When you take on a $80 billion debt you’d better keep an eye on whether it’s going up or down.
And $80 billion is roughly how much the State Retirement Funds are in the red.
The Pension Fund is run by the State Treasurer, who collects incoming payments from the General Assembly and current state workers, invests the money, and then, hopefully, earns a 7.25% return. And that’s how the Treasurer gets the cash to send pension checks each month to state retirees.
This system rolled along fine for years, until a seismic shift in markets and interest rates sent out a tremor that rocked the edifice. To stay in the black, the Retirement Funds need to earn a return on investments of 7.25% each year – but that hasn’t happened for the last 15 years.
Instead of interest compounding to help pay the Fund’s bills, it’s had debt compounding. This year state taxpayers paid $1.5 billion into the Pension and Medical Insurance Funds to cover debts. That payment is projected to triple to $4.5 billion over the next ten years.
Where will that additional $3 billion come from? Taxes.
Which brings us to the State Treasurer’s race. And the NC Retired Government Employees Association’s newsletter, reporting Republican Dale Folwell’s and Democrat Dan Blue’s views on how to fix the problem.
Dan Blue III is an eminently qualified candidate. His studies at Duke earned him a BS in Engineering, a J.D. and an MBA. And as a former investment banker, he surely understands the problems the Pension Fund faces.
But no one figures the best way to get elected State Treasurer is to announce you’ll ask the General Assembly to raise taxes $3 billion to keep the Retirement Funds afloat.
Nor, at the same time, does anyone figure it’s a good idea to tell 900,000 state retirees they won’t be getting more money in their retirement checks (say for cost of living increases) because the Retirement Funds are in the red.
So, Mr. Blue didn’t exactly grab the bull by the horns.
Instead, he told retirees what they wanted to hear: He said he’s all for giving state retirees more money and higher pensions and COLA increases – then he added, Unless it’s ‘not possible.’
It was like watching Santa Claus telling a child he’d bring him every gift he wanted for Christmas – then adding, Unless it’s not possible.