Taking ‘keeper of the public purse’ seriously
Dale Folwell, a certified public accountant, is the North Carolina state treasurer and was elected to a second four-year term in 2020. Folwell was first elected to public office as a member of the Winston-Salem/Forsyth County Board of Education. He later served four terms in the North Carolina General Assembly, including one term as Speaker Pro Tempore. He recently spoke with senior editor Ray Nothstine.
For people who may not know a ton about what a state treasurer does, what responsibilities and opportunities do state financial officers have to safeguard their state from federal overreach?
Folwell: As Derek Kreifels of the State Financial Officers Foundation (SFOF) says, “When you’ve seen one state treasurer’s office, you’ve seen one state treasurer’s office.” In the famous book, “Keeper of the Public Purse”—written by probably the best state treasurer of the 20th century—Harlan Boyles states that the treasurer of North Carolina has more constitutional and statutory responsibilities and duties than any other statewide elected official. Right now, I’m the sole fiduciary of one of the largest pools of public money in the world and wear many other hats.
Directly to your question, I think it’s important for your readers to reconnect with a concept that they’re familiar with called the “State of the Union.” The State of the Union right now is not very good. Your readers are exhausted with things coming at them in a way that they never expected. I say what I’m about to say, not emotionally or politically, because both political parties are responsible for this, but mathematically. We are at a precipice in this country because as I sit here for this interview today, it’s sad that North Carolina has a higher bond rating than our federal government.
Mitch Daniels, who’s highly respected across the country, just did a very good interview with Margaret Hoover on Firing Line. He talked about the math and the national security threat to our country. We are now paying out more in debt and debt service than the entire military budget. As a keeper of the public purse, it’s my job to protect and defend the state of North Carolina from that kind of incompetency and the inadequacy of our federal government, which was highlighted again when America’s credit was downgraded.
Let’s turn to North Carolina because I know you’ve done a lot of work here in shoring up the pension and state health care system. Tell us a little bit more about the challenges of that coming into office. I like that you’ve been a civic educator on this issue. Do you agree with being described as a civic educator in your role in terms of the keeper of the public purse?
It doesn’t matter how handsome you are, how pretty you are, how wealthy you are, or how smart you are. The fact is that when you are the keeper of the public purse and you’re managing an amount of money eight times larger than the state budget, you realize very quickly that you’re standing on the shoulders of a lot of great public servants and public employees.
As much as I thought I knew about unfunded liabilities and the trajectory that North Carolina was on, I’ve learned a lot of other things since I’ve been the state treasurer. Most importantly, we have responsibilities as fiduciaries to be loyal and exercise the duty of care.
What that means for your readers is simply this. When you’re the keeper of the public purse, you must care about things that you don’t like as well as things that you do like. I don’t like the fact that I inherited a state pension plan that had not achieved its assumed rate of return on average for over 16 years.
This is not an indictment of any previous treasurer. Treasurer Richard Moore was hit with 9/11. The stock market was closed, and the pension plan lost billions. Moore didn’t have anything to do with 9/11. Treasurer Janet Cowell was hit with the Great Financial Crisis. The plan lost over $20 billion. Cowell had nothing to do with the Great Financial Crisis. She just happened to be the treasurer when this occurred. Putting sunshine on these issues and educating people is the only way to fix actual problems.
It starts with creating a culture where we answer our telephones, which doesn’t happen very often in state government. If you don’t answer your phone, you can’t hear from your customer. If you can’t hear from the customer, you don’t know what the problem is. If you don’t know what the problem is, you can’t provide solutions.
You played a significant part in getting North Carolina out of debt to the feds on unemployment benefit loans. Why is that important? Some may not think of states being in debt to the federal government as bad, but are there any strings attached when you’re in debt like that, making it harder to govern or to help lead a state?
Folwell: Not just strings. It’s like a Venus flytrap in Hotel California. You can check out, but you can never leave if you owe the federal government money. I know in a lot of interviews, a lot of public servants give answers that reflect, no pun intended, the mirror looking at them, where they take credit for things.
I want to be very clear in my answer that I’m pushing the credit and the power down to the people for solving our $2.7 billion unemployment debt crisis and building a $1 billion surplus in 30 months. Let’s start with the fact that I was the assistant secretary of commerce, and in so many of the situations I’m involved in, everybody else is the brains and I’m sort of the mule, but every team needs one.
The Division of Employment Security was broke and broken. My wife always admonishes me to talk about why our state residents need to know this stuff because this is one of the invisible things that was putting North Carolina at a competitive disadvantage for expanding business and business relocation.
It was broke because we had one of the largest unemployment debts to the federal government, which was increasing federal and state unemployment taxes on every employer in the state. Now if any of your readers wake up thinking about FUTA and SUTA, they should probably get a life, but coming into March of 2013, this was nearly 1.2 percent of payroll. You think about places like Harris Teeter and other grocery stores. On a lot of their products they don’t make but a 1.2-percent profit margin, but they turn that inventory 12 times. It was crippling our state.
Let me explain the broken part. I may not get invited back after using this word, but we sucked. We sucked at getting money to people who didn’t deserve it, and we sucked at getting the money to people who did. It took me almost 200 days to get my own phone answered in my own call center. I would start every meeting as the assistant secretary of commerce, no matter whom it was with, by simply dialing our call center and putting it on speaker because until you can answer the telephone, you can’t figure out what the problems are in state government.
The credit goes to the General Assembly who gave me the tools to implement this turnaround. And something that’s never talked about is the creativity, the ingenuity, and the commitment of the state employees of that agency. I had a temporary employee at the unemployment agency whom I nominated for the Governor’s Award, and she received it. She asked this simple question of 80 of her contemporaries—and it’s a way that a lady in North Carolina would ask a question politely.
This was her simple question: “I’ve often wondered why we would pay out unemployment benefits before the form that’s due back into us, as to why Ray is unemployed, was due.” We found nearly 68,000 people who had put those magical letters on their unemployment application: “L-O-W.” That’s not the stock symbol for Lowe’s Hardware. It stands for “lack of work.” No one was ever questioning it. It’s the courage and the creativity and the ingenuity of the people at Division of Employment Security who played a huge role in turning this around.
When I say broken, our quality scores were behind every other state, plus Guam and Puerto Rico. That’s how bad we were. It was taking nearly 300 days to get a case adjudicated. By that time, the unemployment benefits were exhausted, and nobody cared about recouping the money if it was given fraudulently.
An accomplishment is only an accomplishment for as long as it lasts. That $2.7 billion debt turned into a $1 billion surplus that ultimately became a $4 billion unemployment trust fund surplus—not to be confused with the state budget, which is also running surpluses. That $4 billion surplus was desperately needed in March of 2020, as we were on the front of COVID and had nearly a million people unemployed. We were one of the few states that did not have to go back and borrow money from the federal government, which would have reignited these unemployment taxes we talked about earlier.
What kind of unreimbursed costs do states take on when they accept federal grants or money? How might they do a better job of considering these costs before accepting the money? I know this is a somewhat related question, but I’m curious to hear some insights.
Folwell: I think any public official needs to act like a mortgage lender. When you go to borrow money on your home, the mortgage lender is asking you some tough questions: How do you intend to pay it back? Why should we give you the benefit of the doubt? Is this going to be longstanding? I think any of these situations deserve the sunshine that these other states are putting on these federal programs because, as I said earlier, the federal government is inept and incompetent and writing checks it can’t cash. I’m very concerned about that as it relates to some of these federal programs.
It comes back to another question you asked earlier about being a public or a civic educator on these topics. When you turn down money from the federal government, you better have an explanation for the people of your state why you’re doing that. It really comes back to conservatism. The root word of conservative is “to conserve.” It’s a verb. We must be able to explain conservatism and why we turn down federal money in a way that speaks to people like adults and is common sense oriented.
What can a state treasurer do to ensure state pension funds are being invested in a manner that maximizes returns? More specifically, how do we make sure these funds aren’t hijacked by the ESG activist agenda that we see in the financial markets today?
Folwell: I know you’re interviewing a lot of other people but I don’t think you’re going to interview anyone else on the planet who called for Larry Fink to be fired about a year ago because of his woke philosophies and his taking money from our hard-working public servants and using it for a political agenda.
We led on this issue. We negotiated our rates with BlackRock, which we have had a relationship with for years, to just a basis point for some of the fund management. Second, we removed all proxies from New York City. They’re all sitting in Raleigh, and we’re voting those proxies based on the commonsense culture of North Carolinians.
Third, I called for Larry Fink to be fired because that’s what happens in North Carolina when you don’t do your job—you get fired. We never hired Larry Fink and BlackRock to politicize the hard-earned dollars of our public servants. What we hired them to do is make us money.
That’s why when you look at the math—not the emotion and not the politics—but when you look at the math of our pension plan, those that teach, protect, and serve who are participants in this plan at the state and local level, the volunteer firefighter, and all the other important National Guard level plans that we manage, we have a duty of care to do these things. They are participants in one of the best-funded pension plans in the United States.
It comes back to hiring the right people and setting a culture of conservatism and common sense, which has put us in a position to save over $700 million in Wall Street fees over the last seven years.
I spoke to about 200 people the other night in Wayne County—home of Seymour Johnson Air Force Base. I explained to them why they should care about $700 million because that’s $700 million we don’t have to ask taxpayers to appropriate to us, and that’s $700 million that can be available to pay out retirees going forward.
You know this as well as anybody, but the American Founders, they did not agree on many things, but one thing they all agreed on is that you need virtue, as underpinning society, to be the anchor to hold our republic together. As an elected official in a state like North Carolina, or really any state, what component or virtue do you find helpful? What do we need out of our leaders and state officers today in their positions?
Folwell: A couple of things. I was a little bit depressed a few weeks ago. It had been a particularly tough week for me because, as you can imagine, most of the checks that we deliver are blessings, but some aren’t.
I was depressed because we had a corrections officer who was driving one of our state vehicles in Person County around a curve at 6:30 am, nearly dark, and a family was literally walking in the middle of the two-lane road. The truck hit the 17-year-old teenager. Our corrections officer immediately jumped out of the truck, called 911, was trying to save this teenager’s life when the father took out a pistol and allegedly murdered him on the side of the road and then stole our truck and left his son and our corrections officer there to die. That coincided with the one-year anniversary of Deputy Ned Byrd’s killing in Wake County. Byrd was a canine officer, and his canine was named Sasha. It’s my understanding Sasha had not been around Deputy Byrd after he was murdered because she was in the back of the car. During the funeral service in Raleigh, she jumped up on the flag-draped casket to say goodbye.
I was a little bit depressed about that. I was going to our Quaker Friends Meeting in High Point, which is celebrating our 250th anniversary. My wife, Synthia, was in there practicing for the music for the service that morning and I walked down into the cemetery where a lot of the Folwells and my other ancestors are buried. It just reminded me of what the Bible tells us in answer to your question, that when faced with anxiety and uncertainty, our only choice is to give more.
I’ve been the best treasurer money can’t buy. It has to do with me understanding daily, don’t look down, but look up, and knowing who I am and whom I belong to, especially when it comes to having loyalty and a duty of care to those that teach, protect, and serve.
The other part of that is to listen, act, and fix. That’s what I had to do for most of my life as a blue-collar worker—a motorcycle mechanic—listen for the problem, fix it, and then act on it.
When you look up, think about what virtues God gave you. The virtue that He gave us is to see what needs to be seen. Humility is essential. Take the example I gave of Tarsha Crisp, who asked why we would pay out those benefits before we ever heard back from the employer.
Last, having the courage to act on what needs to be done. It’s so interesting, as I walked down to that cemetery that day, and I was just thinking about rage, I didn’t know what Josh was going to preach on that day. I come back up into the service, and he talks about how “rage” is inside the word courage. Courage comes from the heart. We need to be passionate about what it is we’re trying to fix. We must not just be rageful, but we must have the heart to fix it.
I think those are the virtues that are necessary for a public servant. Surrender every night to God by wiggling your toes and coming all the way up to your body and wiggling your fingers. Pray every morning. The first prayer is, please get between my ears before the rest of this world does.
This is pivoting a little bit to state-local issues. What role should the state have regarding municipal financial decisions? How much freedom should municipalities have in North Carolina? If they make bad decisions in the state, is the state obligated to bail them out? Do you provide guidance and insight to municipalities on financial matters?
Folwell: Yes. We have something here called the Local Government Commission, which is going to be celebrating its 100th birthday in the next few years. It was created after the Asheville bankruptcy. The Local Government Commission is meant to be a regulator or a filter for how we approve the ability of these local entities to borrow money. We are asking tougher questions of borrowers than in the past.
I know you’ve answered this to some degree already, but related directly to government shutdowns, what steps can be taken to reduce the state’s financial dependence on the federal government? Because some states are taking loans, or some states are paying back or waiting to receive checks from the federal government, but are there steps states can take to mitigate the problems of a federal shutdown?
Folwell: As I said in one of the earlier questions, your readers are familiar with something called the State of the Union. I want them to start thinking about the states of the Union. When you have a federal government that’s just been downgraded and where the rating agency said that they’re incompetent or did not have the ability to govern, then the citizens are going to have to look to the states.
I’m also reminded that Warren Buffett, who’s been a mentor of mine for decades, once said, “It’s hard to be as smart as your dumbest competitor.” When your dumbest competitor is the federal government, which can’t balance its budget, continues to borrow money, and drives up inflation, it doesn’t matter how many billions of dollars we save at the treasurer’s office. A third of that money has been wiped out with the increased cost of truck tires and light bulbs and paper towels and everything else through their inflationary policies, not to mention the employment crisis where it’s harder to attract people into public service.
But how do you be as smart as your dumbest competitor? Number one in North Carolina, we have retired 60 percent of the state debt. Why should your readers care about that? That means that we’re not in the market of borrowing money at these high-interest rates. We are investing at these high-interest rates.
Second, having a very strong, conservatively managed pension plan. Third, taking on policies that would bring more energy independence to our state. We are very vulnerable in North Carolina. When you look at the fact that we’re the number one state for business outlook and business activity, the third fastest growing state, the ninth most populous state, we are at risk because we don’t have the energy diversity that we need.
That’s why I was so pleased to have filed something with the Federal Energy Regulatory Commission (FERC) that ended up going to the US Supreme Court. That effort is ultimately going to allow the Mountain Valley Pipeline to pump natural gas out of West Virginia and Chatham, Virginia. Then we’re going to start working on the Southgate Pipeline to bring natural gas from Chatham into Reedsville, Greensboro, and ultimately Burlington.
These are things that we can do to head off our situation. In the North Carolina Legislature, in addition to paying off the debt, we’re in the process of eliminating the corporate income tax. These are essential steps to protecting our state from the federal government.
When I was a garbage collector, as you may imagine, people put books out to be discarded. One of the books that someone threw out, and I had no idea the meaning of it at the time, was “Human Action” by Ludwig von Mises. It was a signed copy. Can you imagine how rare that is? In this book, it talks about the fact that consumers don’t know where the border is. Money will go where it’s invited and stay where it’s welcomed.
When you look at the contour of North Carolina and turn it sideways, but for about 60 miles, we have as much border with other states as California. As smart as your readers are, they can’t name one major population center in California that borders another state. When you think about North Carolina, Asheville, Charlotte, Wilmington, and to some degree, Elizabeth City, Rocky Mount, Raleigh, Durham, Greensboro, and Boone, it means that when we are locked down with COVID shutdowns and people want a hamburger or a haircut, many of our citizens can drive 15 miles to get a hamburger and a haircut in another state that’s not locked down.
That’s why your question is important. Not only on how to protect ourselves from the incompetency of our federal government, but also to make sure that we are the low-cost place to live and do business, especially since we share a lot of borders with neighboring states.
…when everything is dividing our society these days—political party, gender, and race—none of that exists in the treasurer’s office.
When people start talking about the border crisis, we have a border crisis here too. When people start talking about human trafficking, we have a huge human trafficking problem. We have a major fentanyl problem. That’s why I was trying to put that vision in the readers’ brains about the fact that when you have that much border with other states, not only do you have to be focused on being the low-cost place to live and do business, but you also have to make sure that you’re protecting and defending our borders against bad elements that come in and damage North Carolina.
You’ve won two statewide elections in North Carolina now as treasurer. Do you have any opinion on whether that position works better as an elected or appointed office?
I’m going to answer your question in a couple of ways. I’m the first Republican treasurer since the Ulysses S. Grant administration here in North Carolina.
Now, I use the word Republican lightly, because as the keeper of the public purse, when everything is dividing our society these days—political party, gender, and race—none of that exists in the treasurer’s office. The blood that runs through me is Quaker. One of the tenets of the Quaker religion is to be fair and just. We treat everyone equally no matter how powerful. You can imagine when you’re managing $248 billion, powerful people try to have their way at the treasurer’s office in one way, shape, or form.
Second, the only color we focus on is green. No one breaks in line at the treasurer’s office. We have a culture of conservatism, common sense, and courtesy. Only two groups get preference: those that are killed in the line of duty and hospice patients.
Concerning the second example, once someone passes away, we’re stuck with the words on paper. If someone has been married and divorced or something else has happened to them, we let them break in line to make sure all their beneficiaries and all their annuitants and all their loved ones are taken care of the way they want.
For those killed in the line of duty, we try to do a small part to minimize the grief, which isn’t even possible. But we want to be conscious if a corrections officer or any of our other state employees is killed. We take that very seriously.
As far as the elected part, I’m standing on the shoulders of a tremendous amount of people that I look up to. I’ve already mentioned Treasurer Boyles, and I hope you get the context of what I’m getting ready to tell you. It’s my understanding that every four years, Boyles, who was a Democrat, would go and meet with the chair of the Republican Party of North Carolina. He would say the following, “I want you to find the best possible, most qualified person to run against me because in a presidential year, anything can happen, and this job is too important to hand off to just anyone.”
I don’t think you’ve ever heard of a public official saying that. That’s what public service is supposed to be, and Boyles was the epitome of that. As far as statewide elections, I’ve been very blessed to be the only candidate in history who has received every newspaper endorsement, including the Black-owned newspapers, and the endorsement of the State Employees Association.
At the end of the day, even after being outspent four to one in both those elections, I received more votes than anyone who’s ever run for president of the United States on the North Carolina ballot. I think that’s the result of me being in touch with humanity, speaking to people like adults, and governing as a conservative without offending people.
The confidence that we have in our government is at an all-time low, and I try to play my part every day as the keeper of the public purse to stabilize this state and help us go in a different direction.
