South Carolina Treasurer Curtis Loftis was critical of recommendations made by the legislative Joint Committee on Pension Systems Review. The 12-member House and Senate panel was tasked with shoring up the state pension system’s estimated $25 Billion in long-term debt.
The pension review panel recommended removing Loftis from the 7-member Retirement System Investment Commission board and transferring custodial control of the $29 Billion in state retirement assets from the Treasurer’s Office to the Public Employee Benefit Authority (PEBA) and the Retirement Systems Investment Commission, which makes investment decisions for the funds.
Loftis has been warning about pension fund shortfalls since he took office in 2011. He notes that the management fees paid out by the fund have risen from $22 Million in 2005 to $468 Million in 2014. Loftis has also pointed out that the South Carolina pension fund’s return on investment has performed near the bottom among other states for more than a decade. The fund operates under the assumption of annual 7.5% asset growth but consistently falls below that target.
Loftis released a statement in which he said, “I have opposed the inefficient and money-losing pension system at every turn, but that work has been ignored. Now, the (legislative) committee has entrusted the sole oversight of the pension system to the very agencies which have placed $25 Billion in debt on the backs of the hard-working taxpayers and state and local public service employees.”
The pension fund is paid for by a 9.1% payroll deduction from state and local government employees, including school district staff, and a 12.1% matching contribution by the government employers. In recent years, the system has paid out more than $1 Billion dollars in benefits than it has collected in payroll contributions. The pension fund has also had a poor return on investment by taking bad risks on hedge funds and real estate. The Standard & Poors 500 stock index, by contrast, has enjoyed an average annual return on investment of more than 14% during the past 5 years.
The recommendations of the legislative pension review panel will have to be approved by the full House and Senate and be signed by the Governor to take effect.