Latest / The SEANC View / Pressing the Button: Will Retirees Ever Get a COLA?

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Pressing the Button: Will Retirees Ever Get a COLA? · The SEANC View

0:00
Hello, everyone. Welcome to another edition of the Scenic View podcast.
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We are nice and warm in the old podcast area that we'll call it.
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I'm Jonathan Owens, your communications director, along with Suzanne Beasley,
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the government relations director, Artis Watkins, the executive director,
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and Sammy Klein, the podcast producer.
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We have a special treat for you today, a very interesting topic that everyone
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will want to hear. So sit back and enjoy the show.
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So we're not going to start with our usual winter banter of,
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we did get snow last weekend, so maybe we'll save that to the end.
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We're over it by now. Yeah, everyone's over it, I think.
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We have a special guest on the podcast today that is of peak interest for all
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of our members, according to our Facebook page.
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If you've been on our social media in the last week, you've noticed that there's
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a lot of talk around retirement and the retirement system. After last Thursday,
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there was a vote at the Retirement System Board of Trustees meeting.
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Suzanne, can you tell us a little bit about that? Yeah, a motion was made at
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the Board of Trustees meeting to use the gains over and above the 6.5%,
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whatever the actuaries say we have to have.
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The 6.5%. Yes, gosh, so many words.
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That's 6.5%. So anything over 6.5% will be used towards a COLA for retirees
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starting in 2027. So we talked a lot about that on last podcast.
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We had three different posts about it on Facebook, and I think it generated
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about 600 comments from my count.
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So that's something that lots of our members really want to talk about.
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So we decided to call in the big guns, right? Right.
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So we called in our old friend, Sam Watts, who is the executive director of
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the retirement system. Right.
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And he's held many of jobs at the treasurer's office over the years.
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How many have you worked with?
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I've worked for three treasurers and with four.
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Oh, wow. Actually, we ended up doing some intern work and some other work with
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Treasurer Bowles after he left office.
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So I worked for Treasurer Cowell and Treasurer Falwell and now Treasurer Breyer.
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And you also were in charge of the state health plan there for a while, right? Yes.
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I was the executive administrator of the state health plan for the previous
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two years, and I've been the retirement director for a year.
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But I spent about nine years in the retirement system before I went to be the legislative liaisons.
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So it's safe to say, with exception of maybe Artis Watkins, no one knows these
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issues better than you, right?
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He knows a lot more. And about a lot of issues.
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Well, you're my boss, I can't say. Because I can tell you, Suzanne and I spent
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many days and sometimes nights in the General Assembly just talking with Sam.
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He's a wealth of knowledge, again, on so many topics.
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But definitely retirement. environment I think is definitely one that you kind
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of educated us the most on over the years, Sam.
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And so it's mutual. You guys have taught me a lot.
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Well, you're good people. Our members love you.
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If you're listening to the podcast and you're a scenic member,
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Sam has spent a considerable amount of time over the years in his various roles
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and functions at the treasurer's office with the scenic board.
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He's come to convention.
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You know, he's done it all. So our members love sam and they
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know when they're hearing from sam they're getting the real deal they're
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not getting some varnished political spin that's right
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so we're thrilled to have him and let's get right into it let's start arguing
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over retirement sam so maybe we're gonna agree or maybe both if you could see
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the room they are on opposite sides of the table so look i'm gonna tell it we're
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having some renovation done so we're literally in a hotel room with sam and
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In a dimly lit hotel. He might be scared. Yeah, with a light shining right on.
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So Suzanne gave us a little overview, but why don't you just give us kind of
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a two or three minute overview of where the system stands and what action that was taken last week?
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So let me start with where I want
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to start, with where I want to begin the conversation. I have a button.
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It's one of those things you can get at Office Depot. I've got this on my desk
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to remind me that the thing I most want to do as a retirement director is press
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this button because this button says COLA on it.
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Cost of living adjustment for retirees, because we haven't had a COLA in a very
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long time, a decent COLA for retirees.
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And we need to get to a place where I can press this button.
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And right now, if I press it, and you won't be able to hear it very well on
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the podcast, it says the criteria are not met, the legal criteria are not met
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to pay a COLA right now, but we're working on that.
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That's what we want to work on. And we took a big step at the board meeting
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two weeks ago, last week. Last week. Last week, goodness.
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The snow storm is off. It was quite a snow. Because the thing you have to remember
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about the retirement system, and we've used this analogy for years,
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it is like an aircraft carrier.
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Have you ever seen an aircraft carrier up close or even driven by one of the,
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over the bridges in Norfolk?
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Yeah. They're huge. They're some of the largest machines made by humans.
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And an aircraft carrier is steady and determined, and it goes in the direction
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you send it, and it doesn't turn very easily.
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If you're going to turn the aircraft carrier, you've got to make a few steps
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ahead of time and know well in advance of where you're going to go.
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And that's what we've always tried to do with the retirement system.
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The state retirement system is enormous. We're the third largest payroll in
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the state of North Carolina behind Social Security and then either how you want
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to count Walmart or the university system.
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We are either the second or third, depending on how you want to count everybody.
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And we're paying five and a half billion dollars in retirement benefits this year.
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And most of that goes into the state's economy. That's worth about $20 billion
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of economic output for the state every year.
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And we don't take our responsibility lightly.
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Now, I would argue and argue frequently that a COLA is a very good thing for
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the state to pay for and for it to happen because retirees spend their money.
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All right. They're not usually saving, putting the pension and not having it do something.
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They're out there buying food with it. They're buying something for friends or family with it.
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They're using the money. It doesn't sit on the bank and not gain economic growth for the state.
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So it is a very important topic for us. But turning the aircraft carrier takes a while.
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And you're at the mercy of a lot of economic forces.
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So the motion from former representative Pat Hurley- Pat Hurley-Thornburg, yeah.
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Last week gave us a shot at changing policy of how we calculate COAs in the
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future, how we calculate paying for it.
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What does that mean? It gave you a chance to calculate it differently.
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Yeah, so like I said on the button, there's two things that would let me push
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this button I have in my hand, okay?
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I have to have the legal authority to do so, which means I have to meet certain
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criteria, and I have to have the money in the right place.
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Because the first priority is making sure we fund the system before we improve
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benefits or enhance benefits beyond what's the basic funding of the system.
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Like I said, aircraft carriers slow the turn.
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20 to 30 years ago, maybe not even quite that long, we made a series of what
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we now know were policy mistakes.
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Hindsight is 20-20. I don't think even was trying to make a mistake when they
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made mistakes like not funding the system or taking contribution holidays or
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not using investment gains in the best ways that they could have possibly done so.
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But all of that is stuff we have to deal with, and that carries forward.
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Yeah, you know, I'd gotten a Twitter spat this week about that very issue that
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if you, you know, it's the opinion of some people.
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Hey, if you didn't put in one year and then you barely put in for a couple of years, so what?
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That's just a few years and it was a couple of decades ago.
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So what? And I think most people don't understand that that compounding effect
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of that so what is kind of huge. and it's, like you said, it's an aircraft carrier you're trying to turn.
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If you hadn't put fuel in it and you gummed the engine up because it was choking,
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you'll pay the piper later for that. So if you can kind of expand on that,
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why does it matter if you don't fund it from the employer side?
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Employees, by the way, always, always, always put in their 6% required by law.
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It was the state. The legislature, at the behest that time of the retirement
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system, gave them the green light.
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You know, you don't have to put anything in. We'll be okay.
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And so the legislature said, perfect. In 2023, they said, we're not going to put anything in.
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And then for a couple of years after that, put a fraction of 1% and then 5 point something percent.
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So 2003, we're talking to early 2000s. I'm sorry. Yeah, 2003. Did I say 23?
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You did. My goodness, I have done this. Like, I want to roll.
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So yeah, so this was 2003, 2004, 2005.
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System got very mistreated in terms of what the legislature did not put in.
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How much of an effect did that have?
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So think about the long life of retirement benefits.
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We've made a long-term promise to people, okay?
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Now, because people have beneficiaries, if you stopped giving anyone retirement
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credit, heaven forbid, we don't want that in the state system today.
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If you cut it off today, ended it, you would still be paying benefits for 123
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years that you've already promised.
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It takes that long to pay out liabilities and it takes that long for assets to grow.
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Wow. 123 years. 123 years. If you, approximately.
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The unfortunate part is because we're not fully funded, you'd still have to,
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even if you closed it off, the legislature would still be responsible for putting
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more money in because the liabilities aren't fully funded right now.
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And so you want to fully fund those because you never want to not have the money
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in hand to pay the benefits you need.
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That doesn't mean we've got enough benefit, money in hand to pay benefits for 123 years.
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It means that we have, if fully funded, it means we have enough money with the
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growth of investments and continued contributions by employers and employees,
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there would be enough money to pay the benefits.
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So one of the things that we did correct a few years ago with the help of Scenic
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in a retirement bill was we put a floor on employer contributions of 6%.
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So employers would never contribute less than employees, which makes perfect sense.
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Because at the current benefit level, at what we promise people,
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the actual cost is about 12% of their salary each year.
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So at its core, once we get caught up, it's the employers putting 6% in,
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the employees putting 6% in.
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It's a 50-50 partnership with employees and the employer to fund the benefits that we have.
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Now, historically and legally, the state is responsible for not hitting the
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investment returns. Because the state invests the money on behalf of both parties,
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the state is taking the risk of not hitting the investment returns.
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And so the years when we did not hit the investment returns,
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we did not fully fund the liabilities.
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Because there's three pieces of money coming here. There's the investment returns,
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employer funding, and the employee funding.
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You have to make an assumption from the very get-go. This is the other thing we were doing last week.
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We're setting the assumptions for the next five years of what we think the investment
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returns are going to be. We had an investment return assumption that was too high for too long.
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We assumed we were going to get more money in from investments than we could.
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Now, they thought when they said it in the early 2000s, in 2000,
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that, oh, it's going to be great. Well, then all of a sudden, 9-11 happened.
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Market crashed. Other things happened they didn't foresee or leave any wiggle room for.
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And then the state had to make up those differences. and they didn't make it
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up fast enough because they didn't change the assumption or react the way we
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should have. Hindsight's 20-20.
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Once we started lowering the return assumption and made it more achievable,
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We've been on a path for correction for seven or eight years of fixing that issue.
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And I also wonder, we've talked a lot recently about the fact that the number
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of state employees has basically not increased since 2009.
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So you have a lot of, all these people that have retired, two million more citizens
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living in the state than in 2009, but pretty much the same number of overall state employees.
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So there's no way you're going to be able to cover those costs when you have
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fewer people working than you have drawing from the system.
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So the cuts to state government, when you add two million people,
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but you don't have the same number of employees, you know, you've not added
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employees to help those two million new citizens of North Carolina.
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That's got to have an effect on the system, too.
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It does. I mean, we've never had a lower ratio of employees to retirees than we have right now.
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And it's only going to decline as we see the retirement trends over the next decade.
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So that has to... And Sam, unsettling. You know, it hit me. It was a few weeks
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ago, I think, for the first time. I was like, good grief, the effect this has.
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You know, the idea that you're going to be cutting government and cutting government
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because we're going to save money. We're going to cut and cut and cut positions to save money.
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Then you end up having to pay on the other side in your employer contribution
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to keep your retirement system solvent.
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Whereas if you had the employees to keep up with your population and they were
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all putting 6% of their check in every month, we'd probably be clicking along
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just fine for cheaper than it's costing them to pay 18% employer contribution.
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Well, I have to leave the decision of what the appropriate size of state government
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is to the legislature and to others to comment on that. But mathematically,
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what you're saying is accurate.
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I mean, the more people in the system, the easier it is, the lower the rate can be.
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But from the perspective of the retirement system, I care how much money comes from that. Right.
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And so it's going to be higher. If you're going to have fewer employees,
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it's going to be a higher rate on the employers.
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Yeah. As long as you have unfunded liabilities. Once you have funded liabilities,
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and we get back to the six and six, which is, that's what we showed.
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That's what we were able to respond to, to react to last and last week.
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The charts we showed, and I've got a copy here that the team has looked at and
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reviewed very carefully.
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We're in an environment over the next 10 years where the employer contribution rate will be declining.
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It'll be going down, even despite
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the fact that employee count is not increasing. But the rate can go down.
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It has been going up steadily for the last 10 years. Our big concern over the
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last 10 years was that it was going to hit 25% of payroll.
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It's hit 17 and a half. And we think we're at the point where we panicked employers.
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I mean, our good friends over at UNC Health Care left the ship a year and a
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half ago and left behind millions of dollars of unfundled liability that everybody else has to pick up.
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Now, that's the General Assembly's choice. And the General Assembly says they
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bear that liability. but there's a point where the employer contribution rate
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is too high for employers to bear, too high for budgets to bear.
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Now, what also happened that time while it was going up.
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Was that the responsibility for covering that was also fell on retirees in the
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form of not having cost of living adjustments.
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Right. Well, yeah. And so this is where we're getting right to Pat Hurley-Thornburg's motion.
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All of the investment gains were
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used to offset the employer contribution rates in the last five years.
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Everything above the assumed rate of return was used to offset for the employers.
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So what Pat's motion does for the future is it lets us put a policy in place,
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which we'll vote on in April.
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We hope, that will come up with a split between how much of it is the offset
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for the employers versus how much could be used for retirement benefit increases.
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Okay. So just for people listening, former Representative Pat Hurley-Thornburg,
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who is now on the Retirement System Board of Trustees and who's always fought
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for folks' retirement rights and for them to get a COLA,
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made the motion Sam was just talking about to change a policy.
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Here's the rub for me if the law doesn't change.
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Do they care? The General Assembly doesn't have to worry about what your policy is, right?
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The General Assembly can always do what the General Assembly wants. Anytime.
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And whether it's the state or the local system. Yeah. So we do have two large
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systems at the risk of going too far in the weeds here.
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The local system has different rules for cost of living judgments than the state
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system. And a higher formula. And a higher formula, slightly.
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The local system trustees can grant a COLA without permission from the General Assembly.
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Yes. If they meet the criteria in the system they have to have that are laid
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out for doing it responsibly.
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I think it's possible that we're heading toward a policy future policy where
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the General Assembly could be asked to delegate that authority to the state
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board, too, in a similar fashion.
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As long as you have well-defined criteria, you have the money in hand,
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you have the criteria, then a COLA can be granted.
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And it takes it out of the political sphere as much as you can,
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and you're putting it on the decision of, do we have the money?
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So the idea is, I think the legislature would like to see us fully fund the
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retirement system from the investment gains.
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And so with the other changes that we made on the investment front,
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other things we're headed, that's the path we're headed toward,
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not where the General Assembly is using taxpayer funding, general fund funding,
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at the very beginning of the process when they contribute the employer contribution rate.
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As long as we keep it well-defined and adequate for the system,
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and then the retirement system will be responsible for generating the gains
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that can be used for COAs.
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So what they were doing in the early 2000s is they were just making investment
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gains like crazy because interest rates were going up, up, up.
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And so they were paying callers. They were increasing the accrual rate for benefits.
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And they were offsetting the employer contribution rate to zero.
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Well, they did very little during that period for employees,
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for folks who were going to retire.
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I mean, our formula is piss poor compared to most states, at least half of them.
18:11
Our formula for the states that don't do Social Security, if you counted those
18:16
in the mix, then we're on the lower end. if you count only the states that like
18:20
us where the employees get Social Security.
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So a lot of places, public employees don't get Social Security.
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There's still some local governments in North Carolina where they don't get Social Security.
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Oh, I didn't know there's any local governments left like that. There's quite a few.
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And they have to adopt it and they have employee votes and whatnot for Social
18:35
Security. I'm actually the state Social Security administrator for those elections,
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believe it or not. You got too many jobs.
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All the hats. One of my side kids. All the hats.
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It's core to the job. Marco Rubio of North Carolina.
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Sam Rubio. Don't you? But for the systems, we're dead solid in the middle for
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the places where you're not having to be Social Security and the retirement system, too.
18:56
Maybe it's easy to use the Charlotte Firefighters as an example.
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They have a separate retirement system for firefighters in Charlotte.
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And the Charlotte firefighters don't get Social Security. So their accrual rate is like 4%. Yeah.
19:07
Because you're covering what would be Social Security and their retirement as well.
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So we're only covering the retirement. We are in the exact middle of the states
19:15
that do participate in Social Security.
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And as far as COLAs go, our neighbors are given more COLAs than we've thought
19:23
about for a couple of decades now.
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Well, and they're also building unfunded liabilities when they do that in some
19:30
ways. Because if you think about it, when you pay for a coal,
19:33
you're adding to that unfunded number that you have to plan for in the future
19:37
and for the next currently 12 years.
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But now the other policy change last week was to change that amortization period
19:43
to 17 years so that you can have a little lower amount put in each year.
19:49
So, again, that'll help us make the coals more affordable, too.
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You're paying for a share of that for each of the next 17 years to get the system funded.
19:57
So the idea is you want to have enough investment gains so that you can responsibly
20:02
fund it, that the gains are going to be sufficient to keep funding it until
20:07
you've fully funded the benefit increase.
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And that's what we're trying to wrestle with. And so the declining rate environment
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I mentioned a minute ago, where the contribution rates can go down,
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is our opportunity to say, okay,
20:17
is the General Assembly and are the employers that have to manage their receipts separately,
20:22
and there are a few of those across the state, are they prepared to let the
20:26
rates go down more slowly than they would if they did nothing in order to allow
20:31
retirees to share in the good news that we're hoping to get?
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In other words, can we have the employer rate still go down,
20:39
but not go down as much and increase retiree benefits at the same time?
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Is that a reasonable compromise?
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And I think that's what we're trying to pull all the stakeholders together to
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talk about and to think through and to enact the new policies that Pat's motion
20:54
set us up for at the April board meeting.
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That's what we think is in the ideal world. Everybody gets something and we're
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able to help retirees improve benefits.
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At the same time, not lose employers or have other agencies like UNC Healthcare
21:09
that want to flee because their retirement system is too, air quote,
21:13
expensive for them. So let's go back to one thing that you mentioned that ties
21:18
in exactly with what you were just talking about.
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But I worry that our members may not understand what you meant by,
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you know, before this policy, investment gains were used to lower the amount
21:29
the General Assembly had to put in. Right.
21:32
Is that. That's what we've done for the last five years. So really the last 10 years.
21:37
And we've often talked about with our members, too, that the way COLAs get funded,
21:41
the system is built to provide its own COLAs.
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So that would come from the employer contribution, the employee's contribution, and investment gains.
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And investment gains have not been in an amount sufficient enough.
21:52
Now, I know there's other policies that were implemented in,
21:56
what, the last five years, the E-CRISP and things like that,
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that would have affected how those returns could be used to provide a COLA or
22:03
not provide a COLA, because whatever we were making had to go towards the unfunded
22:08
liability. Am I explaining that correctly? Yeah.
22:10
Okay. And that's exactly right. I mean, we know we're the aircraft carrier,
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okay? Right. Don't forget that. We're the aircraft carrier.
22:16
We know where we want to go. We just got to turn slowly and get to where we
22:21
need to go because we know we want to get to a point where it's a 50-50 partnership
22:25
with employers and employees at the initial funding stage,
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and then the system creates the investment gains to adjust for inflation.
22:33
Right now, that's not allowed. I mean, it's thought about, it's talked about,
22:36
but that's not the criteria we can use without having the authority and the money to do so.
22:42
So we want to get to the point where it's the shared relationship with the employers
22:46
and employees at the initial point, and then the system makes the gains to cover
22:50
the increases in benefits for retirees.
22:53
Because that's an exorbitant amount of money for a COLA.
22:56
It's a lot of money for a COLA. So when there's not money in the system to provide
23:01
for a COLA, that leaves scenic at the door of the legislature.
23:04
You know, asking for money to fund this COLA, and that's what 1% is well over
23:09
half a million, I believe.
23:10
How much is 1% of a COLA?
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A 1% COLA for the state system costs $586 million.
23:19
So for each 1% is $586 million for a permanent COLA.
23:25
For a one-time supplement, it's $57 million. So that makes sense because now,
23:31
well, we're usually walking in the door, you know, looking for a 2% COLA at least.
23:36
So it would be over a billion dollars for 2% that we're asking the legislature
23:39
to fund, which makes that one-time supplement, which is not recurring money,
23:45
look much more attractive. And we're going to get that money before we're going
23:48
to get a billion dollars out of the legislature.
23:51
Exactly the situation. We're always putting less money into the system that's
23:55
coming out. Yeah. Because the system's always making gains.
23:59
So it's never not a good deal for the state.
24:02
And I think the typical knee-jerk reaction is, and it makes sense to me,
24:07
that without knowing all this stuff and all the history, it would be,
24:11
is that, hey, we've been putting an awful lot in compared to what we used to,
24:15
so let's back off of that.
24:16
But the problem is no one ever, ever, ever thinks about things like when the
24:23
governor escrowed retirement funds, diverted them before they could even get to the system.
24:29
And Scenic had to sue. It took years. We had to go all the way to the Supreme
24:32
Court to get that money put back.
24:33
That was employees' money. That was the state of North Carolina appropriated that.
24:38
And then it was a budget crisis. And so the idea was, well, we'll just grab this money.
24:43
And it was Governor Easley at the time. He diverted those funds.
24:46
And we shouldn't have had to sue to get people's money back.
24:50
It took forever to get it back.
24:52
And then, you know, that's when you saw the funding holiday and all but funding holiday.
24:58
So the idea has always been if the state's in a financial fix,
25:03
one of the places they can go to alleviate this pressure on themselves is the retirement system.
25:08
Either put less in it, take it all together. That's crazy to me when you're
25:13
talking about a system like you said that you have to fund for the long haul.
25:18
You can't just, this ad hoc, tiny bit, tons that you put in it,
25:23
that is so nuts to me. If we had just been consistent all along,
25:27
and it would have meant having to make a policy decision that this matters.
25:30
But I think that's what you're getting at with Pat's motion for the policy to
25:35
change to where each side would put in 6%. Is that correct? That's what we're trying to get to.
25:40
That's the vote. And so that's your policy, and you do think there's some kind
25:44
of way that could be made law? Well, so the law is already that employer contribution
25:48
can't drop below the employer contribution.
25:50
We got that a few years ago. I forgot that we did that. You guys helped us.
25:52
But what we're trying to get to is the ability, as the rates are coming down,
25:59
to not have to use the investment gains to offset the employer contribution rates.
26:04
In other words, I'm hoping that the future state of what we're trying to get
26:07
to is we're taken out of that political conversation and out of those budget
26:12
conversations where we're seen as a balancing item.
26:14
Right. How would you make enough gains? How much would you have to make for
26:18
the unfunded liability to stop eating up all the gains?
26:23
Well, we would have had to make the last calendar year, which we measured these on a calendar year.
26:27
A lot of things measured on the fiscal year, but we made 13% roughly in the retirement system.
26:33
We would have had to make 18% to have covered all the gains and start moving
26:38
the other direction in order to pay a call this time.
26:40
So 13% still was pretty good, but still shy of the 18%. As we go into the next
26:45
few years, as the investment gains grow, as the liabilities that we have had
26:50
to eat from changing the assumed rate of return, as those come off of the system.
26:55
It's going to take less money to do that because we've been paying off those unfunded liabilities.
27:00
The unfortunate part of that is that retirees haven't gotten called us while
27:03
we were doing that because we had the first portion. So how long do you think before they see one?
27:07
So, again, I cannot promise. The director, I'm not the genie.
27:13
That makes money come out of thin air. But it could come as early as 27.
27:17
That would be the earliest. I think that statistically, that's possible.
27:21
And I think that state treasurer has said that in a story, in a media story
27:25
as well, recently, right?
27:27
Yes. Now, it's an optimistic goal, and our folks are working very hard on the
27:31
investment side to make that possible.
27:33
Because, you know, there's some possibilities of making that happen.
27:36
But, again, I wish I could promise it, but there's no way I can promise that.
27:40
Because you never know what's going to happen with, I mean, the U.S.
27:44
Could make some bad monetary policy decisions in the next.
27:48
Well, I was going to say, what if the market falls out? The market could blow
27:52
up or we could do something with the Fed Reserve that doesn't make sense for us, that hurts us. Yeah.
27:58
Well, and that's my other question. So because we don't know what the market
28:02
will do, the systems that run where the board gets to decide COLAs,
28:05
that's great if it's a great stock market year.
28:08
But otherwise, doesn't that take the onus off of the General Assembly that should
28:13
be there? This is an employee benefit. This isn't a gift.
28:16
This isn't, you know, some kind of aid. It is not. You pay less than the private
28:21
sector, not you, we pay less than the private sector as a state for state employees to come work.
28:29
Less than they would make by an average of about 14% than they would in the
28:33
private sector, with the goal for them being, okay, I'll make a lot less,
28:38
but I'll have solid benefits.
28:40
And yet what we've seen in at least the last decade and a half is,
28:45
oh, well, look, we wanted you to have solid benefits, but we don't have enough money for you.
28:51
The trade-off and the policy trade-off thing, because this is,
28:54
I think what I'm saying is a fundamental shift in how the General Assembly wants
28:58
to view the retirement system.
28:59
Like I said, we've been a balancing item in budget negotiations over the years,
29:03
usually to our detriment.
29:05
Is the ability to be allowed to generate the callers and grant investment returns
29:11
and just have the general assembly not have us as a balancing item worth the
29:14
trade-off of eventually the only thing we have would be the possibility of what
29:19
we've had to do for the last 10 years.
29:20
I don't think we're any worse off if we're trying to do that on our own than
29:25
we have been for the last 10 years.
29:26
And we might be, And I think we would be better off getting to that stable state,
29:30
the stable state where we're trying to keep the employer benefits,
29:33
the employer contribution and employee contribution as an equal partnership.
29:37
And then everything else we do is a making up deficiencies, investment gains
29:42
or paying for benefit increases is done by the system itself.
29:46
So it's a fundamental shift. It's a question. I can't promise to join somebody once.
29:52
That's kind of what we see and what we're hearing as a policy direction.
29:56
So I think that, you know, what you were talking about with your Twitter spat,
29:59
and I watched that whole thing transpire, and I had a few thoughts that I was
30:04
not brave enough to put down.
30:06
But, like, it seemed like that
30:07
person obviously was arguing for a defined contribution system, right?
30:12
Yeah, just put everybody on a foot. So what happened in the, quote, Twitter spat?
30:16
Is that a point was made that the state has had to put a whole lot more in employer
30:22
contribution than they had 10 years ago.
30:25
That's right. For all the reasons Sam just laid out, that's what it's cost to
30:29
keep the fund rolling and to pay down some of this unfunded liability.
30:33
And I started a back and forth.
30:35
And it was somebody from, to be clear, I don't want to make it sound all mystery.
30:39
It was somebody from the John Locke Foundation.
30:41
And I was kind of interested because I thought surely the John Locke Foundation
30:45
would want, you know, everything very visible.
30:49
And a 401k, his argument was, hey, if you put everything in a 401k instead of
30:55
the retirement system, then everybody could see what they're paying.
30:59
Because it's your own individual account. The problem I had with that is that
31:04
I don't think we should expect more transparency from the private sector than
31:09
we do from our own government. And these are employees of,
31:13
the government. So I think that that was our main issue in the debate that we were arguing over.
31:21
The other thing is just the money itself. This is, again, this is an employee benefit.
31:27
And that's what I was thinking about. It's kind of convoluted,
31:32
but if you don't think that state employees should have a defined benefit system
31:36
and then you're also, you know,
31:39
cutting their health care and making that program different or worse,
31:43
and you're not paying them as much, how are you going to recruit people?
31:47
And I think it gets to like a fundamental attitude towards state workers that
31:52
maybe this person... Oh, there's great resentment over any dollar that's spent on state workers.
31:57
Be clear about that. Yeah, we've always had trouble with public perception.
32:01
What makes state employment any different than working at McDonald's?
32:05
It's considered lesser than.
32:07
Most people think that people working for the state can't get a job somewhere
32:11
else, and they're working for the state for that reason.
32:13
Yeah, but I'm just saying you lose all your competitive advantages in recruiting.
32:17
And sometimes these people are working for the state that think that.
32:20
Yeah. I mean, that's when it's really funny. So there's so much to putting everything
32:26
together with the retirement system and making sure that there's money available
32:29
to pay out the COLA that retirees were promised when they came to work for the state.
32:35
So John and I stayed busy on social media the last couple of days just trying
32:39
to answer people and talk to them. Their main concern was...
32:43
Everything we've talked about today may not even go far as what they're,
32:47
you know, what they've got on their mind. Their main concern is that we're not
32:50
getting a COLA this year.
32:51
They're not even thinking 2027. They know they haven't gotten one in years.
32:55
Is there something that we could say to them to reiterate?
32:59
Yeah, is there? Break it down a little bit more. Simple.
33:02
Something. Trying not to use the word comforting, but. I'm trying to help you
33:06
and I'm not knowing what to say either. I mean. Hope is on the way.
33:10
Yeah. I mean, that's where, like I said, we're turning the aircraft carrier,
33:14
trying to get to where it's going to happen.
33:15
That wasn't possible three to four years ago. We've had the same conversation
33:19
every year for quite a while now.
33:21
But I think what we're seeing, I think what you should take from Pat's motion
33:25
last week is that there's actual hope that we could move to the direction where people will.
33:29
And we don't want to put all the onus on the retirement system because there's
33:34
another aspect. I mean, the legislature could just fund a COLA, right?
33:37
I mean, I know that's a lot of money. No, because at the legislature,
33:41
the Fiscal Research Division,
33:43
or actually maybe it wasn't Fiscal Research, but somebody at the legislature
33:46
said, look, if you're going to calculate it, you have to multiply the amount
33:50
because you do pay it out for more than one year. Yeah.
33:54
It's just a huge number. It's a huge number. So theoretically they could,
33:59
but in practice, it would just be way too much, right? They would never pass.
34:02
You couldn't possibly get a budget if you did that the way they say you have to calculate.
34:09
So I've got one more question for you, Sam. Have you tried lottery tickets?
34:14
We have like $116 billion. Just throw a billion dollars at lottery tickets. You never know.
34:21
I mean, no, does that not sound? That's probably not something we'll head for.
34:27
Well, Sam, I know how hard you've worked for the folks that work for this state and the taxpayers.
34:34
You take their interests just as seriously, and we just appreciate you to no
34:38
end. Appreciate you guys, too.
34:39
Great. Love working with you over the years and enjoy our partnership and friendship. Indeed.
34:44
Well, I guess it's time for the question of the week.
34:53
So we did prepare Sam quickly that we just told him it was going to happen.
34:57
Most of the time I just drop it on people, right?
34:59
But I guess the Winter Olympics are coming up this week. And I like the Winter
35:04
Olympics. I like the Summer Olympics too, but the winter is just like so different.
35:08
You don't ever do these sports or anything. So it's fun to watch.
35:13
So what is your favorite Winter Olympic sport? Start with our guest, Sam. Sam.
35:19
Got to say curling. Oh, yeah. I mean, it's just, you know, you can go for any
35:23
of the classics, but curling is just fun to watch.
35:27
It's interesting. I remember that, like, never heard of curling until,
35:31
like, 20 years ago when it was all of a sudden in the Olympics and everyone was talking about it.
35:37
It seems very cool. It's awesome. People, it really caught on. Yeah.
35:40
I think everybody could see themselves with a little room out there. Maybe that's it. Yeah.
35:45
Maybe we're thinking if we had to do one, where would we be least likely to injure ourselves?
35:52
Although if you think about it, what they're doing is kind of amazing,
35:54
so we would injure ourselves.
35:56
But yeah, I love the curling, too. And we were talking about it.
35:59
There's a place in the triangle that has curling.
36:03
So there's interest in the southeast in curling.
36:07
Let's get a scenic team together. There you go. Oh, my goodness.
36:09
What about you, Sammy? What's your favorite?
36:11
I feel like I should go last. Okay, you want to go last? Because I've got a
36:14
long answer. Oh, wow. The Gen Z answer. I guess I'll have to go with bobsledding.
36:19
It's so cool. And it's like as kind of a NASCAR angle. But I do love the bobsledding.
36:27
Snowboarding is pretty cool, too, especially like the halfpipe thing.
36:30
Yeah, that's what I was going to say, snowboarding, because I can't do any of that.
36:34
So it's fascinating to watch. And also, obviously, the soap opera of the ice skating. Always.
36:41
Every year there's a different. It's like a similarity between ice skating and
36:45
gymnastics in the summer. They're like the same things.
36:49
Everyone loves that. Uber athletes, you know. Yeah.
36:52
I think the luge is cool because we used to pretend we were lugeing,
36:57
get on our flexible flyers on our backs with our feet, controlling the steering,
37:02
holding on. Did you do that last week?
37:05
Not last. No, I wouldn't do it now. That was just regular sledding.
37:09
I like lugeing. All right, Sammy, hit us. So I do love figure skating because
37:13
it's so beautiful. And it reminds me of gymnastics.
37:17
I do like drama, too, but that's not in my own life, in other people's lives.
37:23
But I'm really excited to watch the Nordic Combined, which is a combination
37:28
of cross-country skiing and ski jumping.
37:31
And it's one of the oldest Olympic sports.
37:34
But the crazy thing is, it's the only Olympic sport that bars women from competing.
37:40
It's the only one. And there is currently a girl from Colorado.
37:45
Her name is Annika Malisinski.
37:47
I'm not 100% sure how to pronounce her last name. Well, that's a name.
37:50
But her brother is competing in the men's Olympic Nordic combined.
37:55
And she is there with him with a bunch of other women who compete professionally.
38:00
And they are protesting the fact that women cannot compete in this.
38:05
And it's the only sport that they cannot compete.
38:09
That's the only Olympic sport. That's not expected for something called the
38:13
Nordic combined. You'd think those Nordic countries are all progressive and stuff.
38:18
And so now this is a sport that is on the verge of not even being included in the 2030 Olympics.
38:24
What is the big deal? Like, why are women not included? Good question.
38:29
It's not about capability.
38:30
Women are just as capable of doing it, and they've proved that,
38:34
but they're not allowed.
38:37
That's the crazy thing.
38:40
Okay, so ChatGPT says it's because there aren't a lot of women who compete in
38:45
it, and so it lacks interest. Yeah.
38:48
There's clearly interest if there are women out there fighting to be able to
38:52
compete. If they have built up curling to where we have it around here.
38:56
There's women's curling. You can get it done. Yeah. Yeah. Okay.
39:01
That's what I'm looking forward to, especially since it could be the last year
39:04
that it's in. Well, now I'm going to be looking into that, too.
39:07
That's interesting. Sam, do you have a hot take on women's Nordic combined?
39:12
You know, I think progress happens and progress will happen.
39:16
I do recall growing up, we didn't know what hockey was in North Carolina.
39:21
No, we didn't. That's true.
39:22
Things do change over time. Yeah. I remember when we got the hockey team in Greensboro.
39:28
Well, you know, the Hurricanes were in Greensboro first and we were like, what?
39:31
We're getting a hockey team before a baseball team? Well, we had one before.
39:34
Or it wasn't NHL, but we had a little hockey team with the Raleigh Ice.
39:39
Ice Cats. Do you remember the first year they played at Dorton Arena? Yes.
39:43
Yeah, I went. That's awesome. That was fun. That was a lot of fun.
39:46
Hockey is so fun. Meanwhile, hockey is the only team sport that my parents,
39:51
that my dad could actually get me to sit down and watch with. Oh, I wonder why, Sammy.
39:55
Boy Equiprios. What did you call it? It's fascinating because I can't keep you.
39:59
Apparently the young ladies like the, aren't they like missing teeth and stuff?
40:04
They've all had their teeth fashioned. They have fake teeth.
40:06
They're not walking around with gaps in their teeth whenever they're not in the bully aquarium.
40:13
Sam is looking like, you brought me to a hotel room.
40:18
You bullied me. And now I'm listening to this.
40:21
I'm not going to ask Sam if he has any male hockey takes or anything.
40:27
Seriously, he's done with us at this point. Yeah. Well, thank you so much for
40:31
coming in, Sam. And we love working with you.
40:34
Obviously, we didn't want to put you on the hot seat too bad.
40:37
But I hope you'll come back and see us again anytime you want me.
40:40
I think there's a lot more to hear from Sam, from what I can tell.
40:44
Always. In a good way. All right. And enjoy the rest of your week.