Editor’s Note: The following is the first article of a series resulting from an exclusive AJT interview with North Carolina Treasurer Dale Folwell.
RALEIGH — North Carolina Treasurer Dale Folwell (R) has been on somewhat of a press tour lately. The current NC Treasurer and former Speaker Pro Tempore of the NC House of Representatives has been reaching out to media across the state, and on Friday, May 22, Folwell spoke with The Avery Journal-Times to discuss the state’s financial status, rising health care costs, and issues central to Avery County.
The NC Treasurer serves as the state’s lead banker and chief investment officer. The department is responsible for approximately $110 billion in assets, including the state employee retirement system, the State Health Plan, fiscal assistance to local governments and the NC Cash unclaimed property database.
Folwell says the state is in a sound financial position to deal with the added stress that the COVID-19 pandemic has placed on the economy.
“We are pleased to report that even though this is one of the largest pools of public money in the world, that the public pension plan—not just for state workers but county workers and volunteer fire departments—is only down three percent. We are very proud of the conservative way we have managed this pension plan, and it is holding up well compared to other states,” Folwell said.
The drop in the value of the $105 billion state pension plan has continued since March when Gov. Roy Cooper first enacted the statewide stay-at-home order. At the time, the fund was down about one percent amid an unprecedented market selloff. The Dow Jones Industrial Average is currently down by around nine percent as of May 26.
Additionally, Folwell says that the state’s budget rollover has created an unappropriated $2 billion surplus in the budget. North Carolina has been operating under its 2018-2019 fiscal year budget since legislative gridlock over Medicaid expansion prevented the proposed 2019-2020 budget from passing. When this occurs, the state rolls over the previous year’s budget in order to continue operating.
“Nobody could have predicted COVID-19, but not passing that budget has created $2 billion in surplus, and I think we’re going to need all of it,” Folwell said.
The state has received a total of approximately $4 billion from the federal government through the CARES Act, with Wake, Guilford and Mecklenburg counties, as well as the City of Charlotte, receiving a combined total of $480 million. Avery County received approximately $500,000 as part of the allotment to deal with the COVID-19 pandemic.
Folwell also said there is $2 billion in the state’s Rainy Day Fund, and $4 billion in the Unemployment Trust Fund.
“I don’t know of any state the size of North Carolina that is in a better financial situation to pull itself out of this situation,” Folwell said.
While the state has received the emergency funding needed to better deal with the current health crisis, its continued gridlock has had trickle-down effects that local governments and state entities have to solve.
For example, Avery County Schools is expecting to see employee benefit costs increase by 8.8 percent for retirement and 5.4 percent for health care. The local match the school system is obligated to pay will increase accordingly, and as a result, the school system will need to absorb approximately $265,000 out of its own budget.
Even in years when the state is operating under a budget specific to its current financial year, finance officers across the state can expect to see employee benefit costs increase annually. According to the NC Civitas Institute, the health insurance cost per public education employee has increased by about five percent annually.
In the 2003-2004 fiscal year, retirement benefits were 3.42 percent of total teacher salary, while the health insurance cost per employee was about $3,307 annually. In 2015-2016, retirement benefits were 15.32 percent of total salary, while health insurance costs per employee rose to $5,471 annually. During that time, average state teacher pay increased from about $43,000 in 2003 to about $46,000 in 2013.
“The appropriation to the health plan for health care for teachers, troopers and other state employees is only going up by four percent, but the pension payment is going up more than that, and the reason is that for 22 years on average the pension plan has not achieved its assumed rate of return,” Folwell said. “So it would be like you putting money in your kid’s college account, and it didn’t do quite as well as you thought it would do, so you put more money in it.”
Folwell has been an advocate for transparency within the health care field as it relates to costs of services and treatments, as well as openness in the health insurance marketplace. The treasurer said that he spends almost $2 billion a year on health care for public service workers, and he does not have access to the contracts the department spends that money on, which is written is by insurance companies and health care providers.
“Unlike everything else that you or your family or business consume, you typically know the value of the price of it beforehand. The only thing in your life that you don’t know the value and price of it beforehand is health care. Even after you consume it, you don’t know the price of it,” Folwell said. “Why can’t people consume health care instead of it consuming them? [Medical costs] is the leading cause of bankruptcy. These teachers and troopers are part of a health plan that is the largest purchaser of health care and pharmaceuticals in the NC. Our teachers and troopers should be getting the lowest possible prices.”