Local Politics

Cowell: N.C.'s financial stability at stake with pension funds

Posted March 23, 2009

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— State Treasurer Janet Cowell said Monday that North Carolina risks losing its high bond rating unless lawmakers adequately fund the state pension funds.

The funds lost $17 billion in value last year as the stock markets declined, and they began 2009 valued at $60 billion. Cowell said the funds have enough money to make payments to retired state workers and teachers.

Printing money Slipping pension fund threatens N.C. finances

Last month, however, she called on lawmakers to put $358 million into the system over the next two years to make up for the losses and for years of small state contributions.

Gov. Beverly Perdue included $42 million for the pension funds in her proposed budget.

"We sort of need to dial up the heat a little bit and have them understand that their crown jewel of fiscal stability is fragile," said Cowell , who is scheduled to speak Tuesday to the Senate Appropriations Committee.

North Carolina has prided itself on the fact that its pension funds are fully funded, but she said the funding level could drop from 100 percent into the 90 percent or 80 percent range because of the recession's impact.

"It's strong if you take action. If you do not take action, the funding of this system and the stability of this system will erode quickly," she said.

The state contributed 8 to 10 percent of annual payroll to the retirement system in the 1980s and 1990s. In recent years, that contribution has been between nothing and 3 percent because investment gains covered the system's obligations.

"The problem is, for eight years, there was neglect, and our cries for more funding were not heeded," said Ardis Watkins, legislative director for the State Employees Association of North Carolina. "When the economy turns around, there's no question we expect that there will be no more neglect."

Cowell said that, even if the state had contributed more money in recent years, making up the 2008 losses would still require "aggressively higher contributions."

Keeping the pension fund healthy is part of a financial plan that gives the state its high bond rating, she said. Withholding contributions, combined with quick fixes like state employee furloughs and cutting reserves, could hurt North Carolina's ability to borrow, she said.

"If you don't aggressively fund this pension plan, we will very rapidly start down a slippery slope," she said.

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  • Fun Mar 24, 2009

    Nukka, she say's she attended Wharton Business School...maybe she just attended, never graduated. When she was a legislator she was on WRAL with Meeker apologizing for the state changing zoning within a certian area. She said "I sponsored the bill, I never read it" I cant believe people voted for this woman for treasurer...she's a real piece of work!

  • Nikka Mar 24, 2009

    Cowell is the same person who about a year ago wanted to squander millions of dollars at the recommendation of 3M's lobbyist by making NC a 2 plate state. Later she said on her blog that she didn't realize the cost implications.

    What does she know about finances? Nothing!

    I have no ideal how she was elected.

  • ohmygosh Mar 24, 2009

    "Eight years of neglect..." Read Gov. Mike's watch. Perdue was around too.

  • Bendal1 Mar 24, 2009

    If our pension plan has been so well managed, why did its managers tie it to risky investments? Did the lure of easy money (and the legislature not funding it adequately) cause them to invest in these risky programs?

    BTW, what's with the new allowed comment times? The later cutoff time is fine but why go to 8:00 am instead of leaving it at 7:00 am?

  • Fun Mar 23, 2009

    I got it Janet...write a book with proceed to the plan. Title it "Treasurer's Error-$358 Million Dollars" Subtitle: "Real Life Lessons Why Everyone Should Learn To Manage Risk Through Putting on the Hedge.

  • Mean Old Mom Mar 23, 2009

    My "pension fund" needs replenishing too.

  • Fun Mar 23, 2009

    Why did you let the money "get away-vanish" Janet? You were in office. Must be a buy and hope gal. Somebody was selling just no you huh?