An encouraging start by North Carolina’s State Treasurer, Dale Folwell
North Carolina’s new Treasurer, Dale Folwell, seems to have a realistic and constructive view of the financial challenges facing the State’s defined benefit pension plan and its health insurance fund. While the pension plan is relatively well funded, it is not fully funded. As I’ve written in the past, the financial gap is manageable, and Treasurer Folwell said as much in a recent interview on Raleigh’s WTVD.
On the investment front, Treasurer Folwell is headed in the right direction. He is expressing a healthy skepticism about the use and cost of alternative investments (e.g., hedge funds and private equity). I’ve spent a considerable amount of time on this blog and on the pages of the News & Observer criticizing the state’s foray into alternative investments. He recognizes that shifting investment policy and reducing fees will take several years. Alternative investments tend to be relatively illiquid and contractually restricted. It appears that our new treasurer understands the challenge of changing direction.
However, I was most encouraged by the Treasurer’s admission that proper funding of the pension and insurance plan (which has a large and rising deficit) will require increased taxes over the long run. Many politicians acknowledge the importance of pensions and health insurance in retaining and attracting public servants. Mr. Folwell has taken the rare step of telling the public and the legislature that these vital programs aren’t free. With a Democratic governor and a Republican treasurer, I’m hoping that our state’s pension and insurance fund will be dealt with as non-partisan issues.