The North Carolina treasurer’s race often gets overshadowed by other elections. But consider this, the treasurer runs a pension and health care system for state employees that is roughly four times the size of the state’s yearly budget.
WFAE’s Tom Bullock and Morning Edition host Marshall Terry break down the race for North Carolina treasurer.
MT: Tom let’s start with the candidates.
TB: Marshall, this is a race without an incumbent. Democrat Janet Cowell who was first elected as North Carolina’s treasurer in 2008 announced this year she is not seeking re-election.
So the two candidates on the ballot are Democrat Dan Blue III and Republican Dale Folwell.
Blue is a former investment banker with Bear Stearns who has launched a health care tech company and is currently a lawyer focusing on bonds. This would be his first elected office. But if his name sounds familiar it’s because his father is currently the minority leader in the North Carolina Senate.
Dale Folwell is a certified public accountant and investment advisor. He served in the North Carolina House from 2004 to 2012. Folwell is hoping to be the first Republican to serve as North Carolina’s treasurer since 1876.
MT: Arguably the most important job for the candidate is running the state’s pension system.
TB: Absolutely. The treasurer is the sole trustee of North Carolina’s pension system which is one of the largest in the country.
And Marshall, this is an issue that will affect every taxpayer in the state especially now that more and more baby boomers are reaching retirement – here’s why.
In order to meet the state’s obligations the pension has to return an average rate of 7.25 percent each year. In the most recent quarter which ended in September, the pension fund did well and it has grown by 8.4 percent over the past 12 months. But that’s an instance of good news in an overall trend of bad news for the pension.
Over the past 15 years the fund has averaged just 5.8 percent in returns well below what it needs to make to pay retirees. So it's solvent now, but if that trend continues long term taxpayers will be left to pick up the bill – or the state will have to cut promised benefits despite the fact the retirees have made their required contributions.
MT: So investment strategy is clearly a big part of the job – what are the differences between the two candidates?
TB: Specifically who invests the money. The current treasurer has increasingly turned to investments in private equity firms, hedge funds and other so called “alternative investments” to try to boost returns. But those investments are managed by Wall Street firms and come with really high fees. The fees paid to outside investors has jumped more than 1,000 percent since 2000. Last year alone the fund paid more than half a billion dollars to outside money managers.
Folwell, the Republican, says he will cut $100 million in these fees immediately by negotiating new deals, managing more money in house and by relying more on index funds in the stock market to grow the pension.
Blue, the Democrat, says he too wants to cut the fees but overall supports the way the pension is now investing. Blue says the decision on using outside money managers should be based on a comparison of cost, expertise and results.
MT: The other key role of the treasurer is managing the state’s health care system for retirees.
TB: And with almost 800,000 state employees and retirees on the rolls, the state is the largest purchaser of health care insurance in North Carolina.
And premium costs for the state plan are an issue both candidates bring up.
Both Blue and Folwell say the state needs to negotiate better rates with their benefit providers in order to keep costs low.
In addition, Folwell says he would freeze premiums for state workers in order to encourage more young and healthy employees and their families to join the plan and make it easier to enroll.
Blue says he would focus on preventative care as an additional way to cut costs.
