It's not clear state pension needs any drastic action

Editorial by Wilmington Star-News, April 29, 2014.

State Treasurer Janet Cowell has the same goal as state employees: maximize the size of the pension fund so that those employees will have a secure retirement. So far, the performance of the pension fund reflects responsible practices by a treasurer who was well qualified for the job.

But the organization representing state workers is worried that Cowell’s efforts to invest more of their retirement money in high-yield – but also higher-risk – stocks will jeopardize their golden years. That concern has resulted in a complaint to the federal government seeking to rein in the treasurer’s broad discretion when it comes to investing pension money. North Carolina is one of four states that assigns that responsibility solely to the state treasurer.

A financial consultant hired by the State Employees Association of North Carolina declared that $30 billion could be at risk, and on Thursday a commission appointed by Cowell, a Democrat, recommended that a new, politically appointed commission oversee the pension fund. There are benefits and drawbacks to that idea. A board would ensure that the $86 billion pension fund not be under the control of a single person. The benefit of putting an elected official in control is that the buck stops there; if the fund fails, the people know whom to blame.

That said, a review commission makes sense in that concentrating power under one person who, because it is an elective office, may or may not be qualified to make good decisions or hire competent staff. Cowell ranks very favorably on both counts, but the next person in the job might not have what it takes. Serious questions also arose about former State Treasurer Richard Moore’s habit of accepting campaign donations from Wall Street firms that managed or sought to manage the state’s pension funds.

Additional oversight might have prevented that exercise in very poor judgment.

State employees have a right to be worried about potentially risky investments, having seen during the recent recession just how fickle the stock market can be. Adding to those concerns, it is difficult to find out about those riskier investments because the information is considered proprietary. Cowell and her staff insist that they are appropriately frugal and would be able to move money to safer funds at any time. The employees’ union is not convinced.

Under Cowell’s watch the state’s pension fund held up well, and remains strong. She justified last year’s increase in riskier funds – by 1 percentage point, from 34 percent to 35 percent – by pointing out that safer, fixed-return investments actually have lost money in recent years. If the pattern continues, the pension fund could be in trouble, and state retirees would feel the pain.

State lawmakers should work with Cowell and representatives of the employees association to shore up oversight and ensure that North Carolina’s pension continues to grow, with an eye on longterm gains. But any changes should be carefully considered, because there is also a risk of “fixing” what is not broken.

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