NC Treasurer Folwell Calls for DOT Chief Operating Officer and Chief Financial Officer to be Replaced
Treasurer Cites $2 Billion in Project Overspending, $1 Billion in Highway Trust Fund Reduction, $39 Million in Overspending for Raises that Increased Retirement Systems' Unfunded Liability by $176 Million
In the interest of protecting the state bond ratings, State Treasurer Dale R. Folwell, CPA, yesterday called for N.C. Department of Transportation Secretary J. Eric Boyette to replace the department’s chief operating and financial officers. Treasurer Folwell previously called for Gov. Roy Cooper to replace former NCDOT Secretary James Trogdon and to transfer financial management of NCDOT to the Office of State Budget and Management because of the gross financial mismanagement of NCDOT.
Since 2019, NCDOT overspent by at least $2 billion and eviscerated the Highway Trust Fund by over $1 billion. This overspending resulted in NCDOT going to the North Carolina General Assembly and getting a bailout costing taxpayers hundreds of millions of dollars.
Also, in 2019, NCDOT gave 7,379 employees raises totaling approximately $58.5 million.
At the request of state legislators, the Retirement Systems Division (RSD) completed an actuarial analysis of the impact to North Carolina’s retirement system on the raises given to NCDOT employees.
The pension benefit provided by the Teachers’ and State Employees’ Retirement System (TSERS) is a percentage of the employee’s final average compensation. Therefore, significant increases in compensation (raises), beyond those that the actuary expects based on past experience, will cause unforeseen losses the next time the actuary measures the funding status of TSERS. These losses, in turn, translate to increased costs for all state agencies, school systems, university institutions and community colleges who participate in TSERS.
The RSD actuaries found that the average pay increases for NCDOT employees over two years were expected to be 8.20% but turned out to be more than three times that increase, or 26.63%. The excess of actual pay increases over the expectation (26.63% minus 8.20%, or 18.43%) was more than 11 times the average across all school systems, state agencies, university institutions and community colleges.
The NCDOT salary increases will result in a $176 million increase in the unfunded liability of TSERS. Additionally, it will increase the contributions required of all school systems, state agencies, university institutions and community colleges participating in TSERS by more than $7 million in the fiscal year ending 2021, by more than $23 million for each of the fiscal years ending 2022 through 2032, and by more than $15 million for the fiscal year ending 2033.
“The continued mismanagement of this agency is a potential threat to North Carolina’s coveted triple ‘AAA’ bond rating,” said Treasurer Folwell. “For over two years the DOT has been writing checks it couldn’t cash, harming taxpayers, road users and vendors. Getting it right and keeping it right are requiremnts for issuing more debt on behalf of the DOT. The treasurer’s office stands ready and I hope that Secretary Boyette will take this agency in a new and fiscally responsible direction. Citizens deserve a stable and solvent DOT.”
Further, State Auditor Beth A. Wood, CPA, in a recently conducted Performance Audit found that the NCDOT pay raises:
The North Carolina Retirement Systems is the ninth-largest public pension fund in the country and is currently valued at more than $100 billion. It provides retirement benefits and savings for more than 950,000 North Carolinians, including teachers, state employees, local governments, firefighters, police officers and other public workers.
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