Loftis says bill weakens oversight of pension fund
March 23, 2015
COLUMBIA – State Treasurer Curtis Loftis is campaigning against a bill that would make changes in the agency responsible for investing the state's $30 billion pension fund, charging the legislation weakens public oversight of the fund.
Loftis has written letters to lawmakers and taken to Facebook to argue that the bill would place the "fox in the henhouse."
But Sen. Kevin Bryant, an Anderson Republican and a co-sponsor of the bill, told The Greenville News the legislation offers more oversight, not less, and he is not aware of opposition to the bill from other senators.
He said the bill's many changes, which include expanding the board of the state Retirement System Investment Commission to include a state employee and a retiree, were all recommended in a performance audit of the agency.
"They found this is more in line with how other public pension funds operate," he said.
But Loftis, who sits on the commission and has frequently been at odds with board members in his push for more transparency and controls at the agency, argues the legislation would weaken the checks and balances currently in place.
"This bill allows the commission to backslide, right back to control of unelected bureaucrats and special interests," he told The News. "And I'm going to fight it all the way."
One of Loftis' complaints is that the bill transfers the authority to be custodian of the retirement system's assets from the treasurer to the commission and allows the commission to select the custodial bank.
Currently, the state treasurer is custodian of state funds and has the authority to select custodian services without approval from the commission.
In 2013, Loftis' office announced settlement of a state lawsuit against Bank of New York Mellon and a new 10-year custodial contract with the bank. The $34 million settlement was questioned by commission members at the time, who were not involved in the deal or picking the bank for a new contract.
In a letter to lawmakers earlier this month, Loftis argues it would be a mistake to grant custody of the pension funds to the commission and the retirement system, called the Public Employee Benefit Authority, because both have an inherent self-interest in the money.
"The same people who invest the funds, monitor the investments, report on the investments, and make bonuses and high salaries deriving from the investments will be the sole source for virtually all of the information to the public," he wrote.
The legislation grew out of a 301-page report by Funston Advisory Services with 120 recommendations to improve the investment commission.
The report found no wrongdoing but plenty of needed improvements, including what it described then as a "dysfunctional" relationship between Loftis and the board.
Loftis has repeatedly criticized the commission over the years for what he has described as underperformance of the pension plan when compared to peer public plans in the nation, as well as for the bonuses paid some commission employees.
The Funston report recommended the commission create the post of executive director, expand the board, set term limits for commissioners and that board members have diverse backgrounds. It also recommended placing custody of the fund in the commission after noting that there are at least five state entities that exercise some fiduciary authority over the state's five pension plans.
The bill includes all those changes.
A previous version of thel bill exempted the investment commission from procurement and budget rules but those provisions were removed while the bill was before a Senate subcommittee after some senators said such exemptions gave them "heartburn," Bryant said. The subcommittee approved the legislation unanimously, he said.
Bryant said the South Carolina Retirees Association also supports the bill.
Carlton Washington, the executive director of the State Employees Association, said the group has watched the bill and is pleased the bill would allow a state employee to sit on the commission. He said the group has not taken any stance on the issues Loftis has raised.