The Financial Crisis - The Impact on North Carolina


Pension Fund Facts:

  • Standard & Poor's ranked North Carolina’s pension fund second best in the nation this year - for the third year in a row.
  • The pension fund has a conservative strategy and diversified asset allocation that protects members' benefits over the long haul.
  • Members' benefits continue to be secure. 
  • For the quarter ending March 31, 2009, the fund is down approximately 6.4 percent. Stock market losses were close to 9.5 percent.
  • Funding for the pension fund is a shared responsibility. It is composed of pension earnings, employee contributions, and employer contributions.
  • In light of lower investment returns, the employer contribution to the pension plan will go up. This affects both state and local government budgets. 
  • In the next two years, state and local government leaders will need to prepare for increased contributions to the public pension plan.
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Press Releases about the Pension Fund

Cowell Reports First Quarter Pension Fund Results

Cowell Advises State Leaders to Plan for Significant Increased Contributions to the Public Pension Fund

Cowell Announces 20 Percent Drop in Pension Fund Value

For more information about the North Carolina Retirement Systems please click here.


The Impact on State Debt

The uncertainty in the credit market is affecting both state and local debt.  Interest rates have been up over the past several weeks, increasing the debt service payments on variable rate debt.  The State has about $855 million in variable rate debt, less than 12 percent of its total debt. Local governments have also been impacted, but the Local Government Commission (LGC) works to ensure that variable rate debt makes up only a small percentage of those governments’ debt load.  These rates have already come down significantly, and analysts hope that the progress of federal government intervention will further help to stabilize rates.  It is also important to know that debt service payments at the state level are budgeted at a rate of 4 percent. Prior to the economic downturn, variable rates were consistently lower than this for quite some time, banking savings for the State.

Local governments that are planning to issue publicly traded debt are also feeling the pinch of the current credit crisis. In addition to the rise in interest rates, credit in the marketplace continues to be tight across the board, making it difficult to sell debt regardless of the rating.  Analysts are hopeful that the work at the federal level will help ease rates and inject liquidity back into the market, helping these local units.


Learn more about State debt:

Current Conditions in the Debt Market - Memo from the Local Government Commission

State and Local Government Finance Division

2008 Debt Affordability Study


North Carolina Banking Operations

Due to the recent financial environment, there have been a lot of questions regarding the safety and soundness of the funds of public depositors. The Department of State Treasurer monitors these funds and the pledged collateral and stays in close contact with the banks. Most of the banks report quarterly on their collateral position, but we do require some to report monthly.

Frequently Asked Questions About the Funds of Public Depositers

Collaterization of Public Deposits Program

Current Issues in Deposits and Investments for North Carolina Local Governments - Memo from the Local Government Commission

News Center

Stay up-to-date on news about the financial crisis. Below are links to the most recent news stories about the economic impact and current events of the crisis.

Flawed Tax Policies Contributed To Financial Crisis - The Wall Street Journal, June 16

Geithner Says China Confident in U.S. - The Wall Street Journal, June 2

Scams About Foreclosures, Jobs, IRS Feed on Desperation - USA Today, April 20

Meltdown 101: Can't Pay Your Taxes? Don't Panic - Washington Post, April 14

Good Time to Be a Bondholder - The New York Times, April 5


Understanding the Crisis

CNBC's Education Center - Financial issues and terms

Federal Reserve Board - Economic surveys and studies

Center For Responsible Lending - A resource for predatory lending opponents

US Treasury website - Current information about Government's plans