The state treasurer’s race is the most important political contest in North Carolina that isn’t making the daily headlines.
    Current Treasurer Richard Moore did make headlines recently when he discussed the 12 percent drop over the past year in the assets of the pension fund for teachers and state employees. This is neither a surprising performance nor a sub-par one, due to the fund’s relatively conservative asset allocation.
    Still, Moore’s announcement underlines the critical connections among the expectations of state employees, the interests of state taxpayers, and the prospects for economic growth far away from the Tar Heel State.{mosimage}
    Democrat Janet Cowell and Republican Bill Daughtridge are trying to replace Moore as North Carolina’s chief investment officer.
    Cowell and Daughtridge both have relevant experience. Cowell is a liberal state senator (she scored 21 percent on Civitas’ new Conservative Effectiveness Ratings) who previously served on the Raleigh city council. She previously worked as a securities analyst in Asia and consulted with a venture-capital fund in Durham. Daughtridge, a moderately conservative state representative (he scored 67 percent on the CER), worked as a financial analyst in Texas before taking over the operation of Daughtridge Group, a family gas and retail concern in Rocky Mount. Both have MBAs and years of legislative experience.
    The candidates’ personal backgrounds and legislative records are worthy of consideration on their own terms. More important, it seems to me, is trying to assess whether their backgrounds and voting records telegraph how they would respond to the kinds of challenges that the state treasurer will almost certainly face in the coming years. For example:
    The new governor and general assembly will likely face a budget deficit next year of between $1 billion and $2 billion.
    There continues to be talk in Raleigh political circles of proposed bond issues for transportation, land preservation, water and sewer and school construction that would add many billion of dollars to the state’s bonded debt. But state debt per North Carolinian has nearly tripled in just the past decade, and is already close to the limit that Moore believes is affordable. Will the new state treasurer oppose massive new state borrowing?
    There’s been a troubling increase in the share of state debt issued without a vote of the people, as the state constitution requires. Will the new state treasurer cry foul?
    While the pension fund has endured some losses, a far more yawning gap exists between the state’s assets and its liability to finance supplemental health benefits for retired state employees. When I say yawning, I mean an unfunded liability in the tens of billions of dollars. Will the new state treasurer demand legislative action on the issue?
    Periodically, lawmakers and others propose that the state directly invest a portion of its pension funds in North Carolina companies. Although touted as a way to boost job creation in the state, such policies are inevitably at odds with the interests of state employees and taxpayers. Political constraints on investment choices necessarily reduce expected returns, which increases the risk the taxpayers will have to pay more to finance promised retirement benefits. Will the new state treasurer always say no to such “economic development” schemes?
    These are the questions that North Carolina voters ought to be thinking about as they choose between Cowell and Daughtridge. But given the far-larger media attention paid to high-profile races for president, U.S. Senate, and governor, I wonder if the electorate is thinking about the state treasurer’s race at all.
    Voters should be. A lot.
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