For many decades North Carolinians of all political stripes have taken solace in the fiscal responsibility of our state. One of only a handful of states with a coveted AAA bond rating, North Carolina benefited from sound fiscal management for almost 50 years under Treasurers Edwin Gill (1953-1977) and his successor, Harlan Boyles (1977-2001). This fiscal heritage is now in danger.
The state health care plan is, according to Folwell, “insolvent, with a $35 billion unfunded liability.” State employees contribute very nominal amounts ($25 to $50/month) for health coverage. Employees who retire after 20 years of service receive full health coverage for life. More is clearly needed, including bringing health care benefits more into line with those offered in the private sector.
Tucker advises that the state follow the private market by converting to a fixed contribution model. This is a major reforms that would require legislative action.
Today there are very few defined benefit retirement plans provided by private companies. Most have migrated to fixed contribution 401k plans (often as a match to employee contributions), and the retirement value is determined by the investment performance of the employee’s 401k account. North Carolina has retained the old defined benefit model, which requires adequate funding from the state to meet set benefit commitments. An attempt to convert to a fixed contribution model failed in the legislature last year. Hopefully Folwell will endorse this reform and get it through the legislature.
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