by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
North Carolina’s pension plans for government employees did well this past fiscal year, growing 10.6% to $93.9 billion. That was below the median gain for all public pension funds in the country of 12.4% through June 30. One good year, however, does not eliminate the need to continue reforming the pension system.
On the bright side, the state’s pension system is healthy compared to other states. Three factors that have contributed to that health are lower expectations for the rate of return, now down to 7.2 percent, a payoff period of 12 years compared to 30 years in other states, and a legislature that sets aside the required funds each year.
State Treasurer Dale Folwell has taken some important steps to improve the pension fund’s performance and lower costs. Legislators will need to dedicate more money to the pension fund if the state is to keep its promises to state employees in a period of low inflation and slow economic growth. Expect more reforms as policymakers work to balance commitments for retiree health and pension benefits with the ongoing needs of state government services. A court decision in May could make that more difficult.