This post appears here courtesy of the Carolina Journal
. The author of this post is Theresa Opeka
North Carolina continues to be in good shape financially, according to State Treasurer Dale Folwell, but he does have some concerns for next year now that the U.S. is soundly in a recession despite the Biden Administration saying that it isn't.
During his monthly "Ask Me Anything"
conference call, he said didn't know of any statistics that the White House could be looking at that would lead them to a different conclusion other than that we are in a recession after having the gross domestic product fall for two consecutive quarters. Folwell said historically high employment numbers and historically low unemployment numbers are complicating the issue because unemployment numbers only include those that are able, available, and seeking employment.
Folwell said that despite food and energy not being included in inflationary numbers, people know it's costing them more to drive, eat, and live their lives, citing a statistic that, according to Moody's, the average family is spending almost $6,000 more than they did last year.
"Generally speaking, you don't talk about recession and inflation in the same sentence,"
he said. "Because recession would indicate less demand for goods and services, which would cause the price of things to fall. That is what is making this so incredibly unique and difficult, especially for low and fixed-income people of our state."
Preliminary numbers for the fiscal year ending June 30 show that the state's pension plan is down 7%, following a decline of 3.5% during the first quarter, according to Folwell.
"Being down 7% for the fiscal year is a tribute to the fact that we have always focused on the pennies and paper clips, and our investment management division has always been very conservative in the management of our pension,"
In contrast, Folwell said Standard & Poor's for that period was down almost 20%.
The state is spending $7 billion on a gross level for benefits this year. and the state has preliminarily approved premiums for the State Health Plan for next year. Folwell noted that there is no increase in family premiums for the fifth straight year, although he expressed disappointment that he could only freeze premiums, but not lower them.
"We want to lower family premiums because we think there is a high degree of uninsured people who are the spouses and children of state employees who may avail themselves of a family premium because it is cheaper,"
Folwell did share his concerns about healthcare costs going up, including the possibility that contracts will be renegotiated upward next year. "I am very concerned that the State Health Plan is going to need $5 billion more incremental dollars over the next several years in order for it to remain solvent. This was part of the unfunded healthcare liability (that I have talked about for the past 12 years), and that is what we are facing right now."
Thee state's Medicare Advantage product will continue to be at a $0 premium to members for nearly five years and S4 a month to dependents, with no cost to the taxpayer, and the state has saved nearly a billion on its pharmacy benefit management contract.
When asked if those with state pensions will see a cost-of-living adjustment this year, Folwell said they can't authorize or recommend a COLA because there are no statutory investment gains inside the plan, which would be a violation of an agreement the state entered into before he became treasurer.
Aware of the challenges that pensioners face as costs go up, Folwell said the pension plan was never designed for people retiring earlier than they have ever before, and people living longer.
"We are now in a situation for the first time in our state's history where there are less people paying into our pension systems than are not,"
Folwell said. "For the females in our state who joined the local or the state system, they are now actuarily expected for the first time in state history to draw more retirement checks than paychecks. The money that was paid for the supplement to the retirees this year did not come from the pension plan. It was a direct appropriation from the General Assembly."
The General Assembly gave a bonus to the retirees in the teacher's plan, the largest, Folwell says, in the last quarter century in the state.