3 new treasurers chosen; 4 state amendments pass

Last week's election resulted in three new state treasurers who have oversight of retirement programs in their states and the passage of amendments in four states that will have an effect on state pension funds and investment options. Referendums in two cities also passed.

Republican Dale Folwell won the vote to be North Carolina's next treasurer, a job that includes serving as sole trustee of the $87.6 billion North Carolina Retirement Systems, Raleigh.

Mr. Folwell, the first Republican state treasurer since 1876, defeated bond attorney Dan Blue III, a former Bear Stearns Cos. Inc. investment banker, with nearly 53% of the vote.

Mr. Folwell, a former forensic accountant with Alex. Brown, a division of Raymond James, campaigned on a promise of immediately reducing money manager fees by $100 million, through a combination of fee cuts, internal management and indexing. He also promised to scrutinize money managers' performance in relation to their fees.

In Oregon, Democratic state legislator Tobias Read will be the next treasurer, whose office manages the state's finances and is a voting member of the Oregon Investment Council, Tigard, which runs the $68.3 billion Oregon Public Employees Retirement Fund, Salem. Mr. Read, who backed legislation creating the Oregon Retirement Savings Plan, which will launch next July 1 for private-sector workers without access to workplace plans, will now chair its board. Mr. Read also said during the campaign that he would consider borrowing from the state's operating funds to reduce a $22 billion funding gap in the state retirement systems.

Also in Oregon, a constitutional amendment approved by more than 70% of voters will allow public state universities to invest some of their assets in equities, which are expected to be managed by the $775 million University of Oregon Foundation, Eugene.

Pennsylvania's next treasurer is Democrat Joe Torsella, who campaigned on the promise of creating the PA-IRA program for private-sector employees without access to workplace retirement plans. Mr. Torsella, a former deputy mayor of Philadelphia, opposes the use of placement agents for hiring money managers and called for fewer outside money managers by the $48.5 billion Pennsylvania Public School Employees' Retirement System and the $26 billion Pennsylvania State Employees' Retirement System, both in Harrisburg, on whose boards the treasurer sits.

Illinois' next comptroller is Democrat Susana Mendoza, a former state legislator and Chicago city clerk who faced criticism about pension “double dipping” from her opponent. Ms. Mendoza is aligned with Democratic House Speaker Mike Madigan, who disagrees with Republican Gov. Bruce Rauner over contributions to the state's five severely underfunded retirement systems that have $111 billion total in unfunded liabilities.

In Wyoming, voters agreed to amend the state constitution to allow all state investment pools to invest in equities, which the $7.4 billion Wyoming Retirement System, Cheyenne, and some other state funds already can do.

In Hawaii, voters narrowly approved by 50.1% a legislatively referred constitutional amendment that would allow excess general fund revenues, now only to be used for emergencies, to be applied to bond payments and shortfalls in the $14 billion Hawaii Employees' Retirement System, Honolulu.

In Louisiana, voters approved creation of a permanent fund that could be used to pay for shortfalls in the $9.9 billion Louisiana State Employees' Retirement System and the $16.6 billion Louisiana Teachers' Retirement System, both in Baton Rouge. The “Revenue Stabilization Trust Fund” would be used to finance construction projects and transportation infrastructure, and to accelerate payments to address pension underfunding.

At the city level, Dallas voters approved a ballot initiative to reform the $3.3 billion Dallas Employees' Retirement Fund, while San Jose, Calif., voters approved a referendum that restores pension benefits.

The Dallas initiative, which applies only to employees hired on or after Jan. 1, reduces cost-of-living adjustments and survivor benefits, raises the retirement age to 65 from 60 and discontinues a monthly health benefit supplement of up to $125. The COLA will be reduced to a maximum 3% from 5%.

The pension fund has estimated that the changes, approved by 69% of voters, will reduce long-term liabilities by roughly $2.15 billion over the next 30 years.

In October, Moody's Investors Service and Fitch Ratings lowered Dallas' general obligation bond rating city in part the city's exposure to unfunded pension liabilities. Moody's said Nov. 9 that the vote is a credit positive for the city.

Moody's also said the San Jose referendum was a credit positive for that city. Voters approved a referendum by more than a 60% margin that restores pension benefits and settles a five-year fight over vested pension benefits for the city's police and other employees.

The voter-approved funding package will help pay for retirement benefits by eliminating retirees' health-care benefits, part of a compromise between the municipal unions and the mayor.

Measure F, as it is called, affects participants in the $3 billion San Jose Police & Fire Department Retirement Plan and the $2 billion San Jose Federated City Employees Retirement System.