Transcription:
Chip Barnett: (
Hi, and welcome to another Bond Buyer podcast. I'm Chip Barnett. My guest today is North Carolina Treasurer Dale Folwell. He's a CPA and he's been Treasurer of the state since 2017. Before that he spent four terms in the state Legislature. We're gonna be talking about a wide range of public finance subjects, things that are important to the state of North Carolina, its people, its economy, and to the municipal bond market as a whole. Welcome Treasurer.
Dale Folwell: (
I'm glad to be here and glad to be with you and your podcast listeners.
Chip Barnett: (
Can you tell our listeners about the state of North Carolina's economy and its finances today?
Dale Folwell: (
I'd be glad to do that. I wear lapel pin that has NC on it. And obviously your podcasters would recognize that as the abbreviation for North Carolina, but in terms of your question, I think it also stands for Nothing Compares. As the keeper of the public purse in North Carolina, I wouldn't trade places with any other state treasurer in the United States, except for our unfunded healthcare liability, but, everything else, nothing compares to the balance sheet of our state. And Chip it's because of something that I wish somebody would've told me when I was younger — and that is if you do what you're supposed to do during the semester, the pop quiz or the final exam won't matter so much. And this pop quiz called COVID and which has been deadly and it's caused poverty and illiteracy and death and sickness in our economy. Because of the policies that have been put in place over the last 10 years during the semester, we were able to get through this pop quiz in financially great shape.
Chip Barnett: (
How's the state's debt profile. I know you back municipal bond issuance when it makes sense, but steered away from more, uh, dubious methods such as pension bond sales. What's your philosophy on bond issue?
Dale Folwell: (
Our philosophy at the Treasurer's Office is that we don't pick and choose which laws to apply or who to apply them to and how that relates specifically to your question is the fact that one of my 21 duties and responsibilities of them includes being the chair of the Debt Affordability Commission. And I wish the Federal government had a debt affordability commission Chip and I'm sure you and others do, but the Debt Affordability Commission, just issued its final report and shows that over the last five and over the next three years that the debt, the general obligation debt of North Carolina is scheduled to fall in half over that period of time. So when I said earlier about nothing compares, that's obviously an envious place to be. You know sometimes you have to borrow money when you don't quite need it, but in anticipation of the cost of money going up, which is obviously what we're seeing, it's also important to remember as the State Treasurer of North Carolina I am sole fiduciary of one of the largest pension plans in the entire world, and that's $122 billion. So anytime that we see rising interest rates, it's we can talk about the $3 or $ 4 billion in long-term outstanding GO debt, but it's also important to realize we have $46 billion sitting in things that we'll be able to earn more interest in that environment.
Chip Barnett: (
You have been at the forefront in the United States of getting municipalities back on track after their finances have kind of run off the road. There have been some entities that have needed a lot of guidance, a lot of help. And, frankly, sometimes there's not much that can be done except to kind of start over. Can you speak about these laws in the state that allow a takeover or even a dissolution of a municipality?
Dale Folwell: (
I'd be glad to do that Chip and it's important with everything I've have said and will say for your podcasters to know that I'm standing on the shoulders of a lot of a lot of people, not only the Treasurer's office, but people who formally worked at the Treasurer's Office who have put us in this position. And, specifically to your question, we have something here called the Local Government Commission that I chair and for nearly 50 years, nearly half a century, it was unique in the United States and it was formed in North Carolina after the bankruptcy of Asheville, after the Depression, The Local Government Commission is designed — currently we have over 1,300 entities that report in the Local Government Commission.
Dale Folwell: (
Chip if you're as old as I am, you probably start out on two wheels on a mini bike and then that mini bike had a lawnmower engine on it and beside besides the carbarator there's this thing called the governor, not the governor that most of your podcasters are thinking about, which is a noun. This is a regulator on the engine that you could take your hand down there and you could move it with your finger and make it run faster. The local government commission is meant to be a governor, so to speak on the engine of a hundred counties, 548 cities, water and sewer district universities, as well as hospitals and in order to issue debt tax free in North Carolina, they have to come through the LGC. Now those 1,300 entities, we have nearly 200 that are on the union assistance or watch list for one reason or another. It has to do with transparency, lack of governance, lack of solvency, lack of audits.
Dale Folwell: (
We would much rather be the Maytag repair person. If you're as old as I am, you may remember that's the old longest person in the world, because a Maytag never broke down. So that person never got called, but unfortunately, we're getting called a lot cause of what's happening in North Carolina and everybody tries to blame everything on COVID, but these have been things that have been evolving for a long period of time. Two quick examples, we have Terrell County, which some of your podcasters might be familiar with is the last county you would enter before getting to the outer banks of North Carolina, from the west. Terrell County to put this in some context has less citizens than Myers Park High School in Charlotte has pupils and teachers. Secondly, half the property in Terrell County is off the books cause of who owns it, the state or federal government and between St Patrick's and July 4th of 2020 the county suffered a 26% decrease in their sales tax revenue.
Dale Folwell: (
So when you have less population than a high school, half your property's not taxed at all. And then you have sales tax drop, you can see why, you know, what's happening in some of these entities is a deep concern. The chairman of the county commissioners once told me that he thinks he may have more bears in Terrell County than people. But of course we can't tax the bears and you know, that's Treasurer humor, so I hope everybody laughed. So anyway, uh, my point is saying that to you, and then we come further west and we have East Lauremberg where we're in the process of dechartering. I've been a motorcycle mechanic for 45 years. There's no tool in my toolbox that can fix East Laurenberg. That's a community of about 200 people. And you know, they haven't consistently produced audit in a decade.
Dale Folwell: (
The state auditor has gone in and looked and found some things that are very unsetteling. And then the last election in East Laurenburg in 2021, there were five positions on the ballot, literally five positions, four city council, one mayor. There was only one person that signed up in total for five positions. And I need to report to you that person lost due to a write-in candidate. So my point is, is that we have a lot to do with the local government commission, but it's all centered on transparency, governance, solvency, and the ability to reconcile the books and, and have complete audits.
Chip Barnett: (
Thank you, Treasurer. And we'll be right back after these messages. And we're back, we're talking today with North Carolina State Treasurer, Dale Folwell, you know, you fought to find a better way to fund healthcare and looking at nonprofit hospitals and what they can do. Can you talk a little bit about the healthcare system in the state, it's transparency and why it should be reformed?
Dale Folwell: (
You can probably tell by listening to me that there may have been a period of time in my past where I stuttered. And I was advised when I started taking classes at HBCU probably Winston Southern state and UNC Greensboro. I was advised by a professor that when I struggled to find just the right word, maybe I should just go right to the Webster dictionary or, or the Bible. And, uh, so the world I'm getting ready to use is cartel. We are seeing the cartelization of healthcare in North Carolina. Healthcare controls, North Carolina and big Wall Street now controlling healthcare. And what the cartel is defined as an association, which is formed to restrict competition and or base prices. We're talking about a situation where the consolidation of power into the hands of fewer and fewer of these multi-billion dollar corporations who disguise themselves as nonprofits who don't pay sales tax income tax or property tax.
Dale Folwell: (
And the result of that ultimately is lower quality, lower access and higher cost. As the keeper of the public purse, who has the responsibility for nearly three quarters of a million subscribers on our state health plan, I'm in favor of higher quality, higher access and lower cost. This puts the three quarters of a million in context. A lot of your podcasters are familiar with the venture that was launched five years ago, which has now been disbanded called B B D — Bezos, Buffet and Diamond. It was the joint venture between Berkshire Hathaway, JP Morgan and Amazon to collectively take advantage of their buying power. So they could drive down rising healthcare costs. The state health plan is almost the size of the domestic employment base of B B D combined. So that tells you how much buying power we have. And what we're trying to do with clear pricing is simply get rid of secret contracts, push the power down of the consumer.
Dale Folwell: (
Cause we're talking about a product that people would rather not consume — that would mean they weren't sick when they're inquired as to what it's gonna cost, they're total another dang business. And then when they don't pay for what they didn't wanna consume, and they weren't told what it cost, there's a high potential in North Carolina to have their credit rate destroyed. And so we're trying to get rid of all secret contracts in healthcare in North Carolina on behalf of those that teach, protect and serve. And the reason is I inherited a $34 billion that's right, big billion dollar unfunded healthcare liability, which according to Pew Research a few years ago puts us on a per cap basis right behind the state of Illinois. So when we talk about, you know, a $34 billion PayGo unfunded healthcare liability, that's something that we have to have to address, and it's hard to address it when our healthcare costs are going up to twice the pace of inflation even before COVID.
Chip Barnett: (
What do you think are some of the other biggest issues that are facing the state today?
Dale Folwell: (
I think the biggest issue is the trade gap. When you're listeners hear the word trade gap, they're always thinking about things that are happening over the water. I'm thinking about the gap that exists in North Carolina, especially between those that are on fixed or lower income individuals and, and everyone else. We have seen an evisceration of the middle class that's happening nationwide. It's also happening here. We can obviously look at the latest census data and look at how strong our torso is. That'd be Charlotte, Greensboro, Winston, Salem, the triad, and the triangle, and then kind of skipping over to Wilmington and then back to the west of the Asheville area. So I'm very concerned about the trade gap and the impact it's having on upward mobility, joy of achievement, and what COVID has done, not only to job security, food security, but also what has done to poverty and illiteracy.
Dale Folwell: (
We're in a situation, especially given the last topic about healthcare, we're in a situation right now where people are not able to see themselves getting out of poverty that's even before their natural gas bill doubled this month, as well as their electric bill. So these are various serious issues. And when people don't have reliance on their government and they can't see themselves getting out of poverty, we're no longer talking about a saying that you and I Chip have heard all of our lives about making ends meet, we're talking about an environment where ends will never meet.
Chip Barnett: (
Exactly. Do you have any last thoughts for our listeners today?
Dale Folwell: (
I appreciate the service that you provide. I think that being able to inform people about these important topics, instead of just affirming, it's very important. You know, when I was growing up, we had the military industrial complex and now we have the healthcare industrial complex. And now we have the rage industrial complex, where people are making hundreds and millions of dollars off keeping people divided in this country. And I'll say this as elegantly as I can, people really don't give a damn what political party you're a member of when they're facing job health education and food insecurity and uncertainty — they just want their problems solved. And, people are losing confidence in government for the simple fact that there may be all levels of disagreement about how much government we should have, but everybody in this country agrees that whatever, whatever level is determined and set, they want to work for its essential purposes. And I'm very concerned about people losing the joy of achievement and upward mobility opportunities in their life and how some of these bigger systemic things that The Bond Buyer focuses on, how it impacts all that.
Chip Barnett: (
Treasurer Folwell, thank you very much for being here today and talking to us about the issues and unity in this country.
Dale Folwell: (
Well, thank you. And you people can learn more at
Chip Barnett: (
Thank you very much. And thanks to the listeners of this latest Bond Buyer podcast. Thanks to Kellie Malone, who did the audio production for this episode. And don't forget to rate us, review us and subscribe at www.bondbuyer.com/subscribe. For the Bond Buyer, I'm Chip Barnett, and thank you for listening.