State Treasurer Dale Folwell is sounding alarms about the two huge programs he manages, the state’s pension and health plans. He says both are underfunded and may be losing millions of dollars through waste, fraud and abuse.
Such claims certainly draw the attention of the hundreds of thousands of current and retired state employees who rely on the plans and state lawmakers who may have to raise taxes to bolster the plans. But the question is still open as to whether Folwell is a fiscal Paul Revere or a Chicken Little.
Either way, the usually low-profile office of the treasurer is likely to gain wider notice as Folwell cuts into the more than $500 million in fees paid to money managers, changes senior staff and combs through expenses in search of what he sees as wrongheaded procedures and people bilking the system.
The treasurer already has put many state health plan participants on edge by announcing that they must send in evidence electronically or by fax by July 31 showing that any dependents covered by the plan are qualified. That filing requirement is aimed at building a digital database but may lead to many legitimate dependents losing coverage as plan participants either fail to provide documentation or don’t know how to file the documents electronically.
At issue is whether Folwell, a motorcycle enthusiast and a motorcycle mechanic, is fixing what ain’t broken. And when the treasurer starts yanking on and pulling apart systems that involve more than $90 billion, his sense of alarm itself may be alarming.
A North Carolina native, Folwell, 58, is a former state legislator who stressed budget discipline and cost efficiencies. He left the legislature to join Gov. Pat McCrory’s administration as head of the Division of Employment Security, where he oversaw the state’s unemployment insurance program. He’s also a certified public accountant.
Folwell, who was elected last November over Democrat Dan Blue III, came into the office run for the previous eight years by Democrat Janet Cowell. He says there are problems in the state’s $92 billion pension plan and the State Health Plan, which covers more than 700,000 state employees, law enforcement personnel, educators, retirees and their dependents. To keep both plans properly funded, he says the state will have to come up with $45 billion in additional funding over the next 10 years.
As he explains the problems, the new treasurer sits at a long table crowded with stacks of documents and reports. Each stack seems to contain a fiscal fire. He reaches into one to show excessive money management fees, another to reveal the lack of health plan oversight, another to document overly optimistic predictions of investment returns. Then he holds up a chart with trend lines lurching downward toward doom.
Folwell is known for his energy and his demands that employees keep up with him. “You’ve got to have a big motor to work here,” he says. But his own motor seems to sputter as he looks over his piles of problems and says, “I’ve inherited a mess.”
This verdict is surprising given the solid reputation of the treasurer’s office under Cowell and indeed under treasurers going back at least to Harlan Boyles, who served from 1977 to 2001. North Carolina’s pension fund is more than 90 percent funded and is one of the best-funded in the nation. The health plan, which pays out more than $3 billion annually, has $885 million in reserve. The state enjoys a AAA credit rating, the highest possible.
Nonetheless, Folwell says he keeps finding more financial trouble as he digs into his new work. Of the pension plan’s supposed hidden issues, he says, “I try to get to the bottom, but every time I think I’ve found the floor it collapses from under me.”
Folwell prides himself on his work ethic and his willingness to get into the details of an operation, but his style can wear on employees. Five senior managers have departed since he arrived. The most recent was Mona Moon, the executive administrator of the State Health Plan, who quit abruptly during a meeting with the treasurer. She said Folwell has a “different vision” of how the health plan should be run.
Folwell is aware of complaints about his skeptical eye toward employees, contractors and even dependents who may be improperly in the health plan, but he says he is doing his duty as the keeper of the public purse. “This is not emotional or political. It’s mathematical,” he says.
In a few years, North Carolina will see just how well the treasurer’s math – and his methods – add up.
Barnett: 919-829-4512, nbarnett @newsobserver.com