Inside SC’s “Pension-gate”
S.C. Retirement Systems executive director Peggy Boykin was terminated for her opposition to a controversial investment scheme that would have funneled state investments into a new “private company” with no transparency or accountability, sources tell FITS.
Meanwhile, the appointment of Boykin’s replacement – retired CPA William Blume – suggests that a deal has been struck between S.C. Gov. Nikki Haley and powerful Senate Finance Chairman Hugh Leatherman regarding this controversial plan.
Boykin’s termination – announced last week by S.C. Budget and Control Board (B&CB) executive director Eleanor Kitzman – has unleashed a torrent of heated exchanges among the state’s political leaders.
But what’s the story behind the story? Specifically – what did Boykin’s termination have to do with an ill-conceived pension fund takeover that was rejected several months ago by a more “liberal” version of the Budget and Control Board?
Masterminded by the state’s high-rolling investment czar Robert L. “Bob” Borden, FITS broke the story of this proposed pension fund takeover last fall. After the mainstream media picked up on it, the rats started scurrying from the idea. Eventually, the S.C. Budget and Control Board (B&CB) put the kibosh on the idea … although Borden and his fellow schemers at the S.C. Retirement System Investment Commission (RSIC) have reportedly been plotting other ways to get their hands on these investments.
In fact, as we exclusively reported earlier this month, state lawmakers have proposed giving Borden an extra $5.5 million this year – on top of the $5.8 million his agency already receives. This new money – slated to come from the mysterious “other funds” section of the state budget – will go exclusively toward hiring, we’re told. It will also ensure that Borden continues to roll like a rock star.
Borden’s original plan was for state government to create a new investment corporation that would manage up to $9 billion in retirement assets – including investments in South Carolina companies.
The new company – dubbed “NewCo” – would have employed 50 people and operated on an annual budget of $29 million, which ostensibly would have been paid for out of “savings” in investment fees. “NewCo” would have managed up to $6 billion in retirement assets almost immediately – while eventually managing up to $8.7 billion of the state’s $25 billion pension fund.
Needless to say, the creation of this new entity was fraught with all sorts of ethical problems – most notably a complete lack of transparency and accountability at any step of the process. Basically, public employees’ savings would have been spent/ invested under the plan without their input … and with no oversight from either the legislative or executive branches of government.
Sources tell FITS that Boykin opposed this scheme – or any iteration of it.
So do we.
Decisions regarding these investments should be left to the shareholders – i.e. the state employees whose money is being invested. They should have an up-or-down vote regarding any changes to the current model, or better yet they should be given the option of investing this money on their own.
Obviously we have no problem with the administrators of the state pension fund seeking alternative investment models aimed at maximizing its rate of return. However, those investment decisions must be approved by the people who’s money is being invested – and they must be made exclusively with profit in mind, not politics. Speaking of, since when did “South Carolina companies” (or companies that would “relocate their facilities” to the state) constitute the best possible investment of the equity portion of this fund?
It’s not difficult to see how the “S.C. investment” portion of the proposed pension fund takeover could open the door to a whole new world of backroom favor-trading at the S.C. State House – dramatically expanding government’s ability to pick winners and losers in the marketplace while subjecting the pension fund to investments that may not necessarily provide the best rate of return.
Is this sort of thing really what Haley stands for? We know that Leatherman is fully supportive of such command economic schemes – but Haley is supposed to be the Tea Party darling, right? She was supposed to “take government back” from precisely this sort of nonsense, wasn’t she?
On a more fundamental level, regardless of how the pension fund is invested state government needs to stop doling out such lavish benefits to taxpayer-funded employees as this practice is clearly no longer sustainable.
In fact, we’ve outlined several specific reforms aimed at doing that – switching South Carolina’s retirement fund to a “defined contribution” system, moving the retirement window back to thirty years and doing away with the costly Teacher and Employee Retention Incentive (TERI) program, which permits “retired” state employees to double dip in new positions while drawing pensions from their old positions.
This stuff is simple, people – or at least it should be.
Government should limit itself to core functions, pay employees a fair salary and reasonable benefits to perform those functions and then manage any assets related to those tasks in such a way as to maximize efficiency.
Sadly our state is failing on all fronts – and it’s beginning to appear as though Haley is part of the problem, not part of the solution.