Local & State
|NC treasurer on COVID, unrest, recession and state's purse strings|
|Dale Folwell weighs in on challenges|
|Published Thursday, June 25, 2020 9:41 am|
|OFFICE OF THE STATE TREASURER|
|North Carolina Treasurer Dale Folwell oversees a $100 billion pension fund as well as state health plan for public employees. North Carolina is one of 13 states with a AAA bond rating, the highest endorsement of economic strength.|
As state treasurer, Folwell is responsible for a $100 billion pension fund that provides retirement income for more than 900,000 public employees and oversees North Carolina’s bond rating, which is one of only 13 states with a AAA grade by every major rating agency. He also oversees the state health plan, which provides medical and pharmaceutical benefits to more than 720,000 current and retired public workers.
With the country beset by economic pressures from the COVID-19 pandemic and a recession, Folwell’s challenge is to manage the response for employees and local and government. The Post interviewed Folwell on the challenges of handling billions in investments and what the rising unemployment rate means for the state’s coffers. Responses are edited for brevity and clarity.
The Post: What is the state of the pension fund at this point, considering that you've got all these different things that are going on. There's unemployment, we're officially now in a recession. COVID-19 is still out there. And there's social unrest as well.
Folwell: Eight months ago, I had the fund stress tested. I asked for that to happen with the pension plan because the stock market was all-time highs, employment, was at all-time highs, interest rates were at all-time lows. So, I wanted to stress test the portfolio to see how it would withstand if anything happened dramatically.
The people who did the stress test research are the rating agencies. Moody’s came back and said this pension plan was number one the country in terms of its ability to withstand and continue funding the pension plan, so we're very proud of that. Secondly, I can report today, with all the stock market volatility that this pension plan, which is one of the largest pools of money in the entire world – 26th largest pool of public money the entire world. This pension plan is actually up for the calendar year and almost 5% for the fiscal year. The plan is more stable and more solid than ever.
The Post: In your role as treasurer, do you have to put on a futurist hat where you have to take a little bit of a look down the road to you to figure out where this is headed?
Folwell: Yes. The first question is, where are we headed economically and the second is, where is North Carolina headed. One of the functions of state treasurer is that I chair the local government commission, which regulates the issuance of debt by 1300 entities in North Carolina. So, 100 counties 540 city water, sewer districts the airport authority, colleges, universities sustain itself. So, as I look at the future, my fear is the crises this country faces. At the end of the day, it's the lower income, and the fixed income people that get hurt the worst.
That's my first fear. My second fear is that this virus …is creating an economic inequality, not just among groups of people but in regions of North Carolina. Shallotte [a Brunswick County town in the southeastern corner of the state] and Charlotte sound very similar, but they’re in very different boats right now.
And there's a lot of cities and counties across North Carolina, that are just climbing out of the recession of ’08 and now they’re getting hit with this where in some instances sales tax revenues are down 30%. That’s occupancy tax and sales tax that ultimately drive the funding for public education, public safety public works. So, when I look into the future, that’s one of my fears.
Folwell: Charlotte and Mecklenburg County, when we received over $4 billion in COVID CARES Act money, $470 million left the treasurer's office almost immediately. And the biggest bulk of that went to Charlotte Mecklenburg County. The Congress designated that cities or counties with population in excess of 500,000 would receive a direct appropriation. So, the total of Charlotte and Mecklenburg County was over $200 million of that $471 million. We have 100 counties, but only three counties got the money. We have 540 cities, but only one city got the money, and that was Charlotte. the reason is the threshold of 500,000 population, probably already asked why in the hell didn’t Raleigh get any money. There's not 500,000 people within its city limits.
So, as far as the COVID CARES Act money goes, Charlotte and Mecklenburg County received the bulk of what was sent down.
Now, when that money came to them, it has strings attached to it, and what I'm working on right now is trying to get some of those things removed because it says expenditures have to be COVID-19 related. I don't think a community should be forced to buy an ambulance they don't need. I don’t think a community should be forced to build a program to call it COVID-19 that they don’t need when these counties and cities desperately need this money to backfill the budgets that have given their citizens the level of services they've been accustomed to.
The Post: Because there is going to be revenue loss because of COVID, whether it's because cities and towns, or the state for that matter, may lay off workers, is that the thing that is the biggest threat? The loss of revenue because businesses are closed, because services may be lost, is that the larger threat?
Folwell: When people are locked down, they’re not mobile and when they’re not mobile, they can’t consume and when they can’t consume, they’re not generating these taxes to fund the education, safety, public works department. What is different about Shallotte and Charlotte, is that we have communities between Shallotte and Charlotte where the biggest employer in the county is the state, the county or the city itself. The biggest employer in the whole state is the state. The second is the county; the third is the cities.
So, that already exists statewide but it's even more predominant in some of these smaller communities. So, when we talk about cutting expenses in the budget and watching the pennies and clips. When we talk about that, we have to be very aware of the impact it has on smaller communities when you lay off or furlough people.
The Post: What is the impact with private businesses – one person enterprises, mom and pop shops? What is the impact of their difficulties or even demise on that bottom line?
Folwell: I believe in some cases the impact is generationally negative. There are lots of businesses that are never going to reopen. In many cases a small business is really there because of the love of the owners and the love of the owner toward their employees, because generally speaking, a lot of small businesses make just enough money to pay the employees, pay the owner and maybe make 1% or 2% [profit] if they are lucky.
We appreciate all the big businesses in the world, but these small businesses support neighbors, neighborhoods and communities. I believe they're the lifeblood of economic vitality, but they're also the lifeblood of something based on where I started in life that I've experienced for the last 51 years and that is the joy of achievement and upward mobility.
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