- Hi, I'm Mitch Kokai, filling in for Marc Rotterman.

Coming up on "Front Row", North Carolina Treasurer Dale Folwell joins us to discuss some of the state's most important issues, struggling local governments, the future of pension and health plans, and much more, next.

[dramatic music] - [Announcer] Major funding for "Front Row" with Marc Rotterman is provided by Robert L. Luddy.

Additional funding provided by Patricia and Koo Yuen through the Yuen Foundation.

Committed to bridging cultural differences in our communities.

And by, funding for the Lightning Round provided by Nicholas.B and Lucy Mayo Boddie Foundation, A.E.

Finley Foundation, NC Realtors, Rifenburg Construction, Stefan Gleason.

A complete list of funders can be found at pbsncc.org/frontrow.

[upbeat music] ♪ - Welcome back, joining the conversation, Donna King with Carolina Journal, political analyst Joe Stewart, radio talk show host Nick Craig, and North Carolina Treasurer Dale Folwell.

Welcome to you all.

When we think of a treasurer, we think of someone who looks after the money and that's part of the North Carolina State Treasurer's job, but not all.

Our panelists are going to explore some of the main issues the Treasurer's Office is working on these days.

And we start with Donna King.

- Absolutely, I'm so glad you could join us here at the table.

One of the roles, you have lots of different hats you wear as State Treasurer, of course, but one of them is chairman of the Local Government's Commission.

You know, I we've been hearing a lot about local governments lately, you know ones that might be struggling and there's all kinds of issues with annexation.

What are you seeing for our local governments after shutdowns, economic downturn, all that kind of thing that your commission really has to deal with?

- Well, what we're seeing at the Local Government Commission is a need to focus, not just on the torso of our state with our larger cities and counties, but what I consider the rural part in North Carolina, the arms, the legs, the toes and the fingers of our state.

We have had to take over, unfortunately more local governments than ever in the local government commission history of over 80 years.

And for your viewers, you know the Local Government Commission was formed nearly 80 years ago after the bankruptcy of Asheville, and we were one of the only states that had one for a period of time.

So we've got, it's like a Loretta Lynn country music song that kind of builds you up and burn you down a little bit.

[panelists laughing] Next week, we're going to be releasing Pikeville back to the citizens we took over Pikeville 15 months ago, but through discipline and strategy not just Pikeville but Aurora before them.

They have demonstrated the transparency, the competency and all the financial ingredients necessary to now run their own operations.

- [Donna] For sure.

- But we have some serious problems going on with the Local Government Commission.

I sit on that commission with Secretary Marshall, Secretary Penny, and of course, State Auditor Beth Wood and you know, when she and I are on the same meeting, when I'm actually the calm one in the room, [panelists laughing] somebody's having a bad day.

[panelists laughing] - [Donna] Sounds like it.

- Well, one of the functions that served by the commission is to look at the issuance of debt that comes through local government, cities, and counties, as well as North Carolina unique in many regards so that all of that debt flows through the Treasurer's Office.

So you're looking at all of that with the changes in the interest rates markets.

What are you seeing for local governments that are in need of issuing bonds for capital projects that they have locally?

- Well, you know, starting with the national debt, which I think is a national security issue, the great news for your viewers is that the state debt of North Carolina's gonna fall 60% over an eight year period.

Unless you're as old as Calvin Coolidge, you can never recall any state or local or federal government ever saying such a thing.

So the state debt's falling 60%, but we do have major challenges going on in some of our local communities with interest rates going up.

You know, and this is sort of like a Paul Simon song, "One Man Ceiling's Another Man's Floor".

You know, when we had low interest rates that was fantastic for people to invest in their homes in their minds, and their businesses.

But it put tremendous pressure on our pension plan, which we'll talk about in a moment.

So these higher interest rates are raising the cost of financing these very important needs of public education, public safety, public works and public roads across our community.

- [Donna] Sure.

- Well, when you look at the Local Government Commission, there's a story down on the coast that's interesting with the town of Winnabow which is in Brunswick County and they're wanting to incorporate themselves as a town, but it's not actually for the reasons that, you know, you've described in the past of the LGC.

It's because they're afraid of annexation, another government stepping in and becoming a little bit too extreme with what they're doing.

And that's been in front of the LGC.

What have you guys had to say about that?

- Winnabow has applied to be a city.

Our staff had rejected that application, but I've committed to work with the community leaders of Winnabow to figure out why they're feeling this pressure regarding annexation and see if we can't get something done legislatively that would make them feel better.

- Well, it's interesting you talk about the legislatively I think it was Bill Raben passed Senate Bill 9-11 which brought Leland's annexation from three miles is where they could go.

Now it's only a mile and a half.

So there has been some push in the GA for that, which, you know, they're trying to protect their town and they don't wanna be, you know, gobbled up by another municipality essentially.

It's pretty interesting.

- That's exactly right, and for the first time in our history, we have actually deincorporated a town recently called East Laurinburg.

- [Donna] Oh, right.

- Who had not consistently produced an audit in 10 years.

The state auditor found checks made out to petty cash.

The problem is, there's no petty cash account at East Laurinburg.

The person that signed the front of the check, signed the back of the check.

Just a few issues there.

So East Laurinburg will always be a community, but it'll never be a city.

And of course after that, the state auditor went to Spring Lake where she found nearly a half a million dollars of money that had been embezzled, including checks made out to a nursing home on behalf of the embezzler who put her mother's name on the memo line.

- [Nick] Wow.

- So to build confidence in your viewers, this is an example where Republican state treasurer, a Democrat state auditor, and the US prosecutor Michael Francis Easley Jr. have come together, arraigned and this person has pled guilty to these charges.

So as an example of state and federal government across party lines coming together, because as Governor Martin always tells us, doing right's rarely wrong - Now lots of important issues with the local governments in North Carolina and the treasurer plays a role there.

Another thing you're involved with is banking.

I know that's something that's caught your attention, Joe Stewart.

- Yeah, Treasurer, one of the statutory functions of the State Treasurer service chair of the State Banking Commission oversees regulates all of the state chartered banks.

Tremendous changes taking place in the financial services industry.

We see federal charters now significantly.

The new banks being created in the United States are non-terrestrial, meaning they have no physical presence.

They're conducting business entirely over the internet.

What sort of challenges do you see for North Carolina banks in that new environment?

And what can be done to make sure people in the toes, in the fingers, the parts of North Carolina where there aren't necessarily branches of banks now, that they can have access to financial services?

- Well, let me look up what non-terrestrial means.

[all laughing] But to answer your question, I do chair the State Banking Commission.

It's one of my 20 duties as the Keeper of the Public Purse.

I'm honored to be there with the board.

Two small institutions you may have heard of that we regulate are BB&T Truist and First Citizens Bank, to give you an example.

So we're very concerned not only about the impact of higher interest rates, especially as people are trying to get the joy of achievement and upward mobility in their life, but we're also interested in what you just described and the regulation associated with that.

The number of state-chartered banks has fallen more than in half over the last several years.

We just had our first couple of applications over the last couple years for new bank creation in North Carolina and we're excited to see more of those.

I do want to take an opportunity to applaud the bank tellers of our state.

It's indescribable what bank tellers do.

Their intuition to protect the elderly, to find people who got money out of NC cash and somebody's trying to take 25% of that money, to figure out whether my plumbing friend had his check whitewashed out of his mailbox.

It's incredible the positive impact that bank tellers have on our economy.

- Well, and it's interesting that you talk about, Joe, some of these new-style banks and for younger persons like myself, it's kind of cool to not have to go into a bank, but that obviously brings forward some challenges, especially going back to what Joe said, the arms and the legs and some of these further out communities, that might not necessarily be accessible for them.

They might still need a physical branch to go in and cash a check and do some of those things.

- Exactly, And it all comes back to our need to have broadband across North Carolina.

So it's not just efficient water and sewer rates, affordable electricity, good public health and public education, but broadband to drive these issues that you refer to.

- It still feels like there's a bank going up on every corner in our neighborhood.

There's always something going up.

One of the things I was interested in with the collapse of the cryptocurrency FTX in the news this week, there's $2 billion missing I believe of client money in this cryptocurrency.

Is there anything the state banking commission does, can do?

What does it mean for your job as a treasurer?

This is a very new territory for me and I really don't know a lot about it.

- Well, Katie Bosken, who's the Banking Commissioner, and Ray Grace before her have been keeping their finger on the pulse of this crypto issue.

It's a serious issue.

I think Congressman Representative, now gonna be Chairman of the US Banking Commission is gonna be looking at this in Congress.

I'll answer your question biblically.

As far as the pension plan is concerned, this is true yesterday, it's true today, and it's gonna be true tomorrow, we have never invested like other pension plans have in either Bitcoin or cryptocurrency or SPACs and we will never do that.

- Very interesting.

- So we've already heard Loretta Lynn, Paul Simon.

I think it was the Gatlin Brothers who said "all the gold is is in California".

[laughter] On banking issues, is that something that we really need to be paying attention to, where things stand with, as you mentioned, BB&T Truist?

Probably Charlotte has been such a huge banking community.

It's gotta be important for North Carolina to keep that banking community strong.

- It is important.

There's another state that claims to be the second banking center of the United States.

I'm just saying, as State Treasurer, we're the second biggest banking state in the United States behind New York.

We have a fantastic history of bankers in this community.

And I want to say that I wouldn't be sitting here as the Keeper of the Public Purse or the State Treasurer but for a community banker who gave me a $1,200 unsecured loan when I had nothing in order for me to take a CPA review class and live on $20 a week while I studied for the CPA exam.

So when we talk about the bank tellers, it's also loan officers who give people the benefit of the doubt that allows them, like me, to have the joy of achievement and upward mobility in my life.

Bankers, bank tellers, and that whole industry play a very important role in that.

- Big issue for the State Treasurer involving the pension plan and the state health plan.

I know Nick has a question there.

- Yeah, it's interesting when you look at pensions in retirement, and especially inflation right now, it's hurting people on fixed incomes the most, which is a lot of your retirees.

We've seen some stuff going on with social security with a little bit of an increase there.

How about for individuals that are part of the pension plan here in North Carolina?

Are they going to be seeing any sort of increases?

- Well, the pension plan, even though it's one of the best funded pension plans in the United States, if not the world, has had, as Joe knows, some headwinds for about the last 15 years.

These are all blessings in our everyday life.

Low interest rate's a blessing for our economy.

People being able to retire early is a blessing for them individually.

And then, of course, increased life expectancies are the biggest blessings of all.

When I barely got out of high school in Winston-Salem in 1977, we had 300 people over the age of 90 getting a pension check.

Last month there was 8,000 people over the age of 90.

And Donna, the good news for you today is our actuaries have for the first time determined that a female who comes to work for the state and local government is now expected to get more retirement checks than paychecks.

So going back to your question, these are all the things that put pressure on our pension plan.

Now, regarding the cost of the supplement of the General Assembly not by taking money out of the pension plan, but out of their own budget, appropriate a 4% supplement for all of our retirees, which was paid out last month.

- Can you explain the pension plan for folks listening that they hear it, they know what it is, they know what a pension is, but what does that mean for here in the State of North Carolina?

What is it that you do with the pension plan?

- Well, it's the reason I talk the way I do and say the things I say because behind your health and your faith and your family, the two most important things for those that teach, protect, and serve are the safety and security of this pension plan and the state health plan.

Our pension plan is $111 billion this morning.

It's the 25th largest pool of public money in the world.

It is four times larger than the state budget.

For the fiscal year, we were down 7%.

Georgia was down 14%.

So I want to take an opportunity to congratulate the people back at the Treasurer's Office of the Investment Management Division.

Whether it's Gill, Bowls, Moore, Cowell, or Falwell, they've never gambled or pretended.

- To have a crystal ball regarding this.

It's always been one of the best pension plans in the United States.

And what it means is that we have to continue to manage this.

And these interest rates going up have allowed us to put money to work that previously we were earning 1% on a year ago.

We're earning 5% on that money now.

And as said, as long as I'm the keeper of the public purse, I'm gonna preserve, strengthen, but figure out a way to sustain this plan, for not just this but the next generation of public service workers.

- Sure, sure.

Another big job for the state treasurer, managing the state health plan.

This is a huge deal.

You've got some 700,000 folks who are on the state health plan.

But you recently released a report that found that it could be insolvent by 2025.

That's pretty soon.

It's alarming.

Gimme some details on that and what you're working on to try and keep that from happening.

- Well the details are that even though nothing compares, which is what my lapel pin stands for, financially, with our balance sheet, our surpluses, our AAA bond rating and paying down the state debt and our pension plan, when I was sworn in, I inherited a 32 billion, that's billion dollar unfunded healthcare liability.

Your viewers should be asking themselves: "How could the pension be one of the best funded and the health plan be one of the most insolvent?"

And the answer is not emotional or political: it's mathematical.

For nearly 40 years, Promises were made to state employees; after five years and one day of service, to be eligible for lifetime healthcare.

But no money was ever put aside for that.

So I'm dealing with the healthcare situation for mathematical reasons.

And we just sent a letter to the general assembly saying that we're gonna need about $5 billion over the next few years to keep the health plan solvent.

We have done a fantastic job with our retirees for our Medicare Advantage: zero premium to them, zero cost to the taxpayer.

We just renegotiated our pharmacy benefit management contract, saving $800 million.

We've done all that we possibly can.

We've done an enrollment audit to make sure people aren't on the plan who aren't supposed to be on the plan.

We had one gentleman call in and said, "I haven't been married to her for 10 years.

I'm not supposed to be on the plan."

And when you deal with a plan of this size, you can just imagine what's going on there.

But the bottom line is is that we have to break the healthcare cartel in North Carolina.

The consolidation of healthcare in the hands of fewer and fewer of these entities is resulting in lower quality, lower access, and higher cost.

And we're in favor of higher quality, higher access, and lower cost.

- I'm gonna leap back in now because you've already transitioned to one of our next topics, and that is what comes next.

We know there's going to be a new legislature, a new legislative session.

There will be some priorities you will have and that you think the state should have.

Donna has some questions on that.

- Yeah, absolutely.

So what are you looking for?

We've been of course following the Leandro decision from the North Carolina Supreme Court; legislature might address that.

There's lots of things that could really impact the state treasury and your role as treasurer.

What are you gonna be looking for as they gavel in in January?

- Well, what I'm gonna look for is what I always look for, and that is fully funding the pension plan, fully funding the state health plan and the prescription drug plan, but also giving us the enabling legislation we need.

For example, on the Medical Debt De-Weaponization Act.

By the way, Prop 209 just passed in Arizona by 74% two weeks ago.

That had to do with medical debt de-weaponization.

All we really want out of healthcare is this: is we want the healthcare cartel to tell people what things cost.

We want them to start offering a level of charity care that's equal to the billions and billions of dollars of tax benefit they get.

And we want them to stop weaponizing people's credit scores when they don't pay their bill.

So getting the Medical Debt De-Weaponization Act is very, very important to us.

And one component of that that you may be interested in is I talked to a lady four weeks ago who unexpectedly became a widow at 47.

Her husband was in the hospital and had $200,000 worth of medical bills in two days.

Now her credit score has been weaponized and destroyed.

So the Medical Debt De-Weaponization Act on healthcare, CON reform obviously, and fully funding the state health plan, fully funding the pension plan, and the debt services all going in the right direction with the debt of general obligation debt falling by 60%.

- Sort of going back to the pension plan, in the recession in 2001, there was some discussion: was it time for the state to migrate from a defined benefit plan to a defined contribution plan.

Younger employees wanting more flexibility in terms of a retirement benefit.

But given these liabilities and given the challenges faced in managing a a public pension fund, do you think there's room for the legislature to discuss the possibility of migrating to a defined contribution plan?

- Unfortunately, a lot of people get elected to offices, and the night they get elected, they've hit their peak.

[interviewers laughing] And what I've said yesterday, today, and tomorrow is that as long as I'm the keeper of the public purse, I'm gonna figure out how to preserve strength and sustain this plan, for this and the next generation of public service workers.

But it's gonna be very difficult with these headwinds that I talked about, which are all blessings, like increased life expectancies.

What I would like the general assembly to do, which many local governments do, is start providing some level of 401k match.

And I think it should be bifurcated so that especially the lower-income people may get a little bit more than higher-income people who work for the state.

The difference between the participation at the local level in our 401k and the participation at the state level is double.

We have twice as many people participating at the local level for their own retirement readiness in the 401k than we do at the state level.

Because most of the cities and counties make a little match, even a small match.

So one initiative would be to get the general assembly, it could be a $100 a month.

It could be $50 a month.

People, if they think they're getting a match, they may participate more.

And that would make them more retirement ready.

And I'm totally in favor if the general assembly can find the juice to do that.

- Very interesting.

- When you talk about the general assembly, obviously you have to work with them pretty closely.

When they make good financial decisions and smart financial decisions, it looks like it helps you in what you do.

If they make bad financial decisions, does that make your job tougher at the treasurer's office?

Well, it does.

And as I said probably three or four years ago when it came to the rating agencies, somebody says, "Did the rating agency call you on X, Y, and Z?"

And I said, "I don't wait for them to call me: I call them."

'Cause us having our AAA bond rating is very, very important.

I have a great working relationship.

But at the end of the day, as the keeper of the public purse, my loyalty is not to anybody in our party.

Our loyalty is not to Big Wall Street or Big Healthcare or Big Pharmaceutical companies.

Our loyalty is only to those that teach, protect otherwise serve and taxpayers like them.

And to go back directly to your question since we manage $250 billion that is nearly 10 times the size of state budget.

When the General Assembly helps me succeed, then they succeed, enormously.

- Well, we've had an interesting conversation about some of the things that the treasurer is doing but now I want to go around the horn again and just have people tell us something else that we should know about what has happened in the state of North Carolina in policy or politics this week.

Let's start with Dawn.

- Sure.

So, now we, the Civitas poll came out this week.

This is a first real pulse check on where North Carolinians are after the election.

And it was held just in the days after the election.

Couple of things that I really noted out of it.

One, optimism is actually on the way back up.

So, you know, optimism on the direction of the country still underwater though, you know is like 63% still think we're going in the wrong direction.

But that is down just a little bit since it was before the election.

I don't know if that says people are feeling a little better they're not seeing so many ads.

You know, I don't know exactly what that means but I think it's promising.

But at the same time, the vast majority of North Carolinians think we're already in a recession or headed there, which I think is why it's so important that we have Treasurer Folwell here with us to talk about what we can do as a state to be ready.

- [Marc] Joe?

- Yeah, one of the things that came out after the election certainly the Republicans took a super majority in the state Senate, but it was heralded that they had come up one seat short in the house of a super majority.

I would contend that 71 is a practical super majority for the Republicans on the outside.

You only need one Democrat to cross over the line to be able to override a veto as a result of that.

And I think given the fact that the state is sitting on a relatively large balance in the general fund there'll be lots of money for projects and districts in this legislative session.

I think as we start the 2023 session of the general assembly, it's safe to say that Republicans do have a super majority in both chambers.

It's a little trickier on the house side but I think it's just true that they have the numbers to pass and override a veto of Governor Cooper.

- [Marc] Nick?

- Over the last couple of years, there's been a lot of conversations about education and board of educations and things going on within the school system.

And as we're still, you know, results still trickling in from the midterm elections in the state of North Carolina out of the partisan Board of Education races which I think there was about 190 of them that people were actually registered a Republican or a Democrat, 75% of them went towards Republicans for that.

And out of that, 40% of them were clean sweeps of Board of Educations changing the power of those boards.

I think it goes to the fact of folks were very unhappy with what they saw with remote learning and school shutdowns and things of that nature.

And parents and guardians throughout the state of North Carolina want to try something new and they're gonna have a chance to do that when these new boards and commissions get sworn in here in a few weeks.

- Well, we've thrown a lot of questions at you but this is your opportunity, Treasurer Folwell.

What do you hope that folks who watch this show will be thinking about?

- Well, over the last two weeks I think what we've seen is that rage lost, R A G E. People are no longer interested in Ernest T. Bass where every problem's a window and every solution's a rock, and you just get to throw a rock, break a window about a particular problem, giggle and just go and throw another rock.

You know, eventually a government is about actually leading and fixing the problems that we have responsibility for which is very important.

The second thing is that I think people are looking for somebody to vote for because in the last election there seemed to be a lot of folks who just voted against something else.

And lastly, my optimism for next year is the same as my optimism for last year.

If any public officials are gonna stand up and show up, if they can't do that by attacking a problem and not attacking people, then they should shut the heck up.

- Well, if you had filibustered a little bit longer I would not have had time for this last question.

But I do have a very brief question for you.

We know that one thing that's on the table is this Leandro school funding plan.

You may be in a position where you actually have to do something on this.

What are you thinking about with Leandro right now?

- Well, there's two gates that Leandro would have to go through and Leandro's, sort of like yoga, you know, the secret of yoga is to pay attention to your mat and breathe.

And this battle regarding Leandro between the general assembly and the courts and the executive branch has been going on for two decades.

But very briefly, the controller who's appointed by the Governor, that's - - [Marc] We're actually not gonna be able to get into it, so at this point, you're waiting and seeing, right?

- [Folwell] Yes, waiting and seeing.

- Okay, waiting and seeing, very good.

Well, that's it for us.

Thank you to the panel.

Thank you to Treasurer Dale Folwell, and we thank you for watching and join us again next week on Front Row.

- [Narrator] Major funding for Front Row with Marc Rotterman is provided by Robert L Luddy.

Additional funding provided by Patricia and Koo Yuen through the Yuen Foundation.

Committed to bridging cultural differences in our communities.

And by.

Funding for the lightning round provided by Nicholas B and Lucy Mayo Boddie Foundation, A.E.

Finley Foundation, NC Realtors, Rifenburg Construction, Stefan Gleason.

A complete list of funders can be found at PBSNC.org/frontrow.

[dramatic music] ♪