Democratic Treasurer hopefuls hold different priorities

The Democratic candidates for state treasurer both say the management and return on investment of North Carolina’s mammoth health and pension plans for public employees need improvement, but their priorities differ.

Dan Blue III and Ron Elmer will meet in the March 15 primary, with the winner to face uncontested Republican Dale Folwell in the Nov. 8 general election. Two-term incumbent Democrat Janet Cowell isn’t seeking re-election.

The state treasurer is an elected member of the Council of State. The treasurer’s duties include administering the state’s $86.57 billion pension plan, and the State Health Plan which during the 2014-15 fiscal year had $3 billion in total revenues and $2.99 billion in claims and administrative expenses.

To Elmer, the greatest concern for the incoming treasurer is the deteriorating position of the state pension plan, while Blue thinks the health plan is the priority.

Ron Elmer (from campaign website)

“There is a difference between well-funded and well managed,” Elmer said of the pension plan, noting that it has gone from 12.8 percent overfunded 15 years ago to 5 percent underfunded now, despite constant state employee contributions and the state chipping in $1 billion a year.

The core problem, as Elmer sees it, is that the Treasurer’s Office spends too much on money managers who rack up excessive transactions charges trying to beat the market.

He believes that the large amount of money that the state pension plan has invested effectively makes it an index fund, which typically perform about as well as the stock market overall, and should be managed as such. By bringing stock fund management in-house, effectively eliminating the middle man, Elmer claims the pension plan can save hundreds of millions of dollars a year.

“Stable, healthy, could be healthier,” is how Blue sees the pension plan. He said that different groups have come to differing determinations about the plan’s condition. Reaching a definitive conclusion should be a priority, followed by incremental change.

Dan Blue III (from campaign website)

Blue is not averse to insourcing management of parts of the pension plan’s stock portfolio, but sees a shift to the degree Elmer proposes as “impracticable.”

“There are no magic bullets,” he said.

Blue doesn’t believe the Treasurer’s Office should be constrained to use just the talent it has in-house to manage investments.

“We should make use of the best and brightest minds, wherever they may be located, be it in Charlotte or New York or London,” Blue said.

To Blue, the greater challenge is the State Health Plan, which needs to be “refocused” to achieve improved customer service, re-examine the level of benefits provided, and adjust within the context of broader health care reform.

Elmer and Blue also differ on the Innovation Fund, a portion of the pension fund set aside for investment in companies with a significant presence in the state.

Blue regards the Innovation Fund as a good idea, which could be expanded if the state can continue to get high enough returns for the risks involved.

“I would be open to expanding it if the investments were of the same quality as the other assets in our portfolio because we owe it to our retirees to make sure we are investing their money wisely,” Blue said.

Elmer has ethical concerns about the Innovation Fund, and other such “alternative investments” whose objectives aren’t focused fully on building assets for current and future retirees.

The Innovation Fund “is good for North Carolina, but I can’t say it follows the fiduciary duty to state employees,” Elmer said.

Blue has received endorsements from two prominent employee organization political committees: the North Carolina Association of Educators and the North Carolina AFL-CIO. Elmer has won the endorsement of the State Employees Association of North Carolina’s PAC.

Blue did his undergraduate and graduate work at Duke University. He holds a law degree and master’s of business administration.

He is a past chairman of the Wake County Democratic Party and has served as a panelist on the “NC Spin” public affairs television program. He currently works in his family’s law firm and was named Triangle Business Journal’s Corporate Counsel of the Year for 2015.

He is the son of Dan Blue Jr., the former speaker of the North Carolina House and current Senate minority leader.

Elmer holds an MBA in finance and accounting from New York University. He is a certified public accountant, and chartered financial analyst.

He has spent more than 20 years in the financial industry, much of it managing pension funds, including $2 billion for the state pension plan while managing the equity division at First Citizens Bank. Elmer runs his own tax and financial planning business, and has written four books on investing.

https://www.carolinajournal.com/news-article/democratic-treasurer-hopefuls-blue-elmer-hold-different-priorities/