Years of ill-timed investments and a refusal to abandon questionable strategies have left South Carolina’s government pension plans on the ropes, with a massive funding gap that threatens promised benefits to future retirees.
The above quote from The Post and Courier is fascinating for two reasons. The first is the dire consequences it reveals as a result of South Carolina legislative incompetence. The second is that it isn’t news.
After years of neglect and near-criminal management practices, South Carolina’s pension system in billions of dollars in arrears.”The plans serve roughly one out of nine state residents, and the shortfall — $24.1 billion — is more than triple the Palmetto State’s annual budget.” reports the Post and Courier. “That’s left lawmakers and the state’s investment managers scrambling for a fix, as the burden grows for workers and taxpayers.“
State Treasurer Curtis Loftis was elected to office in a landslide following the Thomas Ravenel scandal and the Converse Chellis debacle. Soon, Loftis started sounding the alarms on the fragility of South Carolina state pensions. Fragile because of cronyism and mismanagement.
A 2012 New York Times article notes “Mr. Loftis decided to take a closer look at the fees charged by just one of the state’s dozens of outside fund managers. The examination reduced the state’s fees by $18.1 million, Mr. Loftis said. He added that the fund manager called the difference a ‘reporting error.’”
“South Carolina,” former Governor Mark Sanford was quoted in the article, “is the dumb investment state.”
Loftis continued to fight against exorbitant fees, poor management practices and a culture of secrecy by the South Carolina Retirement System Investment Commission (RSIC). In 2013, the tension between the Treasurer and RSIC COO Darry Oliver became so intense, Oliver resigned. But things did not sweeten. Loftis was attacked, investigated, “censured”and smeared by powers in state government in efforts to not just quieten him, but bury their own malfeasance. And the media ignored him. A campaign to mediate and discourage Loftis was ignited.
It didn’t work.
An article on governing.com recognized something Loftis’ detractors did not; “The last thing you want to tell Curtis Loftis is that he can’t do something.“
So, where, or who, is the speed bump?
But, as with most everything in South Carolina’s legislature – particularly everything that malfunctions – the boomerang loops back to Sen. Hugh Leatherman. The 85 year old
Leatherman is the single most powerful person in the state because he is Chairman of the Senate Finance Committee, sits on the state’s Budget and Control Board and is President Pro Tempore of the South Carolina Senate. He makes critical appointments to committes and controls assignments and money flow. Leatherman has been in the state senate for 35 years.
Leatherman’s front man is Sen. Kevin Bryant (R-3rd). Bryant sits on the Leatherman-controlled Finance Committer and was once the chair of the Senate Committee on Pension Investments. Earlier this year, with media scrutiny growing, the legislature created the Joint Committee on Pension Systems Review, tasked with identifying the cause and proposing a solution. Sen. Bryant is the chair of the JCPSR.
“Joint Committee” is just another way of saying “legislative ambien.” The pension system is practically bankrupt, yet there has been no deep-dive investigation into RSIC practices nor has there been what Loftis has called for – a “forensic audit” despite the Treasurer’s repeated demands.
Neglect: For years, the pension caretakers merely let the account manager do what he wanted and paid him an obscene amount of money to benefit hedge fund managers.
Incompetence: There just have not been enough people in the government system that understand the high-stakes vagaries of billion-dollar investing. That has led to a circling back to “Neglect.”
Cover-up: With the severity of the problem now being revealed, the powers (Leatherman) are trying to obscure their negligence. The pensioners that are going to be screwed by the funding shortfall are voters. When the fecal matter hits the ventilation system, the Tea Party upheaval of 2010 will look like a Hillary Clinton victory party.
Gas Tax: Yep… gas tax. Hugh Leatherman wants to raise the state’s gas tax so he will have even more money to swim in. Even if that money is lawfully-designated for roads, Leatherman will control which roads, when and how they will be accommodated. A new four-lane road to favor a particular donor or other crony. Allocating funds to improve a roadway as a means to increase property values for those so blessed – by Hugh Leatherman. And on, and on… BUT, if the state’s other, more impending crisis, the state pension fund, is to be repaired, it will mean a tax increase. Two tax increases would be politically deadly and pension funding is money Leatherman can’t control. So, Leatherman and his mafia can’f afford the Joint Committee to accomplish anything positive, so the pension fix will have to be slow-rolled. The consequences would mean diminished pension payments to retirees.
Loftis has made slow, but sure progress in trying to rescue the state’s pension fund from the wolves on Wall Street and the cannibals on Gervais. The Post and Courier article is evidence that the very dangerous issue of pension shortfalls is at least getting sunlight and giving partnership to Curtis Loftis’ long and lonely battle. Even the current RSIC CEO, Michael Hitchcock, has recognized Loftis’ efforts in “pushing the rock up the hill” by trying to expose the exorbitant fees South Carolina has paid and increasing transparency in the pension system process.
Will Henry McMaster’s ascent to the Governor’s Office improve things? Hardly. McMaster is Leatherman’s Maxi-Me. With Governor McMaster, the Senator’s power will absorb that office as well.