State Treasurer highlights fiscally struggling towns, state health and pension plans

Pension plan has topped $118B; ‘highest level in history’

State Treasurer Dale Folwell

RALEIGH — During his monthly “Ask me anything” call, State Treasurer Dale Folwell discussed the state pension plan, the state health plan and touched on municipalities and counties having financial issues.

Folwell also noted that the most recent Council of State meeting was held in-person for the first time since the COVID-19 pandemic started.

“The pension plan just topped $118 billion, and that’s been holding at that level for the last few weeks,” Folwell said during the call. “It’s the highest level in history.”

The treasurer said, “there are less people paying into the pension plan than are not,” and went on to explain that not everyone paying into the plan is currently drawing a retirement check.

“There are over 100,000 people who are vested in the [pension] plan and, for one reason or another, are not drawing a retirement check — yet,” Folwell said. He warned that North Carolina was entering into a life expectancy issue now with no minimum retirement age in the plan and females drawing more retirement checks than paychecks.

In terms of the state’s health plan, Folwell said his office is continuing to work on the Clear Pricing Project to get rid of “secret contracts in healthcare.” As for activity at the state legislature, getting the state health plan and pension plan fully funded and reimbursed for expenses related to COVID activity is also a priority for Folwell’s office.

Folwell also talked about the financial strain on local governments, municipalities and utilities. He said that he was part of a “very intense six-and-half-hour local government commission meeting” that dealt with towns the state has had to takeover due to fiscal issues, as well as towns that will be in trouble going forward.

Earlier this month, the N.C. Local Government Commission (NCLGC) and the State Treasurer’s Office filed a resolution with the legislature that asked for the charter for the town of East Laurinburg to be revoked. The town has around 300 residents and is located in Scotland County. East Laurinburg has had records issues dating back to at least 2016 that include failing to file annual audits.

Legislation has not yet been introduced to de-incorporate East Laurinburg and may hit a roadblock with the bill-filing deadline, or “crossover,” at the General Assembly approaching. Crossover is the deadline for bills without an appropriations or finance note on them to be passed through at least one chamber and to cross over to the other chamber.

A press release by the NCLGC said the resolution “marks the first time the LGC has taken such action against a local government unit, and follows nearly 10 years of efforts to work with the Scotland County town of 281 residents to correct the problems.”

Additionally, the NCLGC has voted to take over the finances of Pikeville, located in Wayne County. A press statement from Folwell’s office noted Pikeville’s audited financial statements for 2019 showed just 4.8% of unrestricted available funds to meet its $765,000 budget. The town also has over $158,000 across five debt payments which will be due in the next few weeks.

The NCGLC has also discussed situations involving the towns of Bethel, Cliffside, Eureka, Kingstown, and Robersonville. On the county side, the commission discussed Alleghany, Anson, Bertie, Duplin, Edgecombe, Gates, Greene, Hyde, Johnston, Lenoir, Madison, Northampton, Orange, Pender, Richmond, Robeson, Scotland and Tyrell.

Folwell said the list is “evolving” and there are a number of reasons for looking at these different towns and counties, including a lack of audits. He also said utilities in certain areas were still experiencing financial issues.  One particular town that was brought up recently is Benson in Johnston County, which Folwell said has a “negative cash flow.” Folwell also used Eureka as an example.

“The utility problem still exists,” said Folwell. “What we found, for example, is that people take showers in Eureka, and when that happens, the sewage is shipped to Fremont. Fremont processes it. The amount of sewage Eureka is charging their customers is a lot less than they are paying to have it processed.”

Folwell added that Eureka is charging about half of what it is costing to have their sewage processed. He also said that in every one of these utility situations, “someone owes somebody something.”

According to the Unit Assistance List (UAL) provided by Folwell’s office, a number of municipalities are facing varying degrees of serious financial issues. The UAL list has assessments for municipalities, counties and utilities along three criteria: internal-control issues, financial issues in their general funds, and financial issues with their water and sewer funds.

The UAL list includes 95 of the state’s 552 municipalities, and 34 of those are deemed to have high or moderate financial risk. There are 75 municipalities that have high or moderate risk in their internal controls, and 68 have issues with their water and sewer funds.

Spring Lake in Cumberland County received a high-risk rating in all three areas, as did Edgecombe County.

The UAL report also keeps track of missing financial audits. There are 20 municipalities that have not yet submitted an audit for 2019, and many of those 20 have not submitted audits for 2018 or 2017.

About A.P. Dillon 1138 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_