Curtis Loftis: Plan to fix S.C. pension crisis falls short

March 11--State Treasurer Curtis Loftis said Friday the Legislature's attempts to shore up a more than $24 billion shortfall in the state pension system fall short of what's needed to make it sound.

"This is the single largest issue of our generation," Loftis said at a brunch meeting of the Spartanburg Area Chamber of Commerce. "It may take two to three generations to pay it off."

Loftis said the pension debt has grown by billions of dollars over the past couple decades, much of it due to rising interest payments, costly fund management fees and poorly performing investments.

An estimated 550,000 state and municipal employees and retirees are part of the state retirement system, which has about $28 billion in assets but has an estimated $24 billion shortfall -- larger than the state budget -- to cover all current and future retirees, he said.

State officials have said no current employees or retirees are in danger of losing any earned retirement benefits.

To help shore up the fund, a joint House-Senate pension study committee has proposed raising employer contributions from 11.6 percent to 18.6 percent in the main plan by 2022; lowering the expected rate of return on investments from 7.5 percent to 7 percent or lower; and shortening the period of time that debt is financed from 30 years to 20 years.

A bill known as the Retirement System Funding and Administration Act is making its way through the Legislature.

The State newspaper has reported that roughly 850 taxpayer-supported employers -- including state agencies, school districts, local governments, colleges and hospitals -- would contribute increasingly more through 2023.

Loftis said even with those changes, the pension system will still be underfunded. He said the state is still paying $1.2 billion a year in interest payments on the debt, and it's unclear whether the Legislature will move future employees off the state system and into other retirement plans.

Loftis did not specify what changes he would recommend to the Legislature.

Allen Smith, president and CEO of the chamber, asked Loftis how he would fix the situation.

"This year, stop the bleeding," Loftis responded. "We've got to be more hopeful, more involved. We need more business people (in the Legislature). The General Assembly rank and file doesn't understand what they're doing."

As treasurer, Loftis manages more than $65 billion in public funds, including the pension funds.

Earlier this year, Loftis, who has long railed against the pension system's failings, was removed by a House-Senate panel from the Retirement System Investment Commission. Lawmakers also removed the treasurer as custodian of the retirement system's assets.

Follow Bob Montgomery on Twitter@bmontgomeryshj

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