Capital Goods - July 2008

Pull of the public purse strings
By Scott Mooneyham

The last time North Carolina legislators decided to borrow money with voter-approved general-obligation bonds, the late Harlan Boyles was state treasurer. These days, the honorables issue more-expensive certificates of participation— $554 million just last year. In fact, since that last bond referendum in 2000, they have borrowed $2.7 billion using the certificates to get around state constitutional requirements that voters approve most debt.

Perhaps it’s just coincidence that the tenure of the cautious Boyles came to an end right when voters last gave their blessing to state borrowing. Certainly, the man who followed him bristles at suggestions that he has been any less responsible as steward of the state’s finances. Over the last several years, Richard Moore has issued a debt-affordability study with a suggested cap on borrowing. And he let legislators know he wasn’t pleased when they approved a budget last year that included a half-billion in new debt. “I am deeply concerned about the trend of issuing debt without a vote of the people,” he said at the time. Still, it’s hard to believe that Boyles wouldn’t be giving state leaders a stern lecture if he held the office today. And complain as Moore might that he has been held to some untenable WWHD (What Would Harlan Do) standard, he has changed the job. The state treasurer is no longer a staid, behind-the-scenes banker who quietly manages North Carolina’s $70 billion pension fund while advising or privately chiding the political leadership on its financial choices.

While Boyles and his predecessor, Edwin Gill, each remained in the job more than two decades, Moore clearly saw his two terms as a launching pad to higher office. He appeared on national television shows, pushing for reform of Wall Street brokerage firms. He used his investing authority to bully wayward companies, whether mortgage lender Countrywide or those doing business with the unpopular regime in the Sudan. He liberalized and modernized the state’s investing, spreading pension money among more managers and pumping more into venture-capital and hedge funds. And, of course, he sought that higher office.

The result wasn’t pretty. Lt. Gov. Beverly Perdue thumped Moore in May’s contentious Democratic primary for governor. In part, he was undone by publicity about his tendency to rely on campaign donations from those investment managers and venture capitalists. But bad publicity about his donor pool isn’t a complete explanation. His loss raises broader questions about whether the treasurer’s post is such a great springboard after all. For better or worse, though, the shiny new stamp he has put on the office may well last.

Unless state legislators, Congress or federal regulators step in to stop it, whoever holds the job can continue turning to the treasurer’s investment-banker buddies to finance any run for a higher-profile office. Already, the Democratic nominee to replace Moore, state Sen. Janet Cowell, has tapped financial-services types for donations, though the Raleigh legislator has confined most of her fundraising to those in North Carolina. Republican nominee Bill Daughtridge, a state representative and oil distributor from Nash County, didn’t collect from any investment-firm execs during the primary season, but he was unopposed.

But as the race between Moore and Perdue shows, having a position where raising money is easy isn’t all you need to become govenor — or even your party’s nominee. Selling yourself as the state’s banker, particularly to the working-class and liberal constituencies needed to win a Democratic primary, might not be such a great idea. The treasurer does have a natural constituency among state employees and retirees interested in how their pension money is managed. But Moore found that constituency can bite you. He angered the largest employees group, the State Employees Association of North Carolina, which endorsed Perdue.

Still, the times they are a-changin’. Cable news channels with a focus on financial matters provide a natural platform for state treasurers with sole authority over multibillion-dollar pension funds. And when an institutional investor with $70 billion at his command talks, the markets listen — whether the investor is addressing Darfur or lending scandals. In a few months, Moore will ride off into the sunset. His successor, whether possessing political ambitions beyond the office or not, will have the opportunity to speak on a national stage. And the days of grave, low-key treas- urers like Boyles will fade further into the past.

Scott Mooneyham is the editor of The Insider,

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