(bright music) - [Narrator] Major support for Carolina business review provided by colonial Life, providing benefits to employees to help them protect their family, their finances, and their futures.

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- All the business and statistical and policy news has been about inflation and how horrible it is and what the effect is going to be you.

Yes, yes.

And possibly yes.

But what does inflation really look like?

And beyond inflation, what's going to happen this spring in the Carolinas.

I'm Chris William and welcome again to the most widely watched and longest running program on Carolina business policy and public affairs scene each and every week across North and South Carolina.

Thank you for supporting it as long as you have, we will start our program in just a second later on.

He is the Chief Financial Officer for the Old North State Treasurer, Dale Falwell returns.

We start right now.

- [Narrator] Gratefully acknowledging support by Martin Marietta, a leading provider of natural resource based building materials, providing the foundation upon which our communities improve and grow.

BlueCross BlueShield of South Carolina, an independent licensee of the Blue Cross Blue Shield Association.

Visit us at SouthCarolinaBlues.com.

The Duke Endowment, a private foundation, enriching communities in the Carolinas through higher education healthcare, rural churches and children's services.

On this edition of "Carolina Business Review" Tony Mecia of the Charlotte ledger, Peter Brews from the Darla Moore School of Business, University of South Carolina and special guest Dale Folwell, North Carolina Treasurer.

- Hello and welcome.

Gentlemen welcome.

It has literally been almost exactly two years since we were in this configuration.

Regular program again, thank you for driving in Peter for coming from Columbia, Tony I know it was all of what, maybe a 10 minute.

- About 10 minutes, right?

- Thanks for the effort here, brother.

- A lot of effort.

- Tony, let's talk about this inflation thing at the top of the program.

I know a couple weeks ago it was a pretty big number, surprise some not surprised some plus 7% inflation statistically year to date year over year however you wanna cut it, but what does that really look like for people for businesses and how punitive is this gonna be in your opinion going forward do you think?

- Yeah, I mean, it just cuts.

It's all across the board.

I mean, we're seeing numbers.

We haven't seen on inflation in, you know, in decades.

And so for people who are used to things, staying kind of the same price, you know, they're changing, you see it at the supermarket, you see it at restaurants, businesses are having to build in more money.

We're talking about higher wages.

It's always the question.

Are the wages keeping up with the higher prices, right?

It just plays out really across the board.

We had a piece in the Charlotte Ledger recently talking about, you know, off-duty police officers, the pay is going way up.

So that means that if you're a daycare and you need a, a officer directing traffic, it's gonna cost you a lot more.

It's just going up across the board.

You know, it's something that businesses are just gonna have to deal with.

- Dean, inflation everyone has talked about inflation, but the there's been so much liquidity in the system.

It hasn't slowed people down from spending.

How do you square those two?

- Well they're related.

And the reason that they are related is people have got so much accumulated spending power that they are spending and that's what's causing the inflation.

So you know, you've got a couple of things that have come together and there's very usual time.

You have a supply chain that is very, very constrained.

You have people changing their expenditure patterns because instead of going to services, they're looking for stuff for their houses.

They're looking for pelotons.

They're looking for things that, you know, two years ago, nobody really thought of at that level.

And that causes massive adjustments.

And I'm not surprised by, by the inflation and I suspect it's gonna peak in the middle of this year and then dissipate.

- Do you think that-- - That would be my guess.

- Yeah.

I'm sorry Peter.

Do you think it's going to, I mean, last year it was a blowout when it came to summer travel and expenditures, is that really going to slow down this year?

- I don't think we're gonna see a return to the sort of services expenditures we saw before the pandemic.

And I think people may decide that they're not gonna eat in restaurants as much because they've learned other things.

But I think absent that we'll go back to normal.

I guess in a couple of years, and we will just look back on this as a time of interest and learn something from it.

But I think there will be a change.

- Can I just ask something?

How much of this do you think is attributable to government policy, to the, you know, the fed, to the fiscal policy side of things COVID relief money.

I mean, how much is how much juice is there out there is that really fueling us?

- Well the sort of amateur economist in me says when you expand the money supply, the way that we have done you are going to see inflation.

And I think to some degree it has been propelled by that.

However, had the money supply not been expanded, had the steps not been taken.

We would've adjustments on the market side and we would've had a much bigger drop in our economy.

So it's a really difficult trade off.

And I actually happen to think the trade off has been run reasonably well.

And I think if we have to stop it quickly, they will.

And I think the feds are, you know, the fed is pretty well, you know, averse at what to do with inflation.

And I think if they have to go quickly, they will.

- Let's shift gears for just a second.

Let's talk about something Charlotte specific, the Charlotte region specific.

Couple weeks ago, there was some controversy about an executive director hired for the mayor's racial in initiative.

You call it a task force, but it's initiative.

It's not a small amount of money.

It's 250 million couple years before that maybe three years before that Charlotte was very successful in pooling money for also an upward mobility study, as well as what was hoped to be an initiative.

These were both very important moments heralded at the time, but seemed to have been sidetracked, start again, stop again initiatives by maybe policy, maybe leadership.

What does that say about a town like Charlotte that has resources, but seems to get sidetracked?

- Yeah, I mean these are obviously huge problems and challenges that a lot of cities have Chris, and you know, there was that, that major study that you mentioned a few years ago that ranked Charlotte 50th out of 50 in major cities in terms of economic mobility, the people at the very bottom ranks of our society, can't make it to the top ranks in Charlotte worse than other places.

And so that really focused a lot of attention on the problem it's been years, they spent years trying to address it, the political leadership, you knows, civic and business leadership, you know, task forces studies, you know, so there's a lot of interest in it, but I don't know, like you're saying the follow through and the actual results, I think we've kind of yet to get to see.

And so there's a lot of questions I think about how how you go forward, how you address some of these problems that a lot of cities are struggling with.

- And Peter just kind of the same subject Dean Bruce.

But the idea that, and this is gonna be a broad question, but do we have too much money for our own good, both states now have billions of dollars in surplus.

Do we make good decisions when we have so much money to spread around or do we pick and choose?

And I'm not just talking about this issue in Charlotte, but in general, both general assemblies have been very slow about allocating what surplus is.

T hat's good, but that's bad.

So bigger question.

Do we have too much affluence?

Do we have too much money?

- So I can tell you it's an interesting data point you asked many years ago, a comment was made in the Business Literature, but that's, companies have got lots of monies.

Innovation rate is lower than those that are more stressed and there is an impact if you have too much.

I think that that's a general statement you can make.

However, I'm also very pleased that they've been pretty careful about where they're gonna spend the money.

And I do think that the more important question is not whether you have too much or too little, but what you do with it and where it's allocated.

And to me, that's a dominant question.

The rest doesn't really matter.

- Do you feel like those who make policy are being very careful about allocating it.

Too careful or just about right.

- Well, we don't really know yet in South Carolina exactly where the money is going to go.

So I can't comment on the quality of where the allocation is.

All I can tell you is that we still are, you know, being careful because we haven't yet spent it.

- Okay.

Gentlemen, thank you.

I guess a good question to ask our next guest, because he knows a little something about finances in the state of North Carolina.

Before we do that coming up on this program in next couple of weeks.

She is the president of one of two female HBCUs in this country.

Her name is president Suzanne Walsh of Bennett college in Gilford county, North Carolina, Greensboro, and then a special panel program around chasing happiness.

What is happiness?

Is it really that important?

And does it make us happy?

I know it's not much of a business question, but we're gonna chase happiness.

This man is pretty important to the finances of the Old North State.

Not just because he's the Treasurer, but because he understands it, he sits and top the fiduciary responsibility of the state's pension fund over $122 billion now among other things, including the healthcare for workers of the state, but also as a legislator in his own time.

So he understands policy.

We welcome back to our program, the honorable Treasurer of the state of North Carolina, Dale Falwell, your honor, welcome to the program.

- Thank you for having me.

- Sir, let's start with the inflation question.

We talk about this huge print.

What many people will call a print around inflation?

Well, over 7%.

Treasurer Falwell, how hard is this going to hit families?

And what does it look like over the summer.

- As a person who used to pump gasoline in the early seventies, Winston-Salem.

I've seen inflation in living color.

A lot of people in this generation have not.

And inflation is a thief especially it's a thief to those lower and fixed income people of our state and when people think about inflation or see it as they're seeing it now, when they start to believe it's here and it's never gonna go away.

That's what I experienced in the '73 to '76 time period.

So it's a thief and especially a thief to lower and fixed income people cause they have nothing to inflate.

So what they're seeing is it's costing them more, to live more, to eat more, to stay cooler, to stay warm and obviously more to drive back and forth to work.

And it's particularly of interest to us at the Treasurer's office for a couple of different reasons.

We're managing about 250 billion now when you add everything together and it's like the old Paul Simon song, "One Man's Ceiling Is Another Man's Floor."

you know, higher interest rates are not good for people who are investing in their minds or businesses or buying a house.

But higher interest rates are good for a large pension plan like ours because we have about $50 billion sitting in things that aren't interest.

But on the other hand, inflation, we're seeing enormous gigantic inflation with healthcare and prescription drug cost in the state health plan of the Treasurer's office.

So we sort of see it both ways, but at the end of the day, it's a thief, especially the lower and fixed income people.

- Yeah.

Tony question?

- Yeah.

Wanna ask you mentioned the healthcare.

I know speaking of healthcare, I know you've been fairly critical.

I think it's safe to say that some of the large health systems in North Carolina, are you seeing any progress in terms of trying them to get them to, you know, to lower their costs?

Or is it just sort of a matter of the bully pulpit shining some light?

- I would say that and I used to stutter.

So I was advised when I was at Winston-Salem State UNC Greensboro, I was struggling to find the right word to go the Webster dictionary.

I've defined, what's going on in North Carolina as a cartel and cartel like activities.

And that's a very strong word for your viewers.

Except when you go to the dictionary, it's defined as an association, which is formed to restrict competition or race prices.

We are seeing the consolidation of healthcare into the hands of fewer and fewer multi-million dollar executives who run these multi-billion dollar corporations who disguise themselves as nonprofits.

And the result of this from every study across the world is that this consolidation is going to lead to lower quality, lower access and higher cost as the fiduciary of nearly 150,000 of those that teach protect and otherwise serve and taxpayers like them.

I'm in favor of higher quality, higher access and lower cost.

And what's happening is as this power gets concentrated in the hands of fewer and fewer people, we're ultimately talking about a product healthcare that people don't want to consume, but cause that would mean they weren't sick when they try to inquire what it costs they're told us none of their business and then when they don't pay for something they didn't want to consume and didn't know what it cost, then they have the potential of having the credit rating destroyed.

So we're simply attacking this problem.

We're not attacking the people that actually do the work of healthcare who actually saved my life in March of 2020, when I was early contractor of COVID, we're actually talking not about the workers of healthcare, but about how the power is concentrating the hands of so many fewer people.

And it doesn't matter if it's former Treasurer, Harlan Boyles or State Auditor Beth wood or Bill Gates or Warren Buffet, or even Elizabeth Warren of last two years.

Healthcare, things associated with healthcare are the leading calls of bankruptcy in the United States.

And it's immoral for what's happening.

- Are you seeing any progress or is it just mostly highlighting what's going on?

- Well, the progress should be when the we've had a president recently.

Now we have new of president there is something they both agree on.

The previous president issued an executive order that said that hospitals need to provide transparency in their product.

The hospital association sued the previous president and this was paraphrasing their quote.

We don't think telling people what things cost, lead them to making better decisions.

I know the Dean would absolutely disagree with that.

I think Darla Moore would disagree with it too.

That was their exact quote.

And so they defied the president's executive order.

And then current president Biden took previous president's order and didn't do away with it actually strengthen the penalties on it.

And now he's being sued over it.

The fact is we're talking about an industry that continues to operate in secret, does not want the people to know what they're paying.

And we're seeing ranges for the same procedure from 6 to $60,000 for the exact same procedure in the same building.

Okay.

- And Mr. Treasurer I don't wanna..

This is such an important topic.

If I would like to follow, let's continue talking about this.

Healthcare costs are now over 20% of our GDP and effectively healthcare is bankrupting our country nevermind our individual citizens.

As you speak, what have you seen in the state of North Carolina at your level about the increase in cost following COVID and where are we with what it's doing to the state, the overall cost of healthcare to our state?

- Well, healthcare as bad as inflation is that Tony talked about a few moments ago.

I mean, healthcare costs are going and prescription drug costs are going up at twice, that pace.

And you know, I'm a big motorcyclist.

We're not talking about whether you to afford to Ducati.

We're talking about whether you can actually afford to maintain it and ride it.

So we're not talking about people just being able to afford a health insurance premium.

We're talking about them being able to afford to get sick, cause the deductibles and copays that happen with this.

So COVID has obviously made all this tremendously worse, but I can tell you that.

For example, one healthcare company here in, in Charlotte based outta Charlotte has nearly $9 billion in the bank.

That is three times as much as the state has long term debt not made by selling software or manufacturing, widgets, but actually made on the backs of sick people.

These institutions have lost their mission.

And when you look at our web site, you can see that a report just came out from John's Hopkins university that talked about the fact that these entities who don't pay sales tax income tax or property taxes are receiving nearly 2 billion of tax benefit in our state.

And the same would be true in your state, but they're only providing a few hundred million dollars of charity care.

And now Rice University, Chris just came out with another study in North Carolina that talked about the fact that there's probably $175 million worth of individuals in North Carolina who were possibly having their credit rating destroyed when they should have gotten charity care to start with.

And this is different than the sixties and seventies.

When I was growing up.

Credit score words, determine what you pay for that cell phone, the basic liability insurance on the car that gets you to and from work, whether you get the benefit of the doubt of renting an apartment.

And of course what you would pay on an interest rate.

If you were trying to buy a house.

- Let me do a quick follow up on that.

and this is not an indictment of the statistics or your style.

I'm assuming there are back channel dialogues going on and you're not just litigating the credibility of these hospitals in the press.

- Well, we've attempted that we've had meetings and members of the press were invited to these meetings.

And if we ever have another meeting, the same thing would take place.

When the head of the hospital association in a group of 14 people puts his finger out there and says, you're not our customer.

- To who?

- To me.

I said, we spend nearly $3 billion with your hospitals.

He said, that may all be accurate, but you're not the customer Blue Cross Blue Shield is the customer.

So when we talk about the cartel like activities, it doesn't just apply to the big hospitals.

It also applies to the insurance companies.

All we're trying to do.

It's so simple for your viewers is we're trying to get the clear pricing, get rid of secret contracts, push the power to the consumer so that the consumer can do what they do in every other aspect of their life which is to determine the quality of value.

Our prime examples in this area are Tryon Medical, Tryon Medical is part of the clear pricing project.

There's no secret contracts with Tryon Medical.

When our state employees go to Tryon Medical, they know exactly what they're paying.

All the deductibles are removed.

We have Wilmington Health.

We have Bethany Medical up in the.. we have 27,000 and providers except all the hospitals, except for three boycott getting rid of secret contracts.

- [Chris] Yeah, Tony question.

- Yeah.

I mean, where do you think it's going with healthcare?

I mean, is it a matter of a lot of times, you know, you see business organizations, if they are kind of fat and happy, they get complacent and they get replaced by innovators.

Like you're saying Tryon Medical.

I mean, where do you see it going.

- As a person who lived through the sixties, I can tell you it wasn't the lawmakers that made the positive changes in our country.

It was the music and the music that's being sung.

The music that's being written right now is that people are no longer gonna tolerate.

As the Dean said, 20% of their income going to something they don't understand.

So that's the music that's being sung right now.

And as I said earlier, doesn't matter if it's former Treasurer Boyles or Warren Buffet or State Auditor Beth Wood or Senator Elizabeth Warren or anyone else.

Everybody knows that something is wrong with healthcare.

And when, especially when people have the ability of their credit rating being destroyed, you know, that's what matters and what's so important about when you ask the question about dialogue and temperature, you know, the citizens out there are greatly mischaracterized a, they know something's wrong b, they just want to be spoken to like adults and what they hear and needs to make common sense.

And they know that not knowing the price of what they're paying for something that 20% of their income going to doesn't make common sense.

- Well, Matt, I just give you a little encouragement.

If you have a pilot, that's working, make sure it gets publicized.

If you need any help on that, come down to the Moore School, we'll write something for you and get it out there.

Second comment I would make is that wellness, I don't think is a thing that's given enough treatment too, because ultimately if we all take more responsibility for our own individual wellness, I suspect we will need less palliative care and we will get healthier.

I mean, are a very unhealthy society just because of our habits and what we do just as a thought, has that surfaced anywhere in your domain.

- Well, absolutely three quick things.

Going back to the whole issue in our North Carolina constitution, section 34 says that perpetuities and monopolies are against the free will of our society.

It's back actually been in the constitution.

Second thing is that in the clear pricing project, we exalted primary care physicians and paid them more.

We exalted mental health specialists and we all know the crisis going on in mental health and paid them more.

We've eliminated the cost of anything related to diabetes.

Because the cost of insulin has gone up threefold in the last seven years, we've taken advantage of our largeness.

We just signed our pharmacy bid management contract, a three or $4 billion contract's gonna save 700 million just over the next three years.

We just a year and a half ago signed our Medicare advantage contract for our over 65 retirees.

And we were able to negotiate that big book of business, zero premium to the member and no cost to the tax payer or the state health plan zero to the member and no cost of the taxpayer.

The reason why all this is important.

And the reason I say the things I say, Chris is the fact that when I was sworn in as the keeper, the public purse, I inherited a $34 billion unfunded healthcare liability.

It's where promises were made state employees after nearly five years of service after five years to be eligible for lifetime healthcare.

But unlike the pension plan, which is nearly 90% funded North Carolina, as compared with the South Carolina plan, only 63% funded.

We're very proud of that.

This obligation for lifetime healthcare was made to the state employees, but no money for 46 years has ever been put aside.

That's why this is so serious.

Not only do you have an inflation or prescription drug cost and healthcare costs, but we also have a $34 billion unfunded liability, which according to peer research puts us right behind the state of Illinois.

- So two minutes left.

- Yeah.

- What is North Carolina?

North Carolina, South Carolina both have these fairly large budget surpluses, billions of dollars.

How does that need to be deployed?

Where does it need to go?

- It needs to be deployed starting with the beginning of this show in a way that doesn't create its own inflation.

You know, oftentimes when I talk about these subjects, people say, "well, you're just talking about business," and I have to remind myself every day, the biggest business in this state is the state.

The second biggest business are the school districts.

The third are the cities and the fourth of the counties.

So my point of saying that is that when this money's deployed, we gotta make sure they're not putting it out on the street, buying things and doing things with it that end up creating our own inflation, we don't end up with competitive bid processes.

So the number one thing is to have a discipline and a constraint and a forecast in that you gotta start out like you're gonna hold out.

So the number one thing for state government is when this, as this money's come in, we've got tens, billions and billions of dollar as this money has come in to absolutely make sure we're not putting it out in a way that creates our own inflation so that we end up getting more for less for the money that we choose.

- Is teachers, principal, educators.

Is that an easy one?

Are we missing something by not giving them more of a raise that's already been proposed?

- Well, I know it's hard to visualize this, but I actually practiced yoga.

And one of those secrets, they said the treasure of humor would be well hidden.

Tony got it.

- Getting the visual of you doing yoga, right?

- So anyway, you know, there's secret yoga is to pay attention to your mat and to breathe.

And the mat about how much teachers make is squarely with the general assembly and the governor and the executive branch.

My job as State Treasurer is I can't determine what people make.

I work as hard as we can.

I'm standing on the shoulders of people at the Treasurer's office to make sure they get to keep more of what they make and to make sure that their participant in a state healthcare program is taken advantage of its largeness about half the state employees, but also has a sustainable pension plan.

And that's my job as State Treasurer.

- Thank you Robbins.

I'm still trying to get the idea of you and yoga pants outta my head.

- So I'm just wondering if there's a goat involved too, but I have-- - They have what?

- Goat yoga.

- There is motorcycle yoga.

- A motorcycle.

(all laughing) - Thanks for your leadership.

Nice to see you again, sir.

- Thank you.

- Dean Bruce.

Always nice to have you here.

- Good to see you, sir.

Thank you.

- Tony you as well.

- Thank Chris.

- You all look healthy.

Thank you for watching our program until next week.

I'm Chris wood.

We hope you're staying healthy and your business is good.

Goodnight, happy weekend.

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