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Online financial dashboard among Cowell's initiatives
State Treasurer also envisions 'more robust, equal partnership' between LGC and counties
As one of its initiatives, the NCACC strategic goals team charged with "enhancing the state-county relationship through effective communication and the development of a working partnership" is interviewing members of Governor Beverly Perdue's Cabinet and Council of State. Interviews are being published in CountyLines.
In June, team members sat down with Janet Cowell, who became the first woman to be elected State Treasurer in November 2008. She is a former member of the North Carolina Senate and the Raleigh City Council.
 How has your professional background prepared you to lead your department?
"I started out my career as a Securities Analyst. So I have analyzed stock, which is obviously helpful since about 45 percent of our portfolio is in public equities or stocks. I was in the international environment so increasingly we have a pretty large percentage of our pension fund invested in international stocks. I have an MBA and I have also worked as a Fortune 500 consultant, doing organizational and management consulting – and that is very helpful in running an organization when it comes to the system. Performance Management, Human Resources – the entire strategic planning process you have to engage in when you're head of an executive agency.
"Having served in a publicly elected office is very helpful, since this is a publicly elected office with all that comes with that, good and bad. I served on the Raleigh City Council, which is great since we have the Local Government Commission that oversees our local government finance. Having been at the table trying to make decisions at a local level is invaluable. Also the constituent services aspect of being in local government – which I still swear is the toughest level of government to serve at because it's the sort of unfiltered constituent feedback that you get – it's very challenging from that perspective. And then also being a State Senator obviously helps a lot just in that we're all functioning under a legal statutory environment. ... I have a pretty broad background, but this is a pretty broadly defined position."
 What is the strongest talent you bring to managing this agency?
"This position requires a lot of 'hard skills' and 'soft skills.' On the 'hard skills' side, having the knowledge of a financial bottom line – that's what we do here and you had better understand numbers and you had better understand the consequences of investments. That is the No. 1 skill, but a close second would be the 'soft skills' of being able to listen. Most people don't understand finance so they are going to have to by default find litmus test issues as to whether they trust that you have their best interest at heart. I found that both during the campaign and also as a sitting treasurer that people gauge your behaviors: Do you listen? Do you show up at events in the community that may not be the big glamorous event? It's the human behavioral interaction that really determines whether or not they trust you to make the financial decisions."
What do you see as the role of county commissioners and county managers in local programs and services?
"For the most part the county is the primary organizational structure by which government is administered. Certainly the county commissioners set the principals and the strategic direction and act as the board, literally, to the corporate model in setting the vision for a given county, with the county manager responsible for the day-to-day execution of that vision. All of that functions under a state that has very strong state-concentrated power. Local authorities have to operate within that framework, so equally there has got to be on the part of the county commissioners and the county managers a strong relationship with both the executive branch at the state level and their legislative representation. That's true particularly for counties because you have that strong social services component to what you do, with the schools, courts and prisons, and all of the social services benefits that you administer.
"Finally you have this unique situation where school boards [operate] underneath the county commissioners. … So, I think the county commissioner position more than any other elected position requires pretty broad-minded people to recognize that you also have to work with the school board and make sure they are able to function and preserve their promises because you're the ones who hold the purse strings and affect how they represent their constituents. So it's a unique and a very important role."
How can the counties most effectively work with your department?
"The primary source of interface is the Local Government Commission. We are all challenged as to how that whole department can function more effectively both to provide counties as well as towns and cities with the kind of technical assistance that you need or the kind of context, perspectives and education that you need, and be more of a partner with you. I put that challenge first and foremost on the shoulders of the Department of State Treasurer and the Local Government Commission. I think in terms of building that partnership, it is also having mechanisms whereby we understand your needs, your frustrations, the resources and the technical skills that you need to execute your jobs at the county level so that we can meet them. So it is a two-way street.
"One of the things we are working on at the Local Government Commission for example, in conjunction with the School of Government, is that we have all of this data that we collect. We audit everyone's finances to make sure they have their financials in order. We are working to create a financial dashboard so that a county commissioner, a county manager, or any citizen could pull up a profile of their county and compare it with a set of peer counties and very quickly be able to ascertain: 'Are we in sound financial shape? Where are the weaknesses and where are the strengths of my county?' As a past city councilor … how was I to know whether or not we had invested adequately in our infrastructure, or where there might be risk that I didn't know about? As a city councilor in Raleigh, I found out that past councils had underinvested in our wastewater treatment plants. We ended up having to spend $300 million, and I made multiple trips to waste treatment plants, which was a learning experience and we fixed the problem, but $300 million later we kind of felt like we had been handed a truck with 500,000 miles and the keys to it and now you get to find out the problems. I think that's a challenge even in the best-run cities and counties. … I'm hoping that's a service we can execute and put in the hands of local leaders to help them – especially now when people are working with lower reserves and tighter budgets.
"Another thing that I would like to do is to try to figure out how to get the resources for video conferencing and other things so that we can communicate more effectively so that people don't always have to get on the road. ... Helping us to understand the best ways to communicate with you – be it putting it on the Web, e-mail listservs, direct e-mails, webinars – how can we be effective at exchanging the kind of communication and data that we need?"
How do you expect counties to interact and communicate with your administration?
"We're in an environment where it's sort of a new day when it comes to pensions, and my biggest challenge as incoming Treasurer is to say, 'yes we have the best – if not one of the best – pension systems in the country.' To keep it that way is going to take aggressive action in coming years because of the 2008 losses in the stock market. We all know there is three-legged stool of funding for pensions. Employees put in their 6 percent at the state level – it may differ by local unit, but essentially employees put in a fixed amount. The employers, especially at the local level, have to put in a fixed amount – of course that has been between 4 to 5 percent of payroll – and then the investments really have provided the lion's share of returns and have made this a fairly inexpensive system for everybody.
"With the investments going down that means employer contributions are going up, and how you communicate that to the General Assembly is a challenge, as is communicating it to all local governments so that everybody understands what's coming down the pipe at them over the next five to 10 years. There will be significant contributions required and that is going to change state government and local government in dramatic ways, because the amount of money is going to go from 4 percent of payroll or 5 percent of payroll to closer to 10 percent of payroll. These are for contracted liabilities. These are – like in any other contract – monies that are obligated for the pension system. That's going to mean that you will have these increasing pressures and competition for limited dollars: How are we going to pay for the infrastructure we need, and maintain the existing infrastructure in competition with funding for pensions – not to mention social services. All of us are going to have to think about the best ways of executing the task, and deciding which of the services we provide that we may not be able to continue to provide, as well as how do we partner with the private sector – which is tricky. Even as a city councilor when we talked about private sponsorship of parks, equity issues arose when you put private dollars in. So there is a lot of work and thought that needs to be done and I think, working as partners, we can figure out that inevitably nothing is going to be easy but by working together hopefully we can mitigate some of the pain that is going to be sustained in state and local budgets in the next number of years."
In light of the current economic climate, what can North Carolina counties expect to see from your department in terms of programs and initiatives?
"In the coming years that is going to be pension education – what can you expect in terms of employer contributions, what can you do to mitigate those, are there actions that can be taken that would help you as you try to handle the pension? One idea we've had is to hold a one-day public participation conference on the future of the retirement system. There will be a study bill in the Legislature on the future of the retirement system and I would like to have the scope of that to certainly be all public sectors – not just the state, but state and local, because many of the problems and issues are similar – and be able to then have a one-day session where you can pull in a broader set of stakeholders, so that it's not just the 12 people sitting on some study commission here in Raleigh, but to engage teachers, retired state employees, police and fire and the labor community to all come to a table and talk about, just starting at a really high level: What is your vision for your retirement? How much money do you think you are going to need as a percentage of your salary? How many years do you anticipate being retired? And then get to what are the options of savings, how do we get those savings and have people have realistic expectations around saving over their career, financial literacy and counseling in the workplace. We want to have a broader discussion that can then inform the legislative study commission and the legislators – who ultimately make many of these decisions – and help formulate a sustained system that will serve the next generation of North Carolinians and ensure that people do have a comfortable retirement for all of those years they have worked.
"Number two is the stimulus package and the money and the debt. How do we, No. 1, ensure that all of the different units of government understand what the opportunities are, understand their eligibility, get their applications in and then get that approved and understand the audit and legal requirements and tracking requirements. This goes beyond the pure function of the Treasurer's Office, but in conjunction with, say, the School of Government and the Auditor's Office, etc., making sure we do our part to help educate and implement the stimulus package so that this state has a good experience, that money gets deployed, that people have jobs and we don't experience repercussions a couple of years down the road in that we didn't track that right and get penalized for some reason.
"Third, with the issue of debt, obviously the Treasurer's Office does debt affordability studies at the state level and tries to ensure access for local units to the capital market. Right now, the higher rated units are not having a problem. Once you get into some of the smaller units it can be more problematic. I think that's an ongoing issue to work at on the state level to figure out can we do some sort of credit enhancement strategies or work with at-risk units. We have been trying to get two additional positions in the Local Government Commission at the request of the NCACC, the League, and the Rural Center as a result of the Small Towns Initiative to work with at-risk rural communities that do not have the tax base or budget to hire full-time experts in finance. Those two positions would really be focused on the kind of technical assistance that is needed to keep folks out of trouble in this kind of economy. We have talked to the governor about that. This is funded not out of general fund dollars, but it would just be a sliver of the sales tax reimbursement that goes to counties and cities. I think your Association and the League both see the benefits. If you share it across 1,300 units, it is a few dollars per unit but yet you can really target assistance to units that don't really have these kinds of internal resources. So just making sure folks do continue to get the kind of resources to debt and access to the capital market that they need."
What steps will your administration take to strengthen and improve the existing relationship between your agency and county government in North Carolina?
"In my conversations with the governor and in my conversations with the Legislature, I have emphasized that the investment team we have here that is investing the pension fund monies is a critical value-added aspect of this department. The Local Government Commission is now incredibly important, both to manage the balance sheet of the State and to help local government navigate lower revenues and how they remain fiscally stable. Every time I am in different states or talking to the private sector, folks think that the partnership we have between local government and state government with the LGC is great. I can only see that it can improve and can become a true partnership as opposed to us checking the box and making sure you did your homework. I think it can become a more robust, equal partnership."
What do you consider the greatest challenges facing your department?
"As the department responsible for investing pension money and the 401(k), which we don't directly invest but we help administer, finding the investment opportunities in today's market environment to ensure we get the kinds of return that will fund a healthy pension system for years to come is no easy task right now. The second is managing that kind of investment shop. Another is the salaries to get the resources within a public sector environment for those kinds of skilled jobs. We have a number of positions that have been vacant for years because the salaries have not been high enough to compete with the private sector. Certainly, the current economic climate helps somewhat, but we have been so far off the market rate of pay, that's challenging. Another is educating both state government and local government on the fundamentals – sort of a 'Pension 101' – because for the last decade it was sort of out of sight, out of mind. Everything seemed to be and was going along fine. With the economic downturn of '08 and the continuing challenging environment, it now means more TLC from all units of government and having the key decision-makers understand that, helping the citizenry understand that, and making the right choices enabling the amount of dollars to be freed up in the budget to help preserve this great pension system that we have is the other big challenge."
What do you hope to accomplish within your department?
"Internally, getting some of the technology is probably the thing that would be most transparent to the outside. Getting our communications team and systems up to speed. Making sure we have those e-mail databases that we can quickly and cheaply communicate. Having the skilled personnel to translate what can sometimes be very technical information into understandable, digestible pieces of usable information to units. Having other tools like this dashboard Internet database.
"A lot of what I am doing right now is organizational development. We are also working on transparency initiatives. I do not doubt or question anyone who in this environment wonders what the heck is going on in the financial community and do people really know what they are doing. You'd be a fool not to be asking these questions. So trying to have this sort of reporting and documentation that's on the Web, and the legal structures and processes so that the local units can feel comfortable that they understand how we are coming to certain decisions or how we are investing money, and have something that is understandable and objective and clearly laid out. Then what you all need to be doing to access the capital market: here is what it takes and here is what you all need to do. I think those transparencies and legal cleanup – all units of government are under that kind of pressure – but I think the Office of State Treasurer is almost more than anybody because of the amount of money that passes through here."
As you transition into your new role, what information, materials or contacts would you like to have from county governments or the NCACC to help with oversight of your programs?
"To the extent that you all have strategic plans, strategic initiatives, metrics across your Association – and I don't know what that looks like – but that is helpful to us because obviously we have our own internal strategic plan that tries to react to what I hear and see and what my staff hears and sees. We already get all of your financials. In terms of feedback from retirees, one challenge is to get better feedback mechanisms – and that is not only from the Local Government Commission – so that I will have a sense of what the talk on the ground is. What are the questions around the pension plan that come up and is that something that our retirement division can answer? What are the questions that come up from city councilors or county commissioners around budget issues or debt? If we get that kind of feedback, obviously it has got to be structured in some way, and that requires infrastructure at the local level that can collect that, distill it and send it up to the state level, but all that sort of raw feedback is valuable. I feel that having served in a public office at a local level you get a lot of that, so I always had my finger on the pulse of public sentiment, of what the fears were, what the hopes were. It's harder at the state level. I definitely want to improve that flow coming up as well as what we are sending down."
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