RALEIGH — State Treasurer Dale Folwell discussed the strength of the state employee pension plan on Dec. 6 during his monthly call with media. As of Nov. 25, the pension plan has assets of nearly $111 billion.
Folwell mentioned that the topic of conversation at the Council of State meeting held just prior to the call with reporters was the strength of the state’s pension plan.
“Those that teach, protect and otherwise serve in North Carolina at the state and the local level continue to be participating in one of the strongest, best-funded pension plans in the United States, if not the world,” Folwell said. He added that more than one in 10 North Carolinians are participating in the state’s retirement systems at “all different levels.”
North Carolina’s state pension plan serves more than 353,000 beneficiaries representing $590 million in monthly pension payments. Additionally, there are more than 647,000 active and former public employees who are not yet eligible to receive pension payouts.
Folwell said the state’s plan was just scored in the zero percentile by a CEM Benchmarking, the benchmarking group used by his predecessor. He said CEM Benchmarking had determined North Carolina has the “most efficient pension plan in North America.”
The treasurer said the state pension’s funded level continues to be in the mid-80s and for the current fiscal year the plan was down 7%.
“To put that in some context, Georgia’s pension plan was down 14%,” explained Folwell. “So, we entered this year with the highest levels of cash equivalents and the shortest duration of bonds in the history of North Carolina.”
In terms of the number of participants seeing payouts, Folwell said the state continues to “smash all records in the check delivery business.”
The treasurer also addressed various state investment plans and was asked whether the state’s pension plan has any ties to what has become a hot topic nationally: Environmental, Social, and Governance (ESG).
North State Journal asked about ESG investment practices and if ESG was represented in the state’s pension plan.
Investopedia.com defines ESG as “a set of standards for a company’s behavior used by socially conscious investors to screen potential investments.”
“We don’t have any ESG Investments inside the pension plan,” Folwell said.
ESG practices have seen significant pushback nationwide from Republican state treasurers and attorneys general in the past six months. Some of the efforts have called for anti-ESG legislation, a move that is opposed by a collection of 13 Democratic treasurers and comptrollers.
Earlier this month, Florida’s CFO Jimmy Patronis announced the state will begin divesting $2 billion worth of assets currently managed by BlackRock.
“Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for,” Patronis said in a press release. “It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do.”
Additionally, Louisiana and Missouri have already taken action to divest from ESG practices employed by big investing groups such as BlackRock and Vanguard.
In August, Texas Attorney General Ken Paxton announced the first investigation by the state into ESFG-tied practices for “potential violations of consumer protection and anti-Boycott, Divestment, and Sanctions (BDS) law.” Similarly, Utah’s attorney general is leading 13 states in an effort to challenge the ESG movement and has filed a motion with the Federal Energy Regulation Commission to intervene specifically in ESG activities by Vanguard.
I can say, with all the chatter going on about cryptocurrency and Bitcoin and SPACs, our pension system or the state of North Carolina, or the Treasurer’s Office — we’ve never invested,” Folwell said of ESGs. “And I say this biblically, yesterday today or tomorrow. We have never invested in cryptocurrency Bitcoin or SPACs.
SPACs are Special Purchase Acquisition Companies, sometimes referred to a “blank check companies.” SPACs are essentially shell companies created for the purpose of raising capital in order to acquire another company.
He also said he thinks ESGs “have the impact of driving up complexity, driving up cost, and driving up the cost of borrowing money, especially for some of our smaller communities.”
On Dec. 9, Folwell issued a press release calling for BlackRock CEO Larry Fink to “resign or be removed” from the firm over a “a loss of confidence in Fink’s leadership” due to his focus on ESG initiatives.
“As keeper of the public purse my duty is to manage our investments to ensure that the best interests of those that teach, protect and serve, as well as of our retirees, are always paramount,” Folwell said in the release.
The North Carolina Retirement Systems (NCRS) have approximately $14 billion invested through BlackRock in various active but mostly passive funds at the lowest possible investment fees, in addition to around $55 million passively invested in BlackRock stocks or bonds, according to Folwell’s office.
Folwell’s release states that “BlackRock and Mr. Fink have been using the financial power of their clients to force the global warming agenda by using their proxy voting authority to push companies to ‘net zero,’ often in conflict with their fiduciary responsibilities.”
An example provided was BlackRock’s 2020 action that used its clients’ proxy votes to vote against two management-supported board members of ExxonMobil because of “insignificant progress” toward ESG goals of moving toward renewable energy and away from oil. The release also notes ExxonMobil’s stock has jumped 60% due to demand for oil and subsequent price increases and that “19 of the 20 best-performing companies in the S&P 500 are fossil fuel producers or connected to the industry.”
“Unfortunately, Mr. Fink’s political agenda has gotten in the way of his same fiduciary duty. A focus on ESG is not a focus on returns, and potentially could force us to violate our own fiduciary duty of loyalty,” said Folwell. “Ultimately, Mr. Fink’s continued ideological pressure could result in using ESG scores against states and local governments, lowering their credit ratings and thus driving up their cost of borrowing at taxpayers’ expense.”
Addressing the state’s 401(k) program, Folwell said it “continues also to be one of the most efficient in the United States.”
During the Q&A portion of the call, Folwell said he would like to get more people to invest the variety of different state offerings such as the state’s 401(k) and 457 plans. Currently, 65% of the participation in the 401(k) plan is at the local level and statewide participation in the 401(k) and 457 plans is around 40% per Folwell. He said increasing participation in those plans would be a topic his office will pursue in the General Assembly’s upcoming long session.
The Town of Pikeville’s financial turnaround was also brought up. The state had taken control of the town’s finances on April 13, 2021, and at a Dec. 6 meeting of the Local Government Commission a resolution was adopted to restore financial control to the town. Pikeville is in Wayne County and has around 720 residents.
The Atrium Health merger was not mentioned during the call, however, Folwell had issued a press release regarding the finalization of that deal.
“Hold onto your wallets, the Attorney General has failed the patients and taxpayers of North Carolina yet again,” Folwell said in a Dec. 2 statement. “There is widespread evidence that mergers make hospital care less affordable and less safe.”
The merger between Atrium Health and Advocate Aurora Health has been dubbed a “mega-merger” by some and will make Atrium one of the top five largest health care providers in the country. Per Atrium’s announcement of the merger, Advocate Health serves almost 6 million patients.
“With revenues of more than $27 billion, the newly combined organization comprises more than 1,000 sites of care and 67 hospitals with more than 21,000 physicians and nearly 42,000 nurses. The health system delivers nearly $5 billion in annual community benefit,” according to Atrium’s statement.
Folwell said he has “deep concerns” about the merger and that “its new partner, Advocate Aurora, is facing an antitrust lawsuit alleging anticompetitive behavior that has made health care prices higher in Milwaukee, Wisconsin, than in New York City.”
In closing, Folwell added, “This is just another example of the cartel putting profits and protectionism over patients.”
Attorney General Josh Stein issued a brief statement on the merger, stating that his office has “conducted a thorough review into this transaction and concluded that there is no legal basis to prevent it.”
The statement also said Stein has concerns about the effect on “health care access in rural and urban underserved communities” and that his office will be monitoring operations to assess the impact.
Stein couldn’t find a reason to intervene in the Atrium/Wake Forest merger last year either, and in a press release stated he “will not take action against this deal at this time.”