Curtis Loftis: On Keeping Promises
By Curtis Loftis || 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 a significant set of promises called the State Retirement Systems. Those promises are important not just to teachers, police officers, clerks and accountants but to all taxpayers of our state, as we are all ultimately responsible for the costs associated with the systems.
Indications are that at its June 14 meeting, the S.C. Budget and Control Board will, for the third time this year, defer taking a vote to officially commit the state to making its required $89 million contribution to the system for fiscal year 2012-13. A majority of the members cite 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 saying, “I will let you know later whether I feel I should make my mortgage payment.” 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 Government Accounting Standards Board 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. S.C. retirees and public service employees deserve this assurance, and taxpayers deserve this stewardship.
Twice a year, the treasurer goes to New York to visit 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 credit rating will be imperiled by the failure to make this required payment. One agency already has 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 AAA rating allows us 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. And it keeps the bar high for the standards of management and discipline that 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 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.