Treasurer Janet Cowell will not give bonuses this year.

Last year, the legislature gave the state treasurer the authority to give performance-based pay bonuses to the chief investment officer and four directors of the state pension plan.

But a sagging economy and sensitivity to other state workers led Cowell to put the program on hold this year, said spokeswoman Kerra Bolton.

The decision follows a similar move last week by the N.C. Banking Commission, which held $200,000 in performance bonuses it had budgeted.

Bolton said that the bonus program helps the state compete with private sector firms for people to make investments., noting that 11 of the 13 largest public pension plans have similar programs.

"This is important because high-performing investment professionals increase the chances for above benchmark performance, save systems substantial sums in external management fees, and help to insure the prudent investment and oversight of  public plan assets," she said in an e-mail to Dome.

The House approved a bill that would give state Treasurer Janet Cowell greater flexibility in investing the state's pension fund.

The treasurer oversees the fund, a $55.9 billion pool of money, that pays retirement benefits for teachers and state and local government employees.

Cowell's office was pushing the bill. The target for return on investments in the fund is 7.25 percent. Without the bill, Cowell's office estimates a return of 6.92 percent, which would translate to a $1.3 billion annual shortfall.

Opponents said the bill would allow risky speculation.

"We need to reduce the risk," said Rep. Bill McGee, a Clemmons Republican.

Rep. Pryor Gibson, a Wadesboro Democrat who fended off multiple amendments meant to limit investment options, said the legislature should trust the Treasurer's office to make the right decisions.

"We hire professionals to do a job over there," Gibson said.

The bill must now return to the Senate before it would go to the governor.

Several more bills were filed in the state Senate today:

S.B. 15: Session Limits, Senate Majority Leader Tony Rand

S.B. 16: DPI / Curriculum on 1898 Wilmington Race Riots, Sen. Julia Boseman

S.B. 17: Pay Teachers the ABC Bonuses They Earned, Sen. Steve Goss

S.B. 18: Amend Cemetery Act, Goss

S.B. 19: Use of Additional Technology Prohibited, Goss

S.B. 20: Voter-Owned Election for Treasurer, Sen. Doug Berger

State Treasurer Janet Cowell said this morning that the state's pension fund is down $16 billion from a year ago.

The fund, which pays retirement benefits for tens of thousands of state and local government employees, is valued at $60 billion, Ben Niolet reports.

A year ago, the fund was worth $77 billion. The drop represents a 19.7 percent decline in fund performance, a measure created by the fund's actuary.

Cowell said the fund is down because of the dramatic downturn in global markets. The state's treasurers have traditionally been conservative in how they invest the money, which is why the state's pension fund is faring better than other similar funds, she said.

As the markets have turned worse, the Treasurer's office has turned even more conservative, increasing its allocation in less risky, long-term investments.

"North Carolina is in better shape than almost any state," she said.

Former Treasurer Richard Moore like to tout the fact that the fund had more than enough money to pay its beneficiaries. That's still true, but the number is sliding, Cowell said. The plan is funded at 104.7 percent. Next year that number will slide to about 100 percent.

Cowell said all retirees will get their benefits.

"You're entitled to your money," Cowell said.

The loss in value likely means that the legislature will have to increase its contribution to employees retirement benefits by about $29 million for the next year. That means the tab for the legislature will be somewhere around $430 million. The legislature's burden will likely increase in 2010.

Employees contribute 6 percent of their checks to the fund. Erica Baldwin, a spokeswoman for the State Employees Association, which represents some 55,000 employees or retirees, said the organization has repeatedly urged the legislature to up their contribution to state employees retirement.

"That's been the weakest leg of the stool," Baldwin said.

Update: Post now includes more details.

Correction: Post now includes correct value of the fund a year ago. It also includes a better description of the change in performance.

Janet Cowell thinks the treasurer should have more tools.

The treasurer-elect told Dome that she thinks financial planners taking care of the state's pension fund should have more options to invest in order to hedge against bad markets like this one.

Cowell was not ready to talk specifics about her proposal, but she said as an example that if the pension had invested heavily in German securities, it might look for another investment to hedge against the euro rising against the dollar.

"You could use that tool to control risk," she said. "Some people might be afraid that if you give (the treasurer's planners) that authority, they might use it to increase risk. So the question is can we give them tools so they can make good investment decisions, but put some contraints on them?"

She said any changes to investing strategy should be "appropriate, prudent and conservative."

Cowell said after her January swearing-in she'll talk more with legislators about expanding the statutory authority of the state treasurer's office, perhaps with a bill as early as next session. 

Janet Cowell says the treasurer's legal authority should be clarified.

The Democratic state treasurer-elect said she believes the office should have the authority to hire its own attorneys to lead class action lawsuits, such as one proposed by Treasurer Richard Moore against mortgage giant Freddie Mac.

North Carolina's attempt to play a lead role in that suit was rejected by a judge after Attorney General Roy Cooper objected, saying that his office should handle the lawsuit.

Cowell told Dome that was unfortunate. She hopes the legislature will clarify the legal role of the treasurer and she pledged to work with Cooper's office to come up with a list of outside law firms approved by both offices that could be hired for such suits.

"Clearly, as treasurer I would like to have that kind of authority and know I've got the full set of tools at my disposal to go after losses," she said. 

She added that she would still prefer the matter be resolved, even if the legislature stopped short of giving the treasurer the full legal authority she prefers.

"I think that's a question worthy of clarification," she said. 

The variable interest rates on some of North Carolina's state debt have started to return to lower levels.

Sara Lang, spokeswoman for the State Treasurer's Office, said the average rate has dropped about two percentage points since last week. The state has $855 million in variable-rate debt, about 12 percent of the total state debt.

The rates adjust weekly.

For about $500 million, the new weekly rate is an average of 5.66 percent. A week ago it was 7.58 percent. For about $355 million, the new weekly rate is an average of 5.36 percent. A week ago it was 7.49 percent.

The state was paying a rate of under 2 percent three weeks ago. Lang said the state budget assumes a 4 percent interest rate, blunting any immediate impact on taxpayers.

From August to September, the state's monthly payment on the $855 million in debt more than doubled from $1.2 million to $2.5 million.

Richard Moore says he has known for some time that something was up with the U.S. financial system.

WUNC radio reporter Jessica Jones asked the Democratic state treasurer whether, as an observer of Wall Street, he saw problems coming.

"Yes. Absolutely," Moore said in a segment dated Thursday. "Exactly when it was going to happen, what form it was going to take, I can't tell you I knew that. But everybody that I know of who was conservative and who wasn't getting paid to say, 'Everything is great,' kept wondering, 'How can you continue to have real estate prices go up, commodity prices go up, tremendous amounts of loans being made?'"

Moore also blamed poor enforcement of leverage requirements.

"There's a reason we put those regulations in place coming out of the Great Depression," he said. "We really have gotten away from that. And I'm not trying to sound partisan, but we have gotten away from that the last five to seven years."

In February, while he was running for governor, Moore said the state's roughly $70 billion pension fund had largely avoided securities backed by subprime loans.

When you flub your checkbook, the mistake is probably worth a few bucks.

When the state treasurer botches the books, it can mean $141 million.

State Auditor Les Merritt released a report Tuesday that was part of a larger look at state finances. It showed that financial statements prepared by Treasurer Richard Moore's office contained a few bookkeeping errors. Moore is a Democratic candidate for governor.

The errors found in a routine audit included an understatement of $141 million, an overstatement of $80 million and misclassification of millions more.

No money is missing and the errors appear to be just that — bookkeeping mistakes. In a response to the auditor's findings, Moore's office wrote that the mistakes were minor and the milliions were a tiny fraction of the total funds Moore's office handles. Moore's office has already improved its processes, according to the report.

"We strive for total accuracy in all aspects of our agency's functions," according to the response from Moore's office.

The State Employees Association of North Carolina has sued state Treasurer Richard Moore over a public records battle.

In March, the association, which represents 55,000 state employees, filed a records request with Moore's office in the wake of a Forbes magazine article that highlighted Moore's heavy campaign contributions from investment managers that did business with the state's pension fund, which Moore oversees.

The association was seeking, among other things, records detailing who was managing the state's money. The association received some, but not all of what it requested, Ben Niolet reports.

A spokeswoman for Moore said in a recent interview she considered the matter closed, although the association had still not received records detailing how much money the treasurer's office spent on legal advice in its dealings with Forbes magazine.

Then, in October, the association renewed and expanded its records request.

The lawsuit, filed Friday morning is seeking a judge's order that would require Moore to turn over records. It is also asking a judge to force Moore's office to pay for legal and attorney fees.

Update: Sara Lang, a spokeswoman for Moore released a written response to the lawsuit.

"The Department of State Treasurer has followed the spirit, the intent and the letter of the public records law and welcomes a judge’s ruling to that point. We have provided nearly 900 pages of documents to SEANC, and Treasurer Moore stood before the group to personally answer their questions. We have worked diligently to fulfill these complicated, complex and often vague requests. It is disappointing that SEANC leadership would attempt to scare the 820,000 police, firefighters and teachers in the pension fund by calling into question the security of what the Wall Street Journal has called the second best public pension fund in America. It seems this lawsuit has more to do with political games than public information."