Lawmakers in 2008 voted to hide public information

Yesterday's Greenville News weighed in on a strange addition to the 2008 budget bill that blocks the public from knowing what lawmakers -- and others -- collect in retirement benefits. In this era of transparency -- and the avoidance of it -- the News explains why that hidden change in the law was so important:

The South Carolina Legislature has done it again: It has passed a law that few legislators claim to know anything about and has brought darkness to an area of government where sunshine should prevail. In doing so, the Legislature has dropped a veil of secrecy over what the state pension system pays to retirees.

The Charleston Post and Courier reported Sunday that South Carolina taxpayers have no way of knowing who gets what when it comes to the state pension fund. The culprit is a 2008 state law that among many other things exempted state pension records from the state's Freedom of Information Act. That law, although more porous than it should be, is what stands between taxpayers and government secrecy by making public officials do their work in public and giving taxpayers access to all sorts of government information and records.

State pension systems across the country have fallen under more scrutiny in the past few years as many of them have been exposed for having serious funding deficiencies. Many of them, including the one in South Carolina, have billions of dollars of unfunded liabilities.

South Carolina retirees were paid more than $2.5 billion last year, reported The Post and Courier, but state taxpayers are locked out of what should be public data that says what specific individuals are getting. That's despite the state FOI law that already gives the public access to the salaries of public employees, by name, who make more than $50,000.

Former state Rep. Dan Cooper, who at the time was the chairman of the powerful House Ways and Means Committee, sponsored the 2008 bill that dealt with many factors involving the state retirement system's investment expectations and set guaranteed cost of living adjustments. Cooper, who resigned from office last year, defended the inclusion of the exemption of pension records by saying it "was primarily to protect people's privacy."

Cooper said state retirement officials tied the exclusion to the Health Insurance Portability and Accountability Act that creates privacy expectations for medical records. Jay Bender, an attorney for the S.C. Press Association, doubted the federal medical privacy law applied to state pension records. "If someone is getting a disability payment, I'm not sure how that's a medical record," he told the Charleston newspaper.

The bill's cosponsor, former S.C. Rep. William Cotty, told the reporter that he wasn't aware of the provision that blocked the public from seeing pension records but nonetheless he defended the practice by asking rhetorically, "Why does John Doe have a right to know what I receive of that share?"

John Doe has a right to know -- along with hundreds of thousands of taxpayers -- because they all are on the hook for helping make the public retirement system whole if it collapses because of bad political decisions. And state retirees, who also are taxpayers, have a right to know so they can be aware of any abuses that jeopardize their promised pensions. After all, those state retirees have paid faithfully into the retirement system and they deserve the protection of transparency, too.

Some states already have total transparency with state pension records, and as expected some interesting stories have surfaced. For example, one of the most outrageous stories has come from Illinois where a union boss legally earned a six-figure pension for working one day as a public school substitute teacher. And in that state, the Illinois comptroller draws a six-figure salary while collecting a six-figure pension from a different job she formerly held.

"While this is egregious, the real story is in the thousands of people doing this below the radar," Rae Ann McNeilly of Taxpayers United of America told the Charleston newspaper.

Gov. Mark Sanford, who had vetoed the 2008 law but did so not knowing about the exemption of state pension records, called the restriction "ridiculous" and said "it is in keeping with the relatively closed nature of the South Carolina political system that very jealously guards its prerogatives." He's right, of course.

The restriction, ostensibly slipped in with the awareness of only a few people, fits the bill for how the Legislature works. Bad decisions make it into law without embarrassing public debate, and the public is left in the dark about what is being done with tax dollars.

Once those indefensible decisions are revealed, elected officials fall all over themselves to get on the right side of the issue. That's happening right now with the closed pension records. Gov. Nikki Haley and four key state lawmakers have told the Charleston newspaper that they want to open the pension records that were closed -- on their watch -- in 2008.

The pension records should be made open. While lawmakers are rushing to do that in this election season, they also should reassure wary taxpayers that they are committed to much more openness in the law-making process so more bad laws aren't tucked away -- only to be discovered many years later.

Educators win major pension victory -- in Florida

Hooray for Florida's educators and public employees. Thanks to a lawsuit filed last year by the Florida Education Association, changes made by the legislature to the public employee pension system have been blocked.

TALLAHASSEE – Circuit Court Judge Jackie Fulford ruled today in favor of the Florida Education Association in its lawsuit on public employees’ mandatory pension “contribution.”

Last year, the Florida Education Association filed a lawsuit seeking to stop the 3 percent tax on teachers, school employees and other workers imposed by the Florida Legislature and signed by Gov. Rick Scott.

Did you catch that? Legislators imposed a "tax" on public employees in the form of an increased contribution to their pension system. A public employment "tax."

I guess conservative lawmakers in Florida found a tax they could love.

FEA President Andy Ford hailed the decision as a significant victory for public employees, but as importantly, for the rule of law in our society.

“The judge’s ruling confirms that the Florida Constitution requires the state to live up to its promises, including those made to the public workers by the state itself,” Ford said.

Florida law has provided for nearly four decades that pension rights are contractual rights that may not be ignored or abridged. If the Legislature determines that changes to the pension system are desirable, it must do so prospectively for employees who come to work after a change in the law. Employees should not dedicate their livelihoods to public service with a contractual expectation of retirement benefits only to have that expectation wrongly taken from them.

Isn't this exactly what South Carolina's lawmakers are trying to do now, to change the retirement system and raise the rates charged to public employees?

I reckon we shouldn't get excited, though: South Carolina lawmakers abide by their own view of the law (which is, we make the law, we can unmake the law, now get back to work).

Ron Meyer, the lead attorney in bringing the challenge, argued to the court that there were three separate constitutional provisions that prohibit the state from taking away employees’ right to a non-contributory retirement system containing a cost-of-living provision. The court found that stripping workers of the contractually provided benefits constitutes an unlawful impairment of the obligations of contract, an action which is prohibited by the Constitution.

“We are pleased by today’s decision. It once again will stop the Florida Legislature from overstepping its authority by ignoring the state’s constitution,” Ford said. “We urge the governor and leaders in the Legislature to embrace this decision and abide by the judge’s ruling. If they decide to prolong this case with an appeal, FEA is prepared to continue fighting for the rights of middle-class families who make our state a better place.”

Yet one more reason why educators in South Carolina would benefit from.... well, maybe now's not the time. A lot of them would have to ask their husbands, and that's usually the end of that.

Still, it doesn't hurt to watch "Norma Rae" again.

Retired public employees blamed for budget instability

The way the dialogue is being framed tells the tale; we can see from a mile away who the bad guys are going to be:

South Carolina taxpayers should expect the amount of money they pump into the state pension system to increase in the coming years as the program struggles to close a widening $13 billion shortfall.

At the same time, the state might be forced to shift resources from areas such as education and transportation to the retirement system to help close that gap, pension experts said.

It's South Carolina's retirees. Not the ones who retired from Lockheed Martin up north and built monstrosities overlooking their sailboats on the bay, not the ones who think Cracker Barrels are so quaint and rustic, not the ones who can't eat grits.

I mean the ones who spent their careers in the public service of South Carolina and its municipalities -- the teachers, the emergency response personnel, the city maintenance guys, the lunch ladies, the bus drivers, the civil service workers and magistrate's secretarial pool, the town clerks, the police dispatchers, the state parks interpreters, the firefighters, the folks at the water department, the prison guards, the folks who salted the roads before an ice storm and who cut and carried away the fallen trees afterward.

They're all the bad guys.

They're greedy, and they're stealing from the rest of us to pad their twilight years with luxury.

Right?

Maybe not so fast, crime fighters. Let's review a little history.

Back in the day -- let's take the mid-twentieth century for starters -- public employees didn't earn much money. They were low on the economic totem pole. A public service job was good for only one thing: employment. So long as you did your job, kept your head down, didn't break any expensive public property and were johnny-on-the-spot when an emergency broke loose, you kept your job for a solid 30, often longer.

Then came the economic boom times of the 1950s and 60s, when citizens' expectations of government grew, so the state added workers to meet those expectations. You wanted to have enough law enforcement to prevent any stir. You needed enough firefighters to protect the new city neighborhoods and suburban developments. You wanted enough public health workers to answer the questions when the baby was colicky, and enough teachers to keep up with the bulging elementary school enrollments. Et cetera, et cetera.

But excited new public employees weren't excited by the permanently low wages, so our elected leaders offered a grand bargain: Take these public service jobs at low pay, said our leaders, and we'll do two things: We'll invest in health insurance and retirement plans for you, and we'll increase your wages when we can.

Public workers took the grand bargain. After all, they too had children who needed a doctor visit once in a while, and they too dreamed of retiring while they still had some life to live, just like the swells.

That worked a while. Life was good, relatively speaking. Raises didn't come often, and when they came, they were meager. Still, you had the promise of employment, a guaranteed paycheck.

Soon enough, however, it was crystal clear that workers in the private sector, who might be doing the same or similar work, with the same or similar education and experience, were getting along a bit better. Public employees, to the extent that they organized themselves at all, asked for better pay.

Their elected leaders were pressed from both their public employees, with their low wages, and their private-sector pals, who suppressed their own employees' wages to just a shade above public employment. If you raise public employees' wages, said the private-sector leaders to their elected pals, then we'll have to raise ours, and that's gonna cut into our affection for your candidacies.

So our elected leaders came back to their public employees with a grander bargain: We can't afford to raise your wages, they said -- we don't have that kind of money -- but what we can do is to improve your health insurance plan a little bit each year, and to invest more in your retirement accounts each year, so that when you retire, you'll have security and can live just like the swells. You can take your family for weekends on the lake, babysit your grandchildren, and shop for the tykes at Christmas and Easter just as well as the fat cats at the country club.

And it was a great bargain. Thanks to promising markets stretching to the horizon, a little more investment in those days would yield a reasonable reward when retirement day came. Public employees understood the concepts of simple interest and smart investments. And they accepted the deal.

Year after year, through the 1970s, the 1980s, and into the 1990s, public employees accepted artificially low wages in exchange for the promise of good health care and retirement security. They saw others fly by them on the ladder of upward mobility, and they kept working. They scrimped, saved and clipped coupons to tend their own families, as the families in the newer neighborhoods seemed to get ahead without trying so hard. Still, our public employees kept working.

And some reached their goal: The full 30, the alleged gold watch, and the little camper at the lake. They collected their retirement check and it kept them ahead of bill collectors. The lucky ones paid off their mortgage at just the right time, so theirs was theirs.

Those who'd come after them kept working, seeing the first waves of those old promises paying off. So it seemed it would for them, too, and for those who'd come along even later.

But a day came in the 1990s when the tide turned. Those old-guard electeds who'd cut the first grand bargains were fading out, and the next guard behind them didn't share their old sense of commitment. Through the 1980s and early 1990s, when lawmakers wanted to pass tax cuts, they still found the money to honor their commitments to their longsuffering public employees. Now, it seemed, there wasn't enough money to do both. Lawmakers chose tax cuts, and they began wearing away at the old grand bargain.

One year, it was not enough money to fund a cost-of-living adjustment for retirees. Another, it was not enough money to continue one particular feature of the state health plan. Another year, maybe it was both. Later, maybe public employees would have to accept an increase in co-payments for doctor visits, or a higher prescription drug rate, or another increase in the out-of-pocket maximum.

Lawmakers cut taxes some more and approved sweetheart deals to exempt corporate giants from paying income tax. Well, that meant they couldn't afford another tick upward in the employer contribution to the state retirement system, so they raised employee contributions.

To employees in their second and third decades of service, still shy of retirement and now with one or two sons or daughters in college, these were bitter pills to swallow. Promises had been made. Wages paid to them had been kept low purposefully, with the guarantee of better benefits to come.

Unfortunately, as we all discover in our interactions with our legislature, what is written can be unwritten, what is done can be undone, and what is promised is never really promised.

Public employees who have remained in public service through the past decade have learned this lesson again with each monthly. Not only has the tide turned decidedly out, but our public employees and retirees find themselves blamed for the alleged instability of the state retirement system, and more generally for the sorry state of our budget priorities. Wages are still pathetic. State health care provisions -- what is left of them -- are so cost-prohibitive that workers are loathe to use them, but for emergencies. And pension security? The only people assured of pension security are the white-collars collecting fees for every stock trade in the foreign and domestic markets. Lawmakers champ at the bit to rewrite state retirement rules -- "reforms," they call it -- and they betray no lack of malignant creativity.

So, what pension security?

Now comes the media, wrapping up matters in the tidiest narrative: Greedy public employees, goes the tale, have leveraged their weight to bilk the state for years, pumping up their fat retirement benefits at the expense of necessities -- education, transportation -- and mortgaging their children's and grandchildren's futures for their own comfort and joy. Cue the scary music.

State lawmakers in recent months have discussed reforms, but those efforts might not be enough to fix the crisis, the experts said.

State and local governments contribute a percentage of public employees' wages to the South Carolina Retirement Systems' trust. That rate has ballooned over the last seven years as state officials enacted four increases in an effort to shrink the pension debt.

In 2005 public employers contributed 7.7 percent of wages for most pensioners; they now contribute 10.6 percent. Over that time, the Legislature raised employee contributions a half-percent to 6.5.

They ripped us off, cry the media.

To hit high return rates, South Carolina's Investment Commission in 2008 approved making riskier investments that can have big payoffs. But those big risks can come at a cost. After the stock market crashed that year, the state took a $7.6 billion loss. It has recovered somewhat since then but remains below pre-recession levels.

Other issues have amplified the retirement system's funding crisis over the past decade:
The Legislature passed measures that pumped up employees' benefits.
Baby Boomers began to retire and draw down pension reserves.
State data shows retirees are living longer than ever.

This all means that the system is paying out more money but taking in fewer contributions.

Look again at the issues that have "amplified" the "crisis."

First, lawmakers passed measures that "pumped up employees' benefits," we're told without any historical context.

Second, Baby Boomers are retiring; and, notice that instead of "collecting their earned benefits," they are "draw[ing] down pension reserves." As if they're thieves. As if they haven't delivered their years of service and earned their legitimate pension benefits.

Third, and worst of all: "State data shows retirees are living longer than ever."

What should be the alternative? That they should respectfully forego their benefits, go home to their Barcaloungers in the dark, and will themselves to die, so as to reduce the economic burden left for the rest?

What a callous and hard-hearted soul who contrived these talking points, these themes, these excuses for legislative treachery and neglect.

This is no hyperbolic reaction to the narrative offered by the Post and Courier of Charleston. Look at its next lines:

Taxpayers make up the difference for what investment income doesn't cover, pension analysts said.

"If the risks don't pay off, you're going to be in trouble," Biggs said. "The person getting screwed is going to be the taxpayer."

Innocent taxpayers, screwed by conniving, elderly town clerks and librarians who had the temerity to live past the actuarial projections for their life expectancies. It's their fault that the state retirement system is under water. Lawmakers who could have honored their commitments and appropriated millions more dollars during the past 15 years bear no responsibility for the state of things, no. Those old tax cuts upon tax cuts were necessary, right and proper. Political favors demand repayment. So those old commitments to invest in the system were dead weight; they had to go.

Pension experts including David Draine, a senior research associate at Pew Center on the States, said South Carolina should be worried. Some states over the past decade have "failed to operate their retirement funds in a financially responsible manner."

"South Carolina is one of them," he said.

Retired public nurses, living now in assisted living facilities -- it's them to blame, folks. They bled you dry and kept coming back for more.

South Carolina's pension fund has a reported $25.4 billion in assets, according to the July 2011 Comprehensive Annual Financial Report. It also has $38.8 billion in liabilities, the amount of pension money it will owe about 500,000 public workers, retirees and their beneficiaries in the system.

That means its so-called "unfunded liability" is about 65 percent. A Pew report from April put South Carolina near the bottom third of states nationally, ranked by funding level.

Retirement systems can operate safely without being fully funded. But experts recommend systems be at least 80 percent funded, according to the U.S. Government Accountability Office.

Keith Brainard of the National Association of State Retirement Administrators compared state pension systems to mortgages. Even if they don't have all the money up front, financially secure homeowners can afford a house if they pay for it over 20 or 30 years.

Likewise, fiscally sound retirement systems will be able to cover pensions for employees whose expected retirements are decades away.

But South Carolina's system is not financially sound, according to the Pew Center report, which said the state's long-term pension liability is "cause for serious concern."

Look not to the proposals of the powerful for the past decade and a half. Look not to the budget writers in the House and Senate for culpability. It's your old first-grade teacher who put you in this mess.

And that unfunded liability actually could be much higher than the state has reported. Economist Joshua Rauh of Northwestern University's Kellogg School of Management said in a 2010 report that states across the country, including South Carolina, drastically have underestimated their liabilities. South Carolina's pension debt is as high as $53.5 billion, he said.

"Employers don't want to hear that because they don't want to pay more, and elected officials don't want to hear it because they don't want to raise taxes," Biggs of the American Enterprise Institute said.

You see, we have no way yet to know the extent of the damage done by those old crooks who swilled black coffee to drive municipal utility trucks across ice at four in the morning, all those years ago. How could we have known that the old firefighters who saved our homes were destroying our neighborhoods by other means, all the while?

No matter. The damage they did is slowly being discovered. Never mind that lawmakers could take other steps to shore up the system, like hiring more public employees and reinstating those old commitments to strengthen and protect their retirement security. Nope; those left in the system will be charged for the bill. Increases in their employee contributions to the system are already being calculated, with the least additional harm to already damaged taxpayers.

The state expects the system to be fully funded in 30 years, contingent on "a sufficient employer contribution rate" -- that's the amount state and local taxpayers contribute -- among other assumptions.

"It could be a lower rate, or a higher rate, but until the future gets here and the actual plan results are evaluated against the previously projected results we won't know," Lindsey Kremlick, a spokeswoman for the state Retirement Systems, said in a statement.

And they won't be the only ones to suffer. All of the public services provided by these public employees will take their share of the medicine, too.

Beyond increasing contribution rates, strained governments also might be forced to shift existing resources, said Josh Barro, a fellow at the Manhattan Institute. State funds that ordinarily would have paid for road repairs and education could be diverted to the pension system in the future, said Barro, a pension expert at the conservative think tank.

That means children will suffer, and the roads that take them to and from their schools will accept their neglect.

Thankfully, no tax cuts will be rescinded; now wouldn't be the time for that. Corporate South Carolina will be appropriately protected from economic harm. After all, it wasn't corporate South Carolina's fault we're in this mess.

It's all our public employees' fault.

South Carolina's unfunded liability trailed most other states in the boom years of the late 1990s and early 2000s, when many retirement systems flourished. In 1999 the system was 98 percent funded, Draine of the Pew Center said. But at that time many systems had surpluses, he said.

Part of the problem then was that South Carolina constitutionally had been forbidden from investing in stocks until 1999. All its funds were in cash and bonds, even in the stock market's boom years.

In 2005, the state established the Investment Commission to manage and diversify the state's investment portfolio in hopes of reaping stronger returns. The state hired a chief investment officer -- Robert Borden, a $485,000-a-year employee who resigned in December -- and set up a six-member panel of political appointees to vote on investment strategies.

The group began making so-called alternative investments in hedge funds and private equity in 2008 -- the same year the stock market crashed. Such bets can deliver higher returns than more conservative investments, but they also carry higher risk.

In the years since the state only has increased the amount of money it puts in alternative investments.

The pension system's critics, including Investment Commission member Loftis, have said the state has put too much money in high-risk bets. Loftis also has said the state has paid too much in management fees, which topped $343 million last year.

Borden couldn't be reached for comment. Commission Chairman Allen Gillespie and Vice Chairman Reynolds Williams did not return requests for comment.

The investment losses were compounded by policy decisions that added to the unfunded liability. In 2000 the Legislature lowered the number of service years needed to retire from 30 to 28. Pension recipients have received annual cost-of-living raises of up to 3.5 percent all but one year since 1999.

"States that are in trouble now have kicked the can down the road and haven't set aside contributions," Draine said. "They've raised benefits without figuring out how to pay for them."

I hope we've learned our lesson.

Could charter school employees lose state retirement benefits?

No, this isn't a new proposal from Governor Nikki Haley, though she may adopt it soon. This comes out of the blue, from a charter-school advocacy group's website.

A little-noticed proposed change in Internal Revenue Service regulations could have devastating effects for charter school teachers by making them ineligible for state retirement plans, and they could stand to lose much of the money that they already have accrued.

The proposed rule, released with little fanfare near the end of last year, would make major changes to the definition of “governmental plans,” the federal standard for who can be considered a government employee for the purposes of participating in state pension systems.

When you start dividing folks by labels, using "government schools" as an epithet, it leads to sticky situations.

“The IRS did not have charter schools in their sights, but whether they had them in their sights or not, it could have negative consequences for us,” said Todd Ziebarth, vice president for state advocacy and support at the National Alliance for Public Charter Schools. “Our concern is that this could raise some questions. It’s a gray area around whether charters would meet the test.”

The proposed change would establish five criteria for determining eligibility in state retirement plans, the most troublesome of which, from the point of view of whether charter school teachers could participate, is a provision stating that “the governing officers either are appointed by state officials or publicly elected.” Another condition is that a government body must be responsible for all the debt a participating institution accumulates.

If that's so, it's a moot point. Haley and our legislature isn't likely to assume any debt or liability for private charter schools.

Consider all the hoopla that's being made over the stability of the retirement system already, and the Henny-Penny ("the sky is falling!") wailing over unfunded liability -- the technical term that reflects the state's cost if all the state's public employees retired, all at the same time, and demanded their benefits to be paid out. That cacophony is bad enough; can you imagine the outcry over assuming all of charter schools' rental contracts and other contractual liability? O, no. That's not going to happen.

After all, sloughing off some of public education in the interest of privatization was the purpose of charters in the first place.

On the surface, charter schools may not meet either criteria because they are not wholly public institutions. For example, elected school boards do not have hiring or firing power over the employees at a charter school, and charter schools can go bankrupt and out of business without a government guarantee of their debts.

It was this very principle that led local school boards to reject charter applications early in Governor Mark Sanford's administration, which is why he pushed lawmakers to create a statewide charter school district, to get around the local control of local school boards.

NAPCS estimates that if the rule is enacted, more than 95,000 charter school teachers nationwide — more than 93 percent of the charter workforce — would be forced either to leave their schools or risk losing their pensions.

Risk losing their jobs? Risk losing their retirement benefits? Why, that makes them just like public school employees during the past decade, subject to the whims of lawmakers who don't support public schools.

Charter colleagues, welcome to our world.

After an uproar from the charter school community, the IRS last week extended until June a public comment period for the proposed rule, which could go into effect as soon as this summer.

Several Republican members of Congress also are putting pressure on the IRS to clarify its rule or risk inflicting a crippling blow to charter schools, which are responsible for educating more than 2 million students in 41 states and the District.

In a letter last week to the IRS, Republican Reps. John Kline of Minnesota, chairman of the House Committee on Education and the Workforce, and Duncan Hunter of California, chairman of the early childhood, elementary and secondary education subcommittee, said the proposed rule “could unfairly jeopardize the retirement security of charter-school teachers.”

What do you think it would take to get Rep. Kline to slip in some retirement security for public school employees, while he's at it?

Not much chance of that? Well, couldn't we try?

“The draft regulations could effectively prevent many public charter schools from recruiting or retaining veteran traditional public school teachers, significantly interfering with charter schools’ ability to achieve their educational goals,” the two men wrote.

Now wait just a blinking minute. This fellow states in black and white that charter schools can't afford this regulation because it might prevent them "from recruiting or retaining veteran traditional public school teachers, significantly interfering with charter schools’ ability to achieve their educational goals." Well, what about the ability of traditional public schools to achieve their educational goals? When you pull veteran teachers out of traditional public schools, it doesn't exactly result in sudden spikes of student achievement, I suspect.

Who are our lawmakers fighting for?

In a post on the IRS website explaining why it drafted the rule, the agency said it was attempting to limit governmental-plan eligibility to those working directly for “an agency or instrumentality of the state.”

The IRS also says it has become “increasingly concerned with the growing number of requests for governmental-plan determinations from plan sponsors whose relationships to governmental entities are increasingly remote.”

O, that's choice. Forgive my incredulity.

In the interest of privatizing a host of public services, including public schools, our wise leaders create all sorts of dodges and loopholes to move individuals off the public employment rolls. Yet, when these individuals gather together in their private entities, they want access to the same public retirement system plans that ever-fewer public employees have been promised.

Look at how the IRS describes it: "requests for governmental-plan determinations from plan sponsors whose relationships to governmental entities are increasingly remote.” That clearly means private entities -- contractors, more or less -- whose employees aren't public employees but who want the same retirement benefits.

Well, the question seems to be: Are charter school workers considered public employees, or are they the employees of private contractors or other non-public entities? If they're public employees, there's a retirement system for public employees. If they're not public employees, well...

If I'm an auto mechanic who works on Fords, that doesn't necessarily mean I'm eligible for employment benefits from the Ford Motor Company.

I'll keep my eye on this one and see what develops.

Other states' retirees are welcome, but not our own, in Horry

We've all heard that the road to hell is paved with good intentions.

That's what came to mind after reading an item in the Myrtle Beach Sun-News about a new policy to purge the Horry County School District's central office of its at-will employees. Maybe the intention is noble -- the superintendent says the move will open up advancement opportunities for others -- but something smells very bad about the policy's fine print.

To be clear, this only affects the Horry central office, according to the news report. And it only affects those at-will employees who have retired and returned to work.

At-will employees are those who are drawing retirement in South Carolina and have returned to work without the legal entitlement a contract gives for guaranteed employment. Most at the district office fall under the Teacher and Employee Retention Incentive, or TERI program.

Some see this as a way to prevent "double-dipping" -- in fact, the Sun-News said so in its headline.

Others say it's about saving money. Apparently, secretaries who have worked for 30 years at the central office make a ton of money.

Board Chairman Will Garland said most board members see the move as a cost savings, which could be 40 to 50 percent - paying someone substantially less than $100,000 a year. "It did not apply to at-will teachers or custodians or bus drivers - that's not the people we're concerned about," Garland said. "It's the ones at or approaching six-figure salaries, where we have some fairly high-paid executives."

Elsberry contends that cost savings would be minimal because at the district level, salaries have to be competitive to attract the talent needed to run the state's third-largest school district, as opposed to teacher salaries, which are set by the state.

"I want somebody who is a proven entity, who can get the job done without a lot of training," Elsberry said of hires in administration.

So, either it is about saving money, or it isn't about saving money; this isn't very clear because Horry's leaders seem not to be speaking from the same talking points.

What is perfectly clear is that the policy is inherently unfair in one really glaring way: Employees who retired from North Carolina or some other state, moved to Horry County and have been hired at the central office are completely unaffected. In fact, once those employees have served in their position through the probationary period, they get a continuing contract and can negotiate a pretty hefty wage.

The district has hired employees who have retired from school districts in other states; after successfully completing one year of employment, S.C. law allows for those employees to be put on a continuing contract and given credit for their previous experience.

So let's play this out in two scenarios.

In scenario one, I retired in 2005 after working 30 years for the district office of Brunswick County, North Carolina, just across the border from Horry County. In fact, I still live in Brunswick County -- in a pretty little condo community in Carolina Shores -- and drive 45 minutes to work every day at the Horry County district office. After my first year of working here, Horry County gave me full credit for my 30 years in North Carolina, so I was able to collect a salary based on my three decades-plus experience. Truly, I live in the catbird's seat, drawing a very healthy retirement check from North Carolina -- because North Carolina's state lawmakers have always honored their commitment to keep a healthy retirement system -- and earning a nice salary in South Carolina while earning credit in its retirement system, too. This new policy adopted by the Horry school board doesn't affect me at all, and I get to continue working here for as long as I want.

In scenario two, I retired in 2005 after 30 years of working for the district office in Horry County. Then, I came right back to work as an at-will employee -- meaning that I have no contract and no rights because South Carolina has been a right-to-work-for-less state since 1954 -- and I've been toiling away, doing my part for the children of Horry County. As a result of the new policy adopted by the Horry school board, I'm now out of a job -- so much for loyalty and dedication -- and am dependent solely on my state retirement benefits, which are stingy and meager because South Carolina's lawmakers fight tooth-and-nail to avoid strengthening that system and, in fact, do all they can to weaken it.

The moral of the policy seems to be that if you retired elsewhere and came to work in Horry, you're a very valuable employee; but if you retired in South Carolina and wanted to continue working, you're a drag on the system and you're blocking others from climbing their career ladder.

Does this sound fair to you?

Will Haley's book feature a chapter on veto overrides?

Really, a book?

Her Excellency, Governor Nikki Haley, has been in office slightly more than five months.

In that time, she has booted the state university's largest benefactor in history from the board of trustees and replaced her with a campaign contributor. See Moore, Darla.

She fired the state's popular and effective retirement system director and quickly named a replacement without notifying key officers. See Boykin, Peggy.

She has presided over a rise in the state's unemployment rate, seeing it return to double digits. See Job Creation, Lack of.

Though millions of South Carolinians, with jobs and without, stretch the weekly groceries bill with ground beef and Hamburger Helper, she has lived well on the public grace, enjoying "menus with Peruvian squid tubes, rabbit loin, shiitake mushrooms and other exotic ingredients," plus "small amounts of Fresh Market Chilean sea bass at $25.99 a pound and Yellowfin tuna at $21.99 a pound, and a number of Publix sushi platters," as well as spending public funds "to buy a Riedel wine decanter and Riedel cabernet/merlot wine glasses." See "Let Them Eat Cake."

She has offended lawmakers in both parties with petty slights, withholding invitations to a Governors Mansion from some, turning another away at the gate. See Brown, Boyd; also Howard, Leon; also "Petulance and Pettiness"; also Not the People's House.

She injected herself gracelessly -- and has infamously sought to drag national candidates -- into a dispute between a federal agency and a corporate campaign contributor operating in South Carolina. See Boeing.

She has fueled a well-publicized feud with another elected executive officer, declaring him "irrelevant" to the state's official business. See Loftis, Curtis.

She bungled an agreement made by her predecessor's economic development team with one of the world's largest companies, who had begun construction on a location in South Carolina but shut down and withdrew when she engaged in a foolish game of chicken over tax breaks. See Amazon.

After campaigning on a platform of "transparency," she has conducted closed-door meetings with national bond-rating agencies and shut the state's retirees out of discussions about their retirement system. See Griswold, Sam.

She embarrassed the state by ignoring the President of the United States during a briefing of governors in the State Dining Room of the White House, and checking email on her iPad instead. See Reuters Photographer, Caught by a.

She provoked legal action from the President Pro Tem of the state Senate by issuing an executive order in contravention of constitutional powers and state law, losing the fight before the state Supreme Court. See McConnell, Glenn. See also Supreme Court.

She earned a stunning rebuke from the full legislature by issuing 35 vetoes and having all but nine overridden, just as quickly and spectacularly as were the vetoes of her predecessor, and garnered an especially raw accusation of double-dealing and dishonesty from a lawmaker from her own home legislative delegation. See Bingham, Kenny.

And she bragged, oblivious, to a small audience of fans in Florence this spring that she hadn't made any mistakes while in office. See Hubris.

All the while, apparently, Her Excellency has been writing a book, no doubt expounding on the highest principles of governance and her nascent, derivative political philosophy. (See Sanford, Mark.)

S.C. Gov. Nikki Haley has a book deal.

Sentinel, a conservative imprint of Penguin Group (USA), said Wednesday that Haley’s “Can’t is Not an Option” will come out in January.

Haley, a Republican and Tea Party favorite, was elected last year. At 39, she is the country’s youngest governor and only the second Indian-American governor.

In an interview in March, Haley said writing had been “therapeutic” and that she would cover everything from growing up in rural South Carolina to her contentious 2010 campaign, when she faced — and denied — allegations of infidelity.

Haley said she was not planning a run for national office. Her literary representative, Washington attorney Robert Barnett, has negotiated deals for Presidents Barack Obama, George W. Bush and Bill Clinton.

Notice the names that her "literary representative" has aided in the past: Barack Obama, George W. Bush and Bill Clinton, all presidents of the United States, including two two-term presidents. What is it that governor-for-five-months Haley has to offer that compares with these political giants? A Newsweek magazine cover?

The title is particularly trite: "Can't is Not an Option." Here's what "cant" is: "cant" is "empty, uncritical thought or talk."

"Cant" is also the "jargon of a group, often implying its use to exclude or mislead people outside the group."

"Cant" is also "insincere, especially conventional expressions of enthusiasm for high ideals, goodness, or piety."

Yes, I know. She's using the word "can't" as a contraction for "cannot," as in "Haley can't play well with others" or "Her Excellency can't understand why people won't just do as she instructs them."

Here's a fun project for readers: What do you imagine will be the chapter titles of Haley's book?
Example: "Voters Would Soon Learn What Hit Them, Hard"

Here's another one: What do you imagine would comprise Haley's top ten list of governing principles?
Example: Reward your campaign contributors early and well.

Or another: What should be the subtitle of Haley's book?
Example: "Can't is Not an Option: If You Can Read This, We're Spending Too Much on Education"

Haley excludes retirees from meeting with bond agency

Back in March 2010, Rep. Nikki Haley delivered a speech to the Spring Valley Rotary Club in Columbia titled "Transparency in State Government." One presumes, as she was taking on several more-experienced opponents in her party's gubernatorial primary, that Haley was "for" transparency. But no record exists of the speech, so we're left to wonder.

It's a fact that Haley ran in that primary, and won, on a platform of transparency. But given all of what has happened since she won that primary, South Carolinians have plenty to question about Haley's definition of the word.

Here's what one online source tells us is the dictionary definition:

trans·par·ent (trns-pârnt, -pr-)
adj.
1. Capable of transmitting light so that objects or images can be seen as if there were no intervening material. See Synonyms at clear.
2. Permeable to electromagnetic radiation of specified frequencies, as to visible light or radio waves.
3. So fine in texture that it can be seen through; sheer. See Synonyms at airy.
4.
a. Easily seen through or detected; obvious: transparent lies.
b. Free from guile; candid or open: transparent sincerity.
5. Obsolete Shining through; luminous.

Read 4b again: "Free from guile; candid or open." That's not our governor's definition, apparently.

A high-level meeting was held by Haley this week with representatives from Standard and Poor, one of the nation's top three Wall Street-based bond-rating agencies. These are the agencies who set a state's bond rating, which determines its standing among state and municipal governments when borrowing money at interest. When a bond-rating agency delivers recommendations concerning a state's fiscal health -- including its investments and investment strategies -- this is huge news because state leaders often follow the agency's recommendation to earn or protect that almighty bond rating.

And when such high-level meetings are held that may impact the state's retirement system -- which invests billions of state employees' and retirees' dollars on behalf of those employees, retirees and their families -- representatives of those groups are usually present to hear the conversation.

But Haley, who uses transparency as little more than a flashcard, excluded state employees and retirees from hearing what Wall Street experts advised her about their money.

We know this thanks to Treasurer Curtis Loftis, who boycotted the meeting over Haley's lack of transparency. The State tells it in today's edition:

Remember that big financial summit with all the New York-based bond-rating firms that Gov. Nikki Haley organized and then trumpeted as open to the public through her press office? Did you read about the meeting with Standard and Poor’s this week?

No?

Well that’s because the meeting to discuss state finances, presumably including the billions invested to pay for public workers’ retirement benefits, was held behind closed doors.

That did not sit well with state retirees who were excluded from any potential discussions about their pensions. Nor did it please state Treasurer Curtis Loftis, R-Lexington, who boycotted the private discussion of public money.

Remember definition 4a from the dictionary citation above? "Easily seen through or detected; obvious: transparent lies." Now read this part of The State's note:

Haley spokesman Rob Godfrey said the meeting was private at Standard and Poor’s request.

“They requested the opportunity to have a meeting with state leaders where they were free to have open dialogue about the financial condition of South Carolina,” Godfrey wrote by email, “and we were happy to comply.”

Public employees have a right to know what advice is being sought and offered that will impact the investment of their retirement funds. To deny them that right, then to send minions to lie about it, is malfeasance on the part of Nikki Haley.

Here's another dictionary definition to ponder:

cor·rupt (k-rpt)
adj.
1. Marked by immorality and perversion; depraved.
2. Venal; dishonest: a corrupt mayor.
3. Containing errors or alterations, as a text: a corrupt translation.
4. Archaic Tainted; putrid.
v. cor·rupt·ed, cor·rupt·ing, cor·rupts
v.tr.
1. To destroy or subvert the honesty or integrity of.
2. To ruin morally; pervert.
3. To taint; contaminate.
4. To cause to become rotten; spoil.
5. To change the original form of (a text, for example).
6. Computer Science To damage (data) in a file or on a disk.
v.intr.
To become corrupt.
[Middle English, from Latin corruptus, past participle of corrumpere, to destroy : com-, intensive pref.; see com- + rumpere, to break; see reup- in Indo-European roots.]
cor·rupter, cor·ruptor n.
cor·ruptive adj.
cor·ruptly adv.
cor·ruptness n.
Synonyms: corrupt, debase, debauch, deprave, pervert, vitiate
These verbs mean to ruin utterly in character or quality: was corrupted by limitless power; ... perverted her talent by putting it to evil purposes; a proof vitiated by a serious omission.

Griswold: Protecting retirement benefits requires vigilance, participation

As president emeritus of State Retirees Association, Sam Griswold is one of the most trusted voices in South Carolina on issues related to the South Carolina Retirement System. Sam has drafted a year-end summary of legislative activities from the 2011 session and new developments affecting retirees (and those who hope one day to retire), and it bears reprinting and sharing with others.

Sam writes:

The State Retirees Association has been closely following the Restructuring Bill (H3066) favored by Governor Haley and passed by the House.

As passed by the House, the bill moved the Employee Health Insurance Program (along with a number of other functions currently in the Budget and Control Board) into a new Department of Administration in the Governor's Cabinet. The Retirement Systems would stay with the remains of the Budget and Control Board. We were very concerned about the separation from the Retirement Systems and possible rumored privatization of the Health Insurance Program. We mobilized retirees to contact their Senators and attend the subcommittee of the Senate Judicial Committee which was reviewing the House bill. We wanted Health Insurance and Retirement to remain with the Budget and Control Board or, even better, buffered from the political system by putting both programs under a Board of Trustees. We failed to do that at the subcommittee.

Efforts were enhanced and when the subcommittee made their report to the full Judiciary Committee there was standing room only in the Committee room. Gray heads flowed out of the room and into the hall. Every Senator had been contacted by retirees from their district. The bill was amended in full Committee to retain both the Retirement Systems and the Health Insurance Program under the auspices of the Budget and Control Board. An amendment was proposed but defeated to create a process which would culminate in the creation of a new Employee Benefits Agency to oversee these functions.

Pursuing the bill to the Senate floor, we conferred with several senators regarding the whole business. An interesting coalition developed among generally younger Senators from both ends of the political spectrum -- Democrats and Tea Party affiliates. They put forth an amendment from the floor. The amendment, offered by Senators Sheheen and Massey, abolishes the Budget and Control Board over a two year period and provides for the creation of a separate and independent Employee Benefits Agency. The amendment also calls for the creation of a transition committee of stakeholders to advise the General Assembly on the actual structure of the new agency and further stipulates that during the transition period no changes can be made to retirement and insurance benefits without a unanimous vote of the Budget and Control Board. The amendment passed 43 to 0.

Most of the remainder of Budget and Control Board functions would be put into the new Department of Administration. We liked this version.

By now everybody has probably heard that the Senate adjourned without taking a final vote on the Restructuring Bill (H3066). Governor Haley heard about it and almost immediately signed an Executive Order directing the General Assembly to return to work the next week. The House leadership said they would, the Senate leadership said they would not. Senator McConnell then took the issue to the Supreme Court to determine if the Governor had the authority to call them back. The Court found against the Governor and they did not reconvene.

While final passage is not a certainty, we have come a long way since that cold winter day when so many of you attended the Senate Judiciary Committee and helped us keep health insurance out of the Department of Administration. You helped us stop a runaway train and in doing so helped to set the debate that culminated in the Senate's vote. You proved that we citizens can make a difference if we put forth the effort to participate.

The legislature is in session now for two weeks to deal with a limited agenda of vetoes, the budget, redistricting, and voter I.D. Governor Haley also wants them to deal with restructuring but it would take a 2/3 vote to put it on the agenda. It is unclear if they will have the votes to do that. If they do not take it up, it will be high on the agenda when they convene in January.

One final thing: The Budget and Control Board met on Tuesday, June 14 at 10:00 A.M. An agenda item created by State Treasurer Curtis Loftis proposed to increase the employer contribution into the Retirement Fund and thus maintain the appropriate contribution level to put amortization of the unfunded liability of the Fund into compliance with Government Accounting Standards. This motion failed for lack of a second.

Technically, payment of this contribution is not necessary until the fiscal year starting July 1, 2012. But Treasurer Loftis believes, and we concur, that taking this action now would help preserve the credit rating of the State. So here is another drama that we will have to follow.

The Board also did not address the issue of the assumed rate of return on investment of the Retirement Fund which means state law will automatically trigger a 1.7% cost of living adjustment for retirees effective July 1 and in the benefit check August 1. Hooray for that law that we got passed in 2008. Active participation works!

Our ultimate goal is a fiscally sound retirement and health insurance system that can meet the needs of government employees in our state for the foreseeable future.

But lots of money is involved here: $1.7 billion in annual expenditures for health insurance and a Retirement Fund in excess of $25 Billion. Whenever that much money is on the table, there are an infinite number of people who want a piece of that pie.

But it is OUR pie and worth fighting to keep. These are your dollars, put there for your benefit. They allow you to live the final years of your life in dignity and with the care you will need. We need to ensure that's how these dollars are spent and that they are not spent on the ambitions or greed of any politicians or outside entities. Help us keep it that way.

Retired educator defends public employee pensions

In what society must we defend the rights of retired public educators and other employees to their pensions?

Ours.

Retiree Martha Serensits of Ocean Isle Beach, North Carolina, had a great letter published in the Myrtle Beach Sun-News on Sunday, and it's well worth re-posting here, to give moral support to our own beleaguered retirees and close-to-retirees.

In response to an antagonist's text published on March 17 in the same paper, Serensits writes,

Mr. Litz, I am very sorry that your pension has remained the same for 20-some years. Perhaps if you had a union representing you, you might have had the opportunity to contribute to your pension fund and receive cost of living adjustments. You see, contrary to what you seem to believe, I contributed 7 percent of my gross salary to my retirement fund for 30 years. As a retired educator, this allowed me to receive 60 percent of the average of my top three years with unlimited cost of living adjustments. (By the way, last year that was calculated at minus-3.5 percent; consequently, we did not receive a cost of living raise and this year our increase is 1.24 percent) I also pay $600 a month for my health insurance.

My retirement is not a "gift" from the taxpayers of my state. Teachers in my state (as in most) were promised better benefits in exchange for accepting lower wages as public employees. (By the way, the retirement system to which I belong has not been an option for teachers in my district since 1980.)

Also contrary to the prevailing attitudes, teachers do not receive vacation pay, paid lunch hours, overtime, differential, etc. Teachers are paid for those exact days that they work (usually 185). That pay can either be spread over 10 months or 12 months. It is still only pay for 185 days of work. Teachers work, at school, a seven-hour day. This does not include nights and weekends doing lesson plans, grading papers and going to school themselves, as well as covering athletic events and extra curricular activities.

Teachers in our district (as in most) are required to continue their education, specifically to achieve a master's degree or its equivalent in five years or have their pay frozen. (Have you paid for college lately?) They must then continue their education in order to keep their certification current. Vertical movement on the pay scale is dependent on years worked and education.

It is truly amazing to me that the Fox News pundits can talk about bankers on Wall Street who created this economic mess and put us on the brink of a depression; how "critical" is it to retain the "brightest and the best" on Wall Street and how we have to pay them outrageous sums of money and must honor their contracts and yet, when it comes to dedicated teachers, many of whom have second (and sometimes third) jobs just to feed their families, they refer to them with disdain and speak of how they are on the "gravy train" and "fleecing" the public. Wonder if those Wall Street bankers ever thanked their teachers?

I thank mine, by God, all the time.

And thank you, Ms. Serensits.

Will state employees have retirement security or not?

Bill Davis, editor of the Statehouse Report, published an item on the state's retirement plan more than a week ago, and I'm curious about how his analysis squares with that of Sam Griswold, whose judgment on retirement system questions is impeccable. Griswold wrote, here, about the competing legislation to make changes to the retirement system, especially for new state employees' benefits, and the significant change that Governor Nikki Haley made that week to the SCRS leadership: the removal of longtime director Peggy Boykin.

Facts don't seem to count for much here -- it's the ideological principle of the thing that seems to be driving this.

Some say our retirement system has an unmanageable unfunded liability. We, like many systems across the nation, do have a significant unfunded liability. Some modest adjustments in contributions and benefits may be necessary to deal with that unfunded liability. But our system is actuarially sound and there is no crisis. We have time to deal with any changes that need to be made and they should be made in a deliberate manner with professional assistance. The system is not broken so we need to be careful when we try to "fix" it. Unfortunately there does NOT seem to be the inclination to want to solve the problem in this manner.

In Davis's words, however, the state is "struggling" with its retirement program.

The crux of the matter seems to be this issue of "unfunded liability." As I understand it, analysts or actuarials calculate that IF every single state employee currently on the job retired today, all at once, the state would be "liable" for the dollar amount necessary to pay out all of their collective retirement benefits on the spot.

Of course, that doesn't happen. Not even employees who are eligible to retire do so on the very date of their eligibility, much less those who have been in state employment only a few years. So the premise is absurd. But let's play it out that way. Let's assume that every single state employee working today retired today. What would happen?

If that occurred, then the "unfunded liability" that lawmakers moan about would impact us. The retirement system is apparently very well situated to meet present needs, even the needs that will arise for many years to come, but it every state employee retired today, it likely wouldn't be able to meet its benefit obligations, and that is apparently what the "unfunded liability" means. Because the state legislature has made promises -- meager, pale, stingy ones, but promises nonetheless -- to its public workforce, the state legislature would have to make up the difference quickly. And that would probably require cutting the budget or raising taxes.

It's that last part -- raising taxes -- that provides the legislature's most conservative members their hook. Using this absurd premise, they wave the "raising taxes" flag to call out their troops, and the troops come a-running. We have to avoid raising taxes to meet this outrageous demand by -- cue the scary music -- retiring state employees, so we have to act now, and cut-cut-CUT! their benefits while we have time.

One way to push state employees out into the cold and get them off the state's retirement rolls is to make them enroll in a 401-K account. And that's where Bill Davis of the Statehouse Report picks up the trail, writing,

Will they or won’t they? That is the question.

Will future state employees continue to get state pensions or will legislators, as bills in the legislature propose, keep new employees from joining the state pension plan and force them into 401K-like savings plans?

State Sen. Chip Campsen (R-Charleston), the primary author of the Senate version of the retirement plan bill, said state government needed to follow the private sector’s lead in handling its pension obligations. How? By segueing from defined benefits plans, or pensions, to defined contributions plans that are controlled by employees and seeded with government contributions.

What's the difference?

The difference in a defined benefit and a defined contribution is the difference between paying off the mortgage and living securely through your retirement, OR losing the house before paying it off, and having to work another 10 or 20 years past your retirement age because your retirement check doesn't cover the groceries.

A defined benefit means that the state guarantees what it promised: You work all those years, and we guarantee that you'll collect the retirement benefit you were promised from day one.

A defined contribution means that the state will kick in a little bit to your 401-K, but when the market tanks again and your 401-K loses forty percent of its value, you're on your own: The state owes you nothing.

Lest we forget, every time there's an economic recession and the market drops, the value in our 401-K account drops too. It happened during the stagflation recession of the 1970s, the Reagan recession of the early 1980s, the Bush I recession of 1991, and Bush II recession of the early 2000s, and when the real estate bubble burst two years ago: Market values dropped, and everyone with 401-K accounts saw a sudden drop in their account values. Translation: If your retirement security is tied up in the stock market, you don't have any retirement security.

But state employees and retirees whose retirement security rests in the South Carolina Retirement System saw no damage whatsoever. What has been promised to them will be delivered to them, because we as a state have guaranteed that to one another. It is the contract we make with our state employees in recognition of the piteous salaries we pay them over the course of a working life.

And this situation provides us perhaps the best illustration of our lawmakers' callousness toward the very workers who clean our buildings and highway roadsides, who provide public services and do them at odd hours of the day and night. When snow falls in the Upstate and shuts down our roads, who gets up at 3 a.m. to clear them? That's who we're talking about.

Davis continues:

Gov. Nikki Haley says something has to be done, claiming the state’s retirement system is burdened with $13 billion in unfunded liabilities. Critics say the number is vastly overstated. But what Haley wants done is unclear as she has yet to spell out specifics in her administration’s plan.

Reached for comment Friday morning, Haley’s spokesman Rob Godfrey said the governor has said state government needed “to protect the benefits promised to current retirees. She has also said that the current unfunded liability is not sustainable, and is probably the greatest financial risk facing South Carolina.”
...
Treasurer Curtis Loftis, who has clashed with Haley publicly over Blume’s appointment, told Statehouse Report this week that the state employee retirement pension fund was $88 million underfunded just from 2010 alone.

This is a great piece of information: Which is it, $13 billion, or $88 million? Not that $88 million is beans, but it's a far cry from $13 billion -- and that's if we should buy this line of criticism in the first place. Is the sky falling? Or are our conservative Cassandras in the big house just chafing at having to pay state workers and then pay them a retirement benefit, too?

Currently, the state retirement system has roughly 450,000 members, with about 190,000 active members and 110,000 pensioners members and 150,000 members not yet eligible to receive benefits, according to the Budget and Control Board, which oversees the retirement system.

Loftis said he worried the state may be on the hook in the future if new hires were cut out of the defined benefits system. The treasurer worried that if the state didn’t continue to add new hires to the pension system, then the state eventually might have to contribute more money over time to fund any gaps in the pension system.

Why should we want new hires to be added to the pension system? It's because new hires contribute to the system, and their contributions are invested with everyone else's in the stock market. The greater our aggregated stock market investment, the greater our return, and the better able we are to pay current and future retirement benefits without adding dollars directly to the system.

Take those new hires out of the equation, and you lose the benefit of their investment. It's a Catch-22 for fiscal conservatives.

In contrast, there seems to be no conflict at all for fiscal progressives, whose argument is simple: If you want public services, pay public employees and guarantee them a retirement benefit.

The key is the guaranteed benefit. This is how Franklin Roosevelt explained Social Security to us, and how it worked before federal lawmakers turned it into their own federal savings account.

Campsen worried that the current retirement model mimicked the federal Social Security program where new contributions were being used to fund existing benefits. “If that’s what happening in the state system, then we need to stop the bleeding sooner rather than later,” he said.

But that’s not what is happening. The state retirement system is fully solvent because the state is not borrowing from the pension fund to pay other bills, as is the case with Social Security on the federal level.

Bob Borden, who oversees the retirement pension fund, has said publicly that the fund is “back in the black” and exceeding investment projections, with a total value of about $23 billion.

Borden did not return several days of calls for comment on the fund, so it is not clear what he means by saying the fund was “back in the black.” In 2008, the fund’s value was $29 billion -- $6 billion higher than it is today. The $23 billion fund now, however, has regained $3.5 billion from a $19.5 billion low point two years ago.

See that "low point" from two years ago? That's when the bottom fell out of the market thanks to the real estate and mortgage mess. In two years, the retirement system was able to bounce back. But how did the sudden drop in value affect Americans with 401-K accounts who were ready to retire when the bottom fell out? They couldn't retire, that's what happened. I can't imagine many things worse than being ready to retire after a long career, and finding that the 401-K account that was supposed to support you through the next 20 or 30 years is now so devalued that it can't support you for five years. What options do you have then, when bills are due and the best your financial advisor can do is tell you to leave the account alone and wait, wait, wait, wait until the market comes back.

That's the difference between having a defined benefit and a defined contribution.

Joe Benton, the interim executive director for the S.C. State Employees Association, disagreed with Haley’s assessment of the pension fund. He said she was playing games with the numbers – that her $13 billon number was premised on the unrealistic idea that everyone would who could retire in state government were to do so tomorrow.

Benton likened the crusade against the state’s retirement system as saber rattling, considering, he said, that the average pension recipient receives less than $20,000 a year. And Benton, a former economics teacher, worried that it might not be the safest idea to let state employees with little investment savvy manage their retirement savings.

Oh, I think that's precisely what the investment firms hope for: Wave after wave of state employees with little investment savvy bringing their retirement savings to invest in the market. This is how newly-minted young investment bankers become wealthy, powerful investment bankers -- and how South Carolina's poor get poorer and poorer, all the while.

Sam Griswold: SC Retirement Systems are under attack

The Retirement System(s), as we know it, is under the most direct attack that it has ever seen.

This attack is precipitated, in my judgment, by a movement in other states to rein in what is perceived to be a pay/benefit package for public employees that is fiscally unsustainable and really better than what these employees/retirees deserve. Interestingly, these efforts are trying to control benefit levels through requiring employee contributions to increase. But in every case I can see -- most notably Wisconsin -- government employees in our state already contribute more to their health and retirement plans than the amount the governor of Wisconsin is suggesting his employees should pay. But never mind. Facts don't seem to count for much here -- it's the ideological principle of the thing that seems to be driving this.

Some say our retirement system has an unmanageable unfunded liability. We, like many systems across the nation, do have a significant unfunded liability. Some modest adjustments in contributions and benefits may be necessary to deal with that unfunded liability. But our system is actuarially sound and there is no crisis. We have time to deal with any changes that need to be made and they should be made in a deliberate manner with professional assistance. The system is not broken so we need to be careful when we try to "fix" it. Unfortunately there does NOT seem to be the inclination to want to solve the problem in this manner.

Two bills have been introduced (S531 and H3568) which mandate doing away with our current retirement system (a defined benefit plan) and replace it with a defined contribution plan which creates individual accounts for each employee, provides for employer matching funds up to a certain amount, and to be managed, in terms of investment of the funds, by the employee him/herself. After retirement, the state has no further obligation to you. You either live on your investment or you don't but the State doesn't care -- no further retirement benefits would be available.

Another set of bills (S134, S238 S261 and H3066) has been introduced regarding the creation of a Department of Administration. These bills do away with many of the functions of the Budget and Control Board by placing them under the oversight of a Department of Administration which would answer directly to the Governor. At this point, it is somewhat unclear what would happen to oversight of the Retirement System though it appears our health insurance system would be headed to the new Department of Administration under these bills.

We need to be very concerned about the ultimate location of these two critical functions.

Two critical subcommittees have been appointed in the Senate. One, headed jointly by Senator Alexander (Oconee) and Senator Ryberg (Aiken) is called the Retirement and Employee Benefits Subcommittee. Senator Hugh Leatherman appointed this subcommittee to examine the system and come up with a permanent long term solution. The second subcommittee is headed by Senator Larry Martin (Pickens) which is examining what should be done with restructuring with the Department of Administration. These are important committees and we will keep you up-dated on their actions and when you need to be there.

The Retirement System and the Health Insurance System currently answer administratively to the Executive Director of the Budget and Control Board. With the election of Governor Haley, one of her first actions was to seek the resignation of the then Executive Director, Frank Fusco. She achieved this. Frank was replaced with Eleanor Kitzman.

On Friday, Ms. Kitzman removed Peggy Boykin, Director of the Retirement System, from her post. A new director is to replace her. In my judgment, Peggy was a very competent professional who kept the interests of her constituency -- that is you and me -- in the forefront.

So now you have an idea of the environment in which we are playing. Significant bills have been introduced to dramatically change the Retirement System and administrative/personnel changes have been taken in preparation for implementation. It appears to me that our retirement system is under direct attack as it has never been before. The system that we and so many who came before us have used to preserve and maintain our financial lives in retirement and which those who come after us have been counting on is in jeopardy. And it appears to me that this attack is a political decision, not a business decision substantiated by professional advice. It is trying to create a crisis where none exists and provide an immediate solution for a problem that cries for more deliberation.

The direct impact on those already retired will be mitigated by the fact that the courts have maintained you cannot go back and apply changes retroactively. But your cost of living adjustment (COLA) does not fall into that protected category; nor does your health insurance. And we have long maintained that our goal is not just the protection of our own benefits but protection of the benefits for those who come after us. This is not just a self-serving activity.

There is only one way to address this. We must use politics just as they are. Our advantage is that we are everywhere. And that old Tip O'Neill adage is true: "All politics is local politics."

YOU MUST CONTACT YOUR LOCAL LEGISLATORS. Right now!

Your Senator is especially important.

Tell them you do not want to see the retirement system changed to a "defined contribution" system. You want it maintained basically as it is now with cost of living adjustments and a retirement benefit from the state--not some individually managed account.

Tell them that certain changes in benefits and contributions can be made but the basic structure must remain the same. IF WE DON'T GET PRESSURE FROM THE GRASS ROOTS ON THESE POLITICIANS THEY WILL GO THE ROUTE OF LEAST RESISTANCE.

IF WE DON'T GET THIS STOPPED, WE WILL HAVE ONLY OUR OWN INACTION TO BLAME. AND REMEMBER, SMALL CHANGES NOW GROW INTO BIG IMPACTS OVER THE YEARS. THIS WILL AFFECT YOU PERSONALLY FOR THE REST OF YOUR LIFE. IT IS WORTH A FEW MINUTES TO WRITE YOUR SENATOR AND REPRESENTATIVE AND LET THEM KNOW HOW THEY CAN BEST REPRESENT YOU.

This won't get done without you. Only you can make this happen.

Dear Senator ...:

There appears to be several initiatives this year designed to change our retirement system and the oversight of our health insurance system (S531, H3568 and H3066). These two systems have served government employees at all levels of government quite well for many many years. These systems are not broken, we do not have a crisis and any needed changes should be deliberately made with the aid of competent professional assistance. Frankly, I am fed up with politicians who seek to sidestep the real issues and scapegoat public employees and their benefits as the problem.

State employees and retirees highly value our current defined benefit retirement plan. Especially important to us are cost of living adjustments which make the difference between living a retirement with dignity and living one in poverty. Shifting to a defined contribution plan would be a great disservice to government employees who have never pretended to be investment specialists.

We know that some changes to benefits and contributions must be made from time to time to maintain a strong system. We are prepared for that. But that does not mean throwing the baby out with the bathwater. Given the current unrest, ask yourself, “what competent young person would come to work for government in this environment?” In this, as in all things, you get what you pay for.

I ask that you please safeguard our interests in our retirement and health plans and resist the temptation to change them so much that we will all regret the outcome. Several other states that have done this are now trying to go back. Look at the West Virginia experience. We must learn from the errors of others.

Thank you for your kind attention to these matters.

Yours truly,
Sam Griswold