Who should manage our $127 billion in pension funds?
Published 9:46 p.m. yesterday
By Tom Campbell
The responsibility for investing and managing North Carolina’s public employee pension funds falls completely upon our elected State Treasurer. For decades there has been discussion about whether this is too much responsibility to place on one person’s shoulders. State Treasurer Brad Briner was the latest to pose this question.
Some 372,000 public retirees receive retirement checks totaling more than $755 million each month. North Carolina has the 9th largest public pension fund in the US and is considered among the top 6 or 7 in management.
When I served as Treasurer Harlan Boyles’ Assistant Treasurer in 1994, the pension fund had assets of $32 billion. By 2016, the assets were $89 billion, with a 43 percent increase in assets since 2017. The task has grown exponentially more important and difficult; only one of the extremely important functions of the Treasurer’s office. Harlan always said it was the most important job in state government nobody knew anything about.
Let us acknowledge and pay tribute to the men and one woman who have been our State Treasurers. They have been faithful fiduciaries and have served us exceedingly well. They deserve our grateful appreciation, as do the many men and women who work in the Treasurer’s office faithfully.
The principal reason no change has been made in this responsibility is because the issue is complex, affects thousands of people, and there are plenty of potential pitfalls for corruption, conflicts of interest, loss of accountability and mismanagement. However, past conversations that ended snarled in more questions than answers don’t mean the subject shouldn’t be addressed and resolved.
The North Carolina House recently passed a bill attempting to address the issue, but it is woefully inadequate, neither addressing fully nor resolving many important considerations. It provides for three political appointees which could easily politicize our pension plans, much as we have experienced with the UNC Board of Governors, State Board of Elections, State Utilities Commission and other boards. The House bill is unacceptable and should die without Senate confirmation.
Having done research on some of the most trustworthy and reputable state public pension funds in the U.S. here are suggestions which would put the issues on the table and perhaps finally resolve the accountability and management issues.
We propose a new organization, named the North Carolina Public Employee Retirement System Board (NCPERS). Its mission is to provide oversight for such items as the asset allocation strategy for the funds; assure a risk management framework and policy; establish investment goals and guidelines for pension investments; provide insurance of needed liquidity of funds; oversight of investment management; investigate investment losses and fraud; provide regular communication of investment returns and operations; and advocate for the adequate percentage of pension funding so as to meet present and future obligations for participants and beneficiaries.
The board should consist of an odd number of members to prevent frequent tie votes. I would propose seven members.
Duties and responsibilities of NCPERS
- Each board member should have expertise in one or more areas important to the oversight and management of public pension funds.
- Board members are legally and ethically bound to act solely in the best interests of the plan participants and beneficiaries. They are to act with diligence, prudence and independence.
- The board must be transparent and accountable in decision-making, ensuring the management, operations and investment decisions are made in the best interests of plan beneficiaries and the state.
- The board shall serve staggered five-year terms so as to ensure orderly turnover with terms overlapping at least one general election cycle.
5 The board should be comprised from the following: 1 appointment from the Governor, 1 from the NC Senate, 1 from the NC House, 1 from active plan participants, 1 from retired government beneficiaries, 1 from the Attorney General, and 1 former State Treasurer.
6. Nominated board members will be confirmed by the State Senate, with nominations not unduly withheld due to political, demographic, or geographic consideration. As closely as they should reflect the political registration percentages in the state.
7. The incumbent State Treasurer will serve as Chairman and can, with sufficient cause and consideration, overrule recommendations by the board. Investment advisors will be hired from inside or outside the Treasurer’s office and specific investment decisions and administration will be overseen by the Treasurer, who will hire employees necessary for the management of the plan.
8. The board will meet monthly to consider matters for its consideration.
With this framework the State Treasurer will still retain responsibility for investing pension funds. However, the Treasurer will have the advantage of advice and consent from the board and the public will have the comfort of knowing that oversight is in place to ensure best practices and results.
Let us proceed cautiously to resolve this important state issue.
Tom Campbell is a Hall of Fame North Carolina broadcaster and columnist who has covered North Carolina public policy issues since 1965. Contact him at tomcamp@carolinabroadcasting.com