Treasurer Loftis Editorial: Keeping Our Promises
June 2, 2011
South Carolina honors our public service employees who work hard, play by the rules, and retire. We make promises and as honorable people we keep them. We create, through law and custom, systems by which our citizens order and organize their lives.
Nearly half a million public service employees and retirees (and their families) have structured their lives around one significant set of promises called the SC State Retirement Systems. Those promises are important not just to teachers and police officers, clerks and accountants, but to all tax payers of our state as we are all ultimately responsible for the costs associated with the systems.
Indications are that the Budget and Control Board will, for the third time this year, defer taking substantive action on the state’s annual required contribution to the system, amounting to $89 million dollars. A majority of the members cite as reasons for this inaction a Senate subcommittee’s study of the retirement system and a pending independent review of the work of the former actuary. While I understand their concerns, I believe that further delaying the recognition of this obligation is a strategic mistake, sends a wrong signal to the credit rating agencies, and is an indication of the relaxation of the decades-long policy of the Budget and Control Board to promptly respond as circumstances such as this dictate.
The action suggested by some is akin to going to your financial institution and telling them “I am not going to make my mortgage payment, but I will let you know later if I feel I should.” It is simply not a good idea.
The Budget and Control Board has a duty to the members of the system and taxpayers to promptly meet these obligations so that they do not accumulate and become unmanageable over time. That is why I am pressing the other members of the Budget and Control Board to commit to the annual required contribution necessary to maintain our system’s conformity with Governmental Accounting Standards Board (GASB) accounting standards. By making this commitment, which will not affect our finances until July 1 of 2012, we make clear our intentions to keep the system fiscally sound. South Carolina retirees and public service employees deserve this assurance, and taxpayers deserve this stewardship.
Twice a year the Treasurer goes to New York to visit South Carolina’s rating agencies, investment bankers and other financial partners. The discussions are part and parcel of the Treasurer’s responsibilities as custodian of the state’s funds and trustee of the retirement system. I made that trip last week and it was very clear to me that our prestigious AAA rating will be imperiled by the failure to make this required payment. One agency has already included that written warning in its report. It is impossible to put into words how important it is that we protect the excellent ratings that our state enjoys.
Our state’s coveted AAA rating means that we are able to access capital at the lowest rates available and is a distinction that only a small number of states can claim. Not only does it save the state money, it also provides trickle-down benefits to cities, counties, school districts and other governmental units, and increases our credibility in the marketplace. It also keeps the bar high for the standards of management and discipline we must apply to our financial affairs to maintain and defend it.
There are many ways to look at this problem and reasonable people can disagree reasonably. It is my position that we live in a time of great economic uncertainty. Why now must we add to the uncertainty of our public service employees, retirees and taxpayers at large? We simply must commit to making the annual required contribution to the retirement system and we must do so now.