State pension fund slides

Despite a 12 percent drop in the past year, the system is solid, the state treasurer says

North Carolina's public pension fund has lost 12 percent over the past year -- including $6 billion over the past three months -- but State Treasurer Richard Moore said Monday that it remains fiscally solid.

The pension fund stood at $66 billion as of Sept. 30, according to the state's preliminary estimate.

"The retirees out there can rest assured that we've got plenty of money we can lay our hands on to make their retirement checks come every month just like they're supposed to," Moore said.

The state pension system provides benefits to 820,000 current and retired state employees, including teachers, police officers and fire fighters.

"We have short-term losses, but those losses are smaller than most funds of our size because of our conservative asset allocation," Moore said.

Over the same period that the state pension fund fell 12 percent, the Standard & Poor's 500 index declined 24 percent, Moore said. The California state pension fund, he pointed out, has fallen 17 percent since June 30.

North Carolina's pension fund has 47 percent of its assets invested in stocks, compared with an average of 60 percent for all state pension funds. North Carolina has 41 percent invested in fixed-income assets such as bonds, versus an average of 30 percent. The state also invests in real estate and alternative investments, such as hedge funds.

"We have a conservative asset allocation that protects our members over the long haul," Moore said. "This is something that my predecessor and I have been criticized for. ... But we have stayed conservative, and I must tell you it is with some satisfaction now that I look back on some of the attacks that we should be taking more chances with the state's money."

Soon after Moore became state treasurer in 2001, he persuaded the General Assembly to let him invest more state pension fund money in hedge funds, venture capital and other alternative investments. Such investments are considered riskier than traditional investments but can generate larger returns. At the same time, one investment theory holds that diversification among different asset classes reduces overall risk.

Ardis Watkins, a lobbyist with the State Employees Association of North Carolina, which earlier this year unsuccessfully sued Moore for access to public records, said she is concerned that the state pension fund has lost "significant amounts of money."

"But I think the biggest question for me is ... 'Since Sept. 30, what have we lost?' " Watkins said. "While the 12 percent got my attention, what I didn't hear got my attention even more."

Last week was one of the worst weeks ever on Wall Street, while on Monday the stock market enjoyed its biggest rally in seven decades. Moore said at the news conference, however, that his office can't provide daily updates on its investment portfolio.

"I personally have never seen the benefit of spending the people of North Carolina's money to get a day-to-day number that, in a defined benefit plan, is useless," Moore said. "Why have a day-to-day number on a plan that, in the end result, people just care about are they going to get their checks, and is there going to be a cost-of-living allowance."

Watkins said that having up-to-date information is critical.

"I don't see how we can possibly figure out where we're going if we don't know where we are," Watkins said.

Moore said he decided to hold a news conference because he was getting a lot of questions about the state's ability to meet its pension and payroll obligations.

"As for active state workers, you're going to get your paychecks on time," Moore said. "While the growth of government may slow, there is no reason to believe that anybody is facing an imminent layoff."

Ed Regan, executive director of the N.C. Retired Governmental Employees' Association, said he was reassured by the treasurer's update. "Everything he said made me feel better," he said. "There were no surprises."

Moore said he is doing some things differently in light of the current economic environment, but he declined to be specific.

"I don't tell the market what I'm doing," he said.

Moore, who unsuccessfully sought the Democratic nomination for governor this year, noted that Monday's news conference could be his last as treasurer.

"I had to think back to when I did my first one," he said. "I didn't have gray hair, and I didn't need the glasses that are in my pocket."