The state pension system has a $16 billion deficit, NC treasurer tells legislators
The state pension system has a $16 billion deficit, state Treasurer Brad Briner told a legislative committee Thursday morning, and the department's investment division needs a new strategic direction.
Briner used his appearance before the House Oversight Committee to talk up his proposal for changing how investment decisions are made.
He also faced pointed questions from Democrats on the committee about potential crypto investments.
A bill moving through the state House, one backed by House Speaker Destin Hall, would allow the Treasurer's office to invest in Bitcoin.
Right now, the state Treasurer makes all the investment decisions. The office has investment advisory boards, but the Treasurer doesn't have to listen to them.
Briner wants the state to create a board, called the Investment Authority, that would make investment decisions. His proposal is in House Bill 506 and its Senate twin, Senate Bill 709. The Treasurer would sit on the board with appointees from the House Speaker, the Senate leader, the Governor and the Treasurer. Members would have a minimum of 10 years' experience in investment management.
Coincidentally, Briner's committee appearance coincided with a sharp drop in stock market indexes triggered by President Donald Trump's tariffs.
'Today is going to be a very interesting day in U.S. capital markets history,' he said. 'The temptation for everyone is to do something, anything,' Briner said. 'The right answer is probably going to be to wait.'
For a political office holder, the temptation is greater, he said. Having an investment board would be a guard against that temptation and still provide political accountability, he said.
North Carolina is one of three states where one person is responsible for investment decisions, he said.
'I think more heads are better than one when it comes to having a disciplined, long-term investment strategy,' he said. 'I think having this kind of concentrated power in a single individual, elected or otherwise, doesn't really make sense.'
Former Treasurer Dale Folwell had an unorthodox approach to investing that was out of step with other large public pension funds, NC Newsline has reported. The pension fund held a far greater percentage of its money in cash than other public pension plans, which was a drag on returns.
Pension investments have fallen short of the 6.5% rate of return, Briner said, and the state pension fund ranks 49th or 50th in returns.
With a sole fiduciary, 'it is easy to be overly conservative in that model, and hard to be appropriately risky in that model, because you get all of the blame, and you get none of the credit. And I understand from a human emotion perspective why you'd end up where we are, and that's not a good place.'
Democrats on the committee asked repeated questions about investments in crypto currency. Rep. Allison Dahle (D-Wake) said constituents are wondering about it.
Briner said Bitcoin is 'the best method to bet against the value of the U.S. dollar' but it's also extremely volatile.
'There probably is a role for them over time in a very modest proportion,' he said.
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