty risk, unlike bonds.
By holding physical gold and silver in its reserve fund, Arizona is protecting its savings against loss of purchasing power and default risk more securely than if it held bonds and other dollar denominated assets.
This measure would help the state hedge its risks of holding stocks, bonds, and short-term debt instrument with an allocation to a bedrock asset carrying no counterparty risk and proven to maintain purchasing power.
This measure comes on the heels of three sound money bills introduced in Wyoming last week. Wyoming legislators aim to allocate a small portion of Wyoming’s pension fund, reserve fund, and mineral trust fund into physical gold and silver held in a depository within the state.
Backed by the Sound Money Defense League, this measure protects Arizona’s account by insulating it with the only money proven to protect against the Federal Reserve Note’s ongoing devaluation. Furthermore, an allocation to precious metals is proven to increase overall returns over time, reduce volatility, and reduce drawdowns.