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- Well, as we hit now our full stride in this summer season, you would almost think that inflation is nonexistent.

I'm Chris William and welcome again to the most widely watched and longest running program on Carolina Business Policy and Public Affairs, seen every week across North and South Carolina.

So what is consumer behavior about higher gas prices, higher cost of living.

And later on in the program, we have the chief financial officer for the State of South Carolina.

Not just about the economy here in our southern region, but what about things like inflation?

What about ESG?

Curtis Loftis joins us again, and we hope you stay with us because we will start right now.

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On this edition of Carolina Business Review, Bob Morgan from the South Carolina Chamber of Commerce, Pat Kahle from the Union County Chamber of Commerce, and special guest, Curtis Loftis, South Carolina Treasurer.

(upbeat music) - Well, it seems like the full effects of summer are taking hold here in the Carolinas.

Bob, you look tan, you look rested, Pat, welcome to the program.

Happy summer to you both.

You know, here we are.

You know, the Carolinas summers are iconic.

We end up flocking to the beaches.

But there's this specter of inflation still hanging over us.

And it's not minimal either.

So Pat, I'll start with you.

Have we seen the... Are we acting as if we've got this full effect of inflation yet?

- Wow, that's a great question.

I think that, you know, about half of our workforce, those who are of the age of working, leave our community every day to go to work somewhere else.

Whether it's down South Carolina or Mecklenburg or wherever.

And so I am hearing a lot of conversation about obviously gas prices and inflation.

At the same time, and I'm sure Bob is seeing this too, our businesses are continuing to do extremely well, right?

And they're continuing... Obviously they're still facing some issues around supply chain and others.

But it is a concern.

It's a huge concern for those, especially who are in underserved populations because this inflation most definitely hits that population and that community much worse than anyone else, but it does have a huge impact on business.

And we're watching it.

We're very concerned about it.

- Bob, are we gonna hit a tipping point?

What do you think?

- You know, you have to assume so.

Pat just said it's a concern.

It is a concern, but it's a bit of a conundrum that behavior does not seem to have been affected.

Restaurants are as busy as ever, tax collections in South Carolina in the month of April.

We added another almost $2 billion of surplus to the state revenues.

So again, you just have to assume that at some point behaviors are affected.

We're not seeing it yet.

- When does it show up?

Is it all of a sudden happen and then we're fearful or is it... And I hate to say it this way, but are we whistling past the graveyard here?

Either one of you?

(Chris laughs) - Well, Bob- - Again, Chris- - Yeah, go ahead, Bob.

- Well, I was just... Again, logic tells us that at some point it has an impact and slows the economy down.

And so, you know, not having seen that yet is a bit of a puzzle, but there is tremendous concern that, that's part of the future.

And so, you know, state government on both sides of the border, you know, do we have enough money with all these surplus dollars that we have now?

How much do we put into a rainy day fund for if and when things do in fact slow down because of the inflation.

- You know, Pat- - And I wonder.

- Go ahead, Pat.

- Yeah, to your point, Chris, does it happen immediately or is it something that just suddenly we discover?

And to Bob's point, the behaviors aren't there yet, but I do believe that we're beginning... Again, I think it starts with a community that tends to be lower income.

I think they begin to pull back first.

And I think there'll be a point where we'll see it catch up, if you will.

Is definitely coming.

- Well, to the broader policy, Bob, you just said it about budgets.

And both Carolinas have billions of dollars in surpluses.

So are we going to look... And this is not an endorsement of one side of the aisle or the other one, but Bob, are we gonna look back on this moment in time and say, you know, sitting on that money and not allocating a budget surplus, maybe wasn't a bad idea.

- Well, there's so much money there that you can probably do both, right?

I mean, there's an opportunity to play offense on some workforce development initiatives on transportation to accelerate some major transportation projects, to cut taxes modestly and to sock some more money away.

The surplus dollars are probably a once in a lifetime opportunity to both invest where we need to, but also to save some money for the rainy day ahead.

- Pat, it's looking like North Carolina, and here we are, and I'll call it press time here on June 3rd as the taping of this program.

Is a lot of momentum surprisingly happened quickly after years of not even considering federal Medicaid expansion dollars in North Carolina.

Now it seems like if it gets through the House that the North Carolina General Assembly is going to be one of those states that does accept it.

How would you handicap it knowing that we're a little bit early before the actual airing of this program?

But is that one of these earmarks in North Carolina that budget surplus taking billions of dollars in Medicaid dollars?

How does this look six months or a year from now?

- Right.

So a year and a half, 18 months, 24 months ago, would you believe we would be having that conversation in North Carolina General Assembly?

So obviously, you know, from what we're hearing and the conversations that we're having, there's surprisingly a lot of interest, again, considering where we've been in the past, related to withholding a budget, because of the lack of that vote.

So it's interesting to be here.

As a chamber, we've not taken a position yet.

We're doing a lot of studying on that, having conversations.

So it's gonna be really interesting to see where we head, but there seems to be a lot more momentum taking place in this area.

- Bob, do you think that the General Assembly in North Carolina is emboldens the South Carolina State House to consider something similar?

- I've seen no evidence of that, Chris.

We do have a gubernatorial race this year.

It is gonna be part of the discussion.

Both of the two Democrat candidates who are running have said on day one, that they would accept Medicaid expansion.

But I do not see an appetite in the State House to take the same step as North Carolina.

- Are you feeling like you've got the wind at your back in the Palmetto State when it comes to one of your big agenda, one of your big priorities for you and your members has been the idea of tax cuts.

Is that going to be substantial?

- Well, there's a conference committee now.

The House and Senate have two competing tax cut proposals on the table.

So yes, we are going to get tax cuts.

The devil's in the details at this point, but we have long supported for more than five years, comprehensive tax reform.

These are tax cuts.

They're good steps in the right direction, but we'll be arguing as we go forward into 2023 and future years, we still need to take a more comprehensive look at our entire tax structure.

And frankly, we need to be more competitive, vis a vis North Carolina, which 10 years ago, (indistinct) cut and put in place a tax structure that's much more of a competitive advantage than what we currently enjoy.

- Pat, specific to North Carolina, more talk, as you said, 24 months ago.

Having the idea that North Carolina would accept Medicaid dollars.

No way, not gonna happen, here we are, it's a different world.

And also when it comes to cannabis, medical marijuana, North Carolina looks like it's on the precipice.

Would you forecast that that happens?

- Well, yeah.

What a surprise, right?

Interesting times that we are living in, for sure.

Yeah, definitely some interesting things taking place in the General Assembly.

I'm not sure that I buy the cannabis part of it.

It'll be interesting... You know, they have certainly proved me wrong before, so wouldn't be the first time, but I'm not sure about that one.

But the Medicaid expansion is certainly interesting.

I think when you look back on where we've been the past couple of years through COVID, through not having budgets, through now surpluses.

And into Bob's point about the opportunity that we have as a state, not only to increase our rainy day fund, 'cause I think North Carolina's certainly been focused on that.

But also to make some much needed investments in infrastructure, around transportation, and you know, broadband, what they're now looking at redefining what the term broadband means, which is very important.

In fact, in our legislative agenda here at the Chamber, we don't use that term anymore because it's too slow.

It's not effective.

You know, when you're talking about 25 down three up, that's not what our community needs.

Our community needs high speed internet.

So anyway, all of this comes back to a unique opportunity in our state to do some very interesting things.

- Well, and let me drop this in the mix.

So do all of these priorities, Pat, as you just talked about them, and Bob even South Carolina tax reform, comprehensive or not.

Do they get crowded out now that... And even in South Carolina, Governor McMaster is talking about gun reform in an indirect way.

So does gun reform now go to the fore?

And both General Assembly start to talk about what that means in states that were traditionally don't tread on me type of attitudes when it came to guns.

How does that unwind, Bob?

- Yeah, I don't think we know, you know, the timing of this is... Our legislative session has formally ended.

There are still some conference committees that are gonna deal with a very narrow list of issues, including the budget and tax cuts.

So things like gun laws, medical marijuana are really off the table until the next session of the General Assembly starts in January.

In the meantime, the State House is up for election in November.

The governor is up for election, of course, in November.

I don't know what the momentum will look like in January, whether it's dissipated from where we are today as a country or whether it's gonna become a priority.

I think the gubernatorial campaign will help us to see a little bit more clearly what the issues are gonna be come January of 2023.

- All right.

Pat, I'm gonna give you the last minute here and specifically around Tepper sports.

Obviously it has a social aspect, but it also has an economic development aspect.

And we literally have a minute left.

Pat, the idea that Tepper sports and entertainment, the owner of the Panthers, David Tepper, the owner of the Panthers, the owner of the Charlotte FC, MLS franchise, had struck a deal that seemed to be set in cement, no pun intended.

And were coming out of the ground with a multi-hundred million dollar project in Rock Hill and York County, South Carolina.

Now that is a regional effort, but that has seemed gone sideways completely.

not so much the social aspect, but not denying the social aspect.

The loss of good will possibly for the Panthers, for Charlotte FC.

How does all this play out now economic development standards in the region for you?

- Wow.

Again, another situation.

- (indistinct) a minute by the way.

Can you do that in a minute?

- Yeah.

I think I can.

Who to thank, right?

Who to thank we'd be here talking about this?

Anyway, I think that this is certainly an interesting challenge for economic development going forward.

I think it'll be very interesting to see how this plays out.

Not only from a good will standing, but trust is an important part of business.

Business hates the uncertainty and this is certainly uncertain.

- Bob, you know the lay of the land.

Very quickly, is it gonna get worse before it gets better with this back and forth?

- Chris, I've never seen anything like this.

It's bewildering to see a public private partnership to crash and burn like this.

What is the end game, where the Panthers' gonna end up?

We don't know that.

We do know that Rock Hill has a beautiful piece of land.

It is on the interstate.

There's new interchange that is under construction as we speak.

Something very positive will happen to that land.

Unfortunately, it will not be the Panthers headquarters and training facility.

And again, bewildering, and it makes you sick to your stomach to drive past that unfinished building and to wonder what in the world has happened to cause this deal to go south.

- The chief financial officer of any organization tends to know where the bodies are buried.

And not just fiscally, but in general.

we are glad to have, again, we welcome back to the program, the treasurer of the State of North Carolina, who is in effect the CFO.

Your honor, welcome back to the program.

Good to see you, sir.

- Thank you very much for having me.

- Let's start with ESG.

It is generally thought of as environmental, social, and governance.

ESG ratings matter.

A couple of issues here, Mr. Treasurer is, how do you think ESG needs to be deployed or applied to what South Carolina's financial structure is?

And maybe just as importantly, what standard do we start to use?

Because ESG seems to be a very fungible way of describing things.

- Well, of course, you know, ESG is problematic for a lot of reasons.

There are literally hundreds of different standards that are used by different boards and commissions and entities.

So there's no conformity.

Also, we've always had components of ESG in our rating.

So the states, we use the big grading agencies like everybody else.

And now the last couple years, they've started giving us ESG ratings.

And South Carolina did pretty well.

We were neutral, which is great.

A lot of states did far les well.

So we are happy about that 'cause we think we're well run state.

A lot of the state treasurers now and other officers are beginning to push back.

There is too much politics and subjectivity in the standards and it really infringes on our abilities to be true to our constituents.

So we're a sovereign state and a federal a system.

Our citizens rule.

They tell us what to do.

Our power is derived from them.

And if we allow unelected folks to impose upon our standards for their investments, that's a real problem for us.

So we started kicking back about that.

We do appreciate what the rating agencies have done.

I think they've done a fine job of rolling this out.

You know, it wasn't easy.

I've been treasure now for what, 12 years, and we've never had a crossword with the rating agencies about anything.

We just went through our round of ratings.

And they know how I felt about this.

But we're pushing back because we just don't think that's appropriate for us to be corralled, if you will, into this ideology that is more political than it is financial.

- Okay.

Bob, question?

- Mr. Treasure.

Good morning.

How much money do we have in state of local government in South Carolina, beyond what we've ever seen in our history?

- It's incredible.

Money keeps pouring in.

Let's see, I've gotta...

I have to write down the numbers because you can't remember them.

They change so often.

But the COVID bump has been great.

Part of that COVID bump was $13.8 billion in the COVID Acts and APA.

For the fiscal year of 22/23, that translates into $5.98 billion extra, $6 billion extra.

So for a state like South Carolina, that's a huge sum money.

And fortunately, I don't have to decide where it goes.

Our friends in the General Assembly have to worry about that.

And kind of wanna put in a plug for them because folks don't realize how hard it is as a part-time member of a General Assembly, to roll into your session in January and find out the whole game has changed.

And so I think they've done a fine job.

They could have done better if they've listened to me on everything, but they didn't.

The total state budget this year, it's gonna be about $35 billion.

And that's exclusive of the big APA funds.

So it's great.

Our unemployment is back up to pre-pandemic levels and our unemployment is lower than it was.

And our employment is higher than it was.

So life is good.

- Pat.

- Well, Mr. Treasure, I'd like to ask kind of a follow up to that.

So here's all this money, and of course I know you don't make the decisions about where the money is spent.

However, we've been talking about inflation.

And what does that look like for you?

What are your concerns?

And what's keeping you up at night?

- Well, you just mentioned it.

Not just inflation, but my view of the future is darker than most folks.

So I have to be careful about it.

You know, I don't wanna be Danny dismal that comes in, and you know, the three of you guys are tearing up before we leave, but I am really concerned about it.

I'm pleased that our state funded its trust funds, if you will.

And they even put money aside on top of that.

Well, we've had great growth.

And in fact, it appears to, it's gonna continue well through next year at this higher level.

Well, they've already anticipated an extra $400 million for the first quarter.

So we're looking at more money, but we want to be conservative, to plan for less money, and to make sure we have plenty of money on hand.

- So let me follow up with that.

You said you're darker than most on this.

Are you concerned because of personal financial statements, because of households and families?

Are you worried that this tremendous amount of liquidity, as you just described South Carolina having a budget surplus, but also the federal system that poured so much money into...

I mean, what is it specifically that has you spooked?

- Well, as you know, personal debt starting to go back up, credit card debts on the rise.

And that doesn't bother me as much 'cause all that's, you know, can be cyclical, especially if you look at a long term.

I'm much more concerned about what's happening around the world.

If you look around the world at what's going on, from Ukraine to our energy situation, we've got serious problems.

How can I say this?

The state treasure's also gotten involved with some of the administration when the administration was in effect putting the damper on domestic production of energy.

And which means we have to purchase it from elsewhere.

And as we go into the supposed transfer to greener energy.

Well, there are a lot of concerns about the climate and what it's gonna do with the planet.

Many of them are founded, some are unfounded.

But the one thing I know for sure is, that the competition for scarce resources like energy, causes present day real problems.

The history of mankind is a armed struggle over these resources.

And at no time have we needed the resources more.

So I worry about this bigger situation.

I spent a lot of time in Ukraine.

I understand what goes on there.

I used to have a house there.

So I've understood what's happened there from the beginning.

And I am worried about those things.

You look at what's happening in the tech sector and that's foreshadows a lot of other things.

So I'm just very dark about it.

I think South Carolina has always... We don't go as high as others and we don't go as low as others.

We're kind of in that middle branch as our demographics.

So I feel better about us personally, but as far as the country as a whole, I'm very worried.

- Okay, Bob?

- So Mr. Treasure, the South Carolina House and Senate have gone to conference over the budget and tax cuts.

What do you anticipate particularly as it relates to the tax cuts?

What do you anticipate coming out of conference?

- I think there's gonna be a real brawl.

I think we haven't seen a brawl like this in a long time.

It'll be fun for those who don't have to be in it.

But I do think that they will meet in the middle.

But you know, they have more money than they started with.

You know, when they started to go into conference, now they've got more money.

So that should ameliorate some of this.

But no matter what happens, it's good for everybody.

We're spending more money on education, law enforcement, healthcare services, infrastructure, economic development, something near and dear to your heart.

It's all reaping this benefit.

Now what we have to make sure is it's spent properly.

And I've been urging everybody about, don't be afraid to save money, don't be afraid to hold it to the last minute before you spend it.

At the treasurer's office and at (indistinct) general's office, we can help with the building and the checks part of it for last minute purchases.

We don't wanna rush to spend.

We wanna make sure that all these billions of dollars that are transformative, are spent in a way that's appropriate for our stay.

- Pat, we have about two minutes.

- Yeah.

I just wanna kinda end on a little different note.

Workforce development is very important to us here at Chamber.

I know it's very important to Bob as well and to our region.

And as I call myself a recovering banker, I'm a banker in my former life.

Tell me a little bit about the financial literacy program you have.

I'm taking us in a totally different direction, but it comes back to this whole thing around, if your vision is somewhat dark, then you must be very focused.

And I know you're an advocate for financial literacy.

Wanna share a little bit about that and the impact you think that can have on the residents in South Carolina.

- I came in the office just after the 2000, 8, 9, 10 debacle.

And you know, I had every fancy idea given to me of what happened.

But what really happened was Americans thought that everybody was entitled to two new cars, a house, a beach house, and a pool.

We just didn't understand what the limits of buy income were.

So that's why we were changing mortgages.

That's why we were doing all these things that allow us to get in trouble.

So we've worked hard on it in our little corner of the world.

We're doing something different.

A lot of treasures involved in financial literacy.

We are paying teachers.

We've gotten private money.

We're teaching teachers about how to teach financial literacy in whatever class they're teaching.

If it's biology or it's physic, whatever, it doesn't matter.

We're actually paying teachers and giving them bonuses so that they can insert this into their classes.

And then we give them additional funds if they teach other teachers.

So we've got our own multi-level marketing and we're trying to force into a crowded curriculum, real financial literacy.

It doesn't take most financial literacy to understand how to manage your money, but unfortunately, as a country, we do a terrible job at that.

- Literally we have about 30 seconds left.

Mr. Treasure, I wanna ask you this one thing.

Is there a shorthand way of figuring out the difference between inflation and price gouging?

- No, but I think... We have so many investment companies come through here and I ask them all about inflation.

And the one thing they never say is, we printed too much money.

Well, we all learned that in freshman college.

And so that bothers me that we are reluctant just to get down to the basic fundamentals.

Supply chains, price gouging, all those things come into it, but we've got a money supply problem.

And we gotta work our way through that.

Let's all pray for the fed.

Make sure they get their rate hikes appropriately.

- Thank you.

I'm sorry.

I asked you a complex question, didn't give you a lot of time.

Thank you sir for being on again.

Bob, nice to see you.

Pat, good to see you.

Happy summer.

Until next week.

I'm Chris William.

Goodnight.

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