State Treasurer Says State Needs To Give Retirement Fund Financial Boost
Posted February 6, 2003
RALEIGH, N.C. — The state employees' retirement fund needs a financial shot in the arm from the General Assembly after two consecutive years of relatively negligible funding, State Treasurer Richard Moore said Wednesday.
While the $42 billion pension fund for more than 460,000 current and retired North Carolina state employees and teachers remains on sound footing, Moore said the state must resume to provide matching funds as it did throughout the 1990s.
"We're sounding the alarm," Moore said in an interview. "We're trying to take the approach, don't zero anything out again. Let's make moderate contributions, and let's keep this plan on firm ground."
Moore also said he would take legal action should the Legislature decline to begin repaying $120 million headed for the fund but withheld by Gov. Mike Easley to narrow the shortfall in the 2000-01 budget.
"I swore an oath to make sure all the money that comes into that fund comes," Moore said, "and we will use whatever means to make sure that promise is kept. If I have to use the courts, I'll do it."
Last year, the Legislature passed a budget with language saying it intends to repay that money over five years. Moore said he would hold them to that promise.
"If they skip the payments, it is my fiduciary responsibility to do whatever I need to get back that money," Moore said. "I'm simply reminding them that the promise is there, and I expect them to be met."
State employees place 6 percent of their pay into the retirement fund, and the General Assembly matched and even surpassed that total through the 1990s.
The amount fell to 5.3 percent in 2000, 2 percent in 2001 and none in 2002.
The Teachers' and State Employees' Retirement System has been able to withstand the reduction in part due to strong investment returns during the 1990s that allowed the fund balance to surpass its current liabilities.
"We are still living off the unrealistic bull-market heyday of the late 90s," Moore said.
The state's pension fund lost billions of dollars in value during 2001 due to the stock market's downturn. But it still managed to outpace other states' funds due to heavy investments in bonds.
Fund managers have had to start making riskier, higher-paying investments as benefits have outpaced fund collections.
Keeping the fund healthy will help keep the state's triple-A bond rating by showing rating firms that it can pay off worker retirement benefits, Moore said.
Moore's office has yet to recommend to lawmakers a state payment this year. The fund's trustee board will meet Friday to make a recommendation.
Moore presented models Wednesday ranging from $70 million to $257 million for the year starting July 1. The high range would equal less than a 3 percent match of the $9 billion payroll for fund members. The total includes $24 million for the first payment for the withheld contributions.
A spokeswoman for Gov. Mike Easley said this week the governor's version of the budget will include money toward the payback but an amount has yet to be formulated.
A Senate budget leader said Wednesday it's too early to tell what the Senate will recommend.
"We want to sit down with the treasurer and go down through the numbers and ask him about his reasoning," said Sen. Walter Dalton, D-Rutherford, a co-chairman of the Senate Appropriations Committee. "We've been informed it's one of the best plans in the nation."
The House, which will approve the first biennial budget proposal before giving it to the Senate, just elected co-speakers Wednesday and has yet to form committees.
Moore scheduled meetings with legislators for next Tuesday to discuss the fund.