The first Republican Treasurer in NC’s modern history is Dale Folwell, and he says pennies and paper clips are important — and in a breakfast presentation Saturday he showed why that saying is so vital to North Carolina today.
He told the crowd the state pension plan and state health plan face daunting challenges, but his office is taking steps to face those challenges.
He told the crowd at the Civitas Institute’s 2017 Conservative Leadership Conference that he keeps with him a copy of “Keeper of the Public Purse.” The book was authored by a former state treasurer, Harlan Boyles, and stresses the point that public servants need to always understand who tax money belongs to — the people of the state — and to do their job accordingly.
As part of keeping the public purse, Folwell said that it’s not just the big things that matter, but even the seemingly insignificant items like pennies and paper clips. He said that the little things add up and can become the big things.
Folwell talked about “working on the invisible,” the intangible facts that are normally not talked about or even thought about. For example, Folwell said, “I work on the invisible. When you do that, and nobody thinks anything is wrong, it’s hard to get your message out.” He cited as an example the state retirees pension plan, which has been operating with an assumed rate of return of 7.25 percent, but has actually returned much less.
People are typically not aware that this has caused the plan to have billions in unfunded liabilities, but Folwell campaigned on taking these things out of the realm of the invisible and into the awareness of lawmakers and the public. Folwell said, “This year we are going to pay out $6 billion in pension benefits, and that number will grow to $9 billion [annually] over the next 10 years.”
Folwell said that North Carolina’s pension plan is the 26th largest pool of public money in the world, at $92 billion. But it has been learning less than 1 percent, even though it has been funded assuming a 7.25 percent rate of return, an assumption that has been unrealistic for many years. “Money has to grow at a certain rate of return in order for there to be a defined benefit for a retiree for the rest of their life,” Folwell said. “Our pension is about 90 percent funded currently. There are some massive things happening in unfunded liabilities in pension plans across the country.” He mentioned problems in Illinois recently as an example.
But though North Carolina’s pension fund is in relatively good shapes compared to those of other states, he cautioned against complacency. “Our pensioners can’t pay their power bill with relativity,” he said. “They have to pay it with cash.”
Another campaign topic for Folwell was addressing the amount the state pension plan pays in investment management fees. Folwell said, “When former treasurer Harlan Boyles left office, he paid $50 million in fees to money managers. Last year the pension paid $600 million in fees. During the campaign, I promised to cut $100 million in investment management fees over the next four years. We have cut $52 million since taking office” in January.
Boles wrote that the state treasurer has more constitutional authority than any other elected official except the governor. Folwell said that everything connects back to the state maintaining its triple A bond rating, and said that the state is one of only a few states with a Triple A rating from all three rating services.
Currently, there are lifetime health care benefits for retired state employees. That has resulted in a $42 billion unfunded liability in the state health plan. Folwell talked about the enrollment process for the state health plan having been extremely challenging. “No one was able to successfully enroll in the state health plan without assistance — including me,” Folwell said. But after working to simplify the process, “We’ve got the process from taking 51 clicks down to nine.”
As he did when working as head of the Employment Security Division, Folwell has already made improvements to service in the customer call center. He said that caller surveys once included a long list of questions; they now include only one question, “Would you hire the person that just tried to help you?”
Folwell said, “We are the largest purchaser of health care in the state [with enrollment of] 900,000 people. We’re going to try bring value to the state health plan for the state employees in NC. Our priority centers around the fact that state employees that have to work five work days to afford family plan coverage in the state health plan. As the largest purchaser of health care in the state, we ought to be able to do it cheaper.”