North Carolina treasurer-elect Brad Briner said he plans to discourage state government from issuing long-term bonds in the next few years though it might sell short-term debt.
In an interview with The Bond Buyer, Briner acknowledged that North Carolina, rated triple-A across the board, has a low level of state debt outstanding but has moderate levels of unfunded pension liabilities and high levels of unfunded health plan liabilities. The state should focus on addressing these during his first term, he said.
Briner, a Republican, will be sworn into office in January for a four-year term.
North Carolina state government currently has $6.9 billion in state debt outstanding, according to Moody's Ratings.
This summer's
Ultimately the decision about how much debt it issues lies with the governor and General Assembly, he said.
North Carolinians elected Democrat Josh Stein governor in November, replacing the termed-out Democrat Roy Cooper. Republicans retained control of the legislature.
The Office of State Treasurer's mission is to "preserve, protect and sustain the state's pension and healthcare plans, reduce investment fees while maximizing returns, properly account for and report on all funds that are deposited, invested, and disbursed through the North Carolina Department of State Treasurer, assure the financially sound issuance of debt for state and local government, maintain the state's 'AAA' bond rating, and provide exemplary service across all divisions of the department," according to the office's web site.
The North Carolina treasurer chairs the Local Government Commission, which among other things,
It also
Along with the treasurer, the LGC consists of the secretary of state, secretary of revenue, state auditor, three members of the public and two current or former county government officials.
Briner said he has observed North Carolina's local governments put a referendum for a bond measure and another referendum for a tax to support payback of the bonds on the same ballot. Occasionally, voters will approve the bond without approving the tax. When he's in office Briner said he expects the LGC won't approve bonds without certainty the bonds will be issued with the supporting revenue stream.
Briner said his focus during the coming term would be on addressing roughly $15 billion in unfunded pension liabilities and $35 billion in unfunded state government health plan liabilities.
In 2014, a government-funded study recommended the state shift from a sole-trustee governance model to a fiduciary board model for making investment decisions with the state's pensions. North Carolina is one of only three states adhering to the sole-trustee model. Briner said he would urge converting to the board model.
The General Assembly and Stein would have to approve this shift but "I don't think it's an overly partisan issue," Briner said.
Changing the governance would improve the pension plan's investment performance, he said.
On his campaign web site Briner also advocated moving away from the plan's strong reliance on investing in U.S. Treasury and other investment grade bonds towards assets like real estate and energy sector stocks. He also advocated for co-investment in private equity transactions, putting larger portions of investments with fewer, high-performing investment managers, and investing in speculative grade bonds.
Briner said handling the health plan deficit will be more difficult. The state faces a $507 million deficit in the plan for calendar year 2026, he said. The state will have to be adamant about only covering generic medications when they are available. He said the state may have to look at its policy of giving lower rates to those who attest they don't smoke as this doesn't seem to be saving the plan money.
To improve the health plan's performance there must be informed consumers, competing providers, and incentives that are aligned among all parties. Health care complications are a chief reason for both high costs and poor results and so the state will focus on reducing them.
"Strategic management of our state's retirement fund and our credit rating are critical factors to our state's economic success. We are encouraged that Treasurer-elect Briner has outlined steps he will take to ensure the best possible performance on both fronts. As North Carolina continues to grow, strong fiscal management will be critical and we look forward to collaborating with Treasurer-elect Briner and his team to ensure North Carolina remains a top state for investment." said Gary Salamido, president and CEO of the NC Chamber.
The Local Government Commission will continue to be "very fiscally prudent," Briner said. The commission has had difficulty retaining staff and Briner said he would try to rectify this.
After Briner's win over Democrat Wesley Harris in November's election, the conservative State Financial Officers Foundation offered its congratulations to Briner, saying "Your continued advocacy for policies against ESG and Diversity, Equity and Inclusion is exactly the leadership North Carolina needs to thrive."
Briner studied economics as an undergraduate at University of North Carolina at Chapel Hill. After graduating he spent five years helping oversee investments at the university. He then picked up a Master of Business Administration from Harvard Business School.
After graduating he spent seven years working for a new investment firm for wealthy families. In 2011 he joined Willet Advisors and continued to advise investment strategy. While there he was a volunteer member of the North Carolina Debt Affordability Advisory Committee.
Briner will take over from Republican Dale Folwell, who ran unsuccessfully for governor instead of pursuing a third term.
Earlier this month outgoing Folwell talked about the state's financial future as well as its past.
He said he thought the General Assembly would like to get to a point where the state reduced its current slightly less than $2 billion in general obligation debt to zero.
The state in 2021 passed a plan to phase out its corporate income tax over several years with cuts starting in 2025. If it were to also rid itself of GO debt, that would "put North Carolina on a very solid path going forward," he said.
Folwell entered office in January 2017 and during the period the state has lowered its GO debt by more than 60%, he said.
The state has bought $20 million of its GO debt at 71 cents on the dollar, he said. This is something he believed no other treasurer had done. It was so unusual that even though the transaction was five years ago DTC just cleared the transaction in November, Folwell said.
While the state government overall is in good shape, the state's Department of Transportation is close to its borrowing limits, Folwell said. Four years ago, the department spent $2 billion beyond its budget and drew another $1 billion from the federal Highway Transportation Fund without getting the required approval from the treasurer, he said. The incoming governor, general assembly and treasurer will have to deal with this issue.
Folwell said in the banking crisis earlier this decade, "We were probably less than 48 hours away from another run on the banks." As chair of the state banking commission, "that was a big deal." North Carolina probably is probably the second biggest financial center in the country, he said.
Folwell was defeated in the GOP gubernatorial primary this year. Asked if he plans to return to government office, he said he planned to dedicate himself to God, his family, and his motorcycles.
"I'm going to miss the creativity and the courage and the hard work of the state employees," he said.
