Former NC governor: No NC treasurer should risk the public’s purse ‘boldly’ | Opinion
With growing astonishment, I read the July 26 column by Associate Opinion Editor Ned Barnett that examined attacks against North Carolina Treasurer Dale Folwell’s prudent management of the pension funds for retired state employees.
It included an unwise accusation by Andrew Silton, who was chief investment officer for the state pension fund from 2001 to 2005. With the benefit of hindsight, Silton claims that North Carolina would be better off had Folwell pursued higher risk for higher reward.
Surprisingly, the two current candidates for state treasurer, Republican and Democrat, jumped on Folwell promising they would gladly play the stock market more on the risk-taking side with pension funds. Republican candidate Brad Briner makes clear on his website, “the risk of long-term under-performance of the target is the central risk we must manage.”
No, sir, that may be the view of some who advise wealthy clients to speculate with part of their vast holdings. But responsibility for pension funds for state retirees requires more caution.
Briner’s Democratic opponent, state Rep. Wesley Harris is no less eager to play the market more aggressively. He finds fault that the N.C. pension fund has “the largest cash-heavy portfolio in the country” and “has lagged well behind the stock market’s overall gains.”
Where would state retirees be if the market had collapsed, as some fear it soon will under massive pressure from the $35 trillion federal debt? In such a scenario, cash is king. It would be a fine legacy for Treasurer Folwell to have a solid cash position to invest in bargain basement equities.
There’s always a chance that Folwell’s critics could get lucky and the market could spiral higher and higher. But what has actually spiraled out of control is the yearly cost of just paying interest on the national debt. For the first time in history, it has soared past the $850 billion annual defense budget and appears likely to exceed $1.1 trillion by year’s end. Not a good sign.
During my time as governor, I was fortunate to have the fiscal support of a man widely admired for his trustworthy management of state funds. Harlan Boyles, state treasurer from 1977 to 2001, was a fiscal conservative Democrat who was so admired that it was foolish politics to run anyone against him.
To my amazement, he urged me to be sure Republicans always had someone competent and honorable running against him, just in case an unexpected tidal wave broke over his party. That marked him with grace, honesty and integrity. Politics was what he did on a personal handshake basis to get elected. Keeping inordinate risk-taking out of his duties as “keeper of the public purse” was how he nobly served our state.
Folwell has proven himself to be a worthy successor, with the same reputation for integrity and sound fiscal management. He preserved North Carolina’s enviable AAA bond rating and saved taxpayers $700 million in Wall Street fees. The State Employees Association, beneficiaries of his sound leadership, backed Folwell for governor. I wish he had remained treasurer.
If Folwell’s critics really think public funds should be used to play the market more boldly, I anticipate they will be consistent and make the same daredevil commitment with the Social Security Trust Fund.
The strategy of Silton did not work very well during the eight years of his boss, Treasurer Richard Moore (2001-09). With pension funds heavily invested in equities as Silton recommends, total valuations rose only $2.44 billion (4.2%) due to losing $20 billion during the mortgage derivative debacle of 2008. During the comparable 7.7 years of Folwell’s more responsible administration, valuations grew $34.6 billion, or 38.9%.
Perhaps our rival candidates for treasurer should study Folwell’s success and follow his philosophy. In a solemn view of the economy, Folwell says, “The need not to gamble and swing for the fences has never been more important.” That standard would please Harlan Boyles.