Gov. Sanford today renewed his call to state citizens to urge government officials to formulate creative means of addressing one of the most serious problems faced by South Carolina in the coming years - the State Retirement System's $12 billion unfunded liability, which makes up more than half of the state's $21 billion debt owed by future generations.
"Just this week 54 million Americans on Social Security were told that the federal government would not be giving them a cost-of-living increase for the second-straight year, marking the first time this has happened in a generation," Gov. Sanford said. "This comes on the heels of news that Social Security is already paying out more money than it's taking in, and may be completely insolvent in 25 years. Yet this fiscal nightmare is not confined to the federal government, as states and cities now harbor more than $3.5 trillion in unfunded pension liabilities - promises made but not paid for in capitals across this nation.
"South Carolina is facing the same nightmare scenario. In 1999, our state's Retirement System (SCRS) was underfunded by just $177 million, meaning that state employees' pensions were basically assured and the system was almost fully funded. Since then, SCRS's unfunded liability has grown on average by more than a billion dollars every year - totaling $12 billion today. More so, the SCRS is now funded at less than 70 percent, which would violate federal law were it in the private sector. Add to this the roughly $10 billion in health care related liabilities, and South Carolina taxpayers and their children are on the hook for more than $21 billion.
"Some experts - including Northwestern University finance authority Dr. Joshua Rauh - believe this $21 billion estimate is far too low, and instead argue that South Carolina's unfunded liabilities could be twice that, or more. Indeed, it's possible that the SCRS's ability to pay out full benefits to state retirees could be compromised over just the next ten years. And perhaps most frightening is the fact that, as of today, there is no feasible plan to pay down these debts, and no plan to ensure that state employees get their full pension checks when they retire in the years and decades to come.
"Other states and countries around the globe have dealt with similar liabilities by making difficult, but necessary, choices. States like Nebraska, California and New Hampshire have increased employee contributions; Colorado and New Jersey, among others, have looked at limiting or eliminating Cost-of-Living Adjustments; several states - but not yet South Carolina - have lowered their investment return assumptions from a lofty eight percent to a more realistic level; states have also increased the number of years of service required before retirement; and Rhode Island as well as nations like France and England are considering raising the retirement age for government workers. All these options must be laid on the table if we're to seriously tackle the issue of unfunded liabilities - and I'd urge all concerned citizens to join in the discussion at next week's Retirement System Roundtable, and urge their respective state legislators to come up with creative means of addressing this issue as we approach the 2011 legislative session."
The Retirement System Roundtable will be held at 10:00 a.m. on Wednesday, October 20, 2010, in Room 252 of the Edgar Brown Building on the Statehouse grounds in Columbia. Speakers, expert panelists and invitees include: State Senators Greg Ryberg and Phil Leventis; State Representatives Tom Young and Jim Battle; Treasurer-elect Curtis Loftis; Peggy Boykin, Executive Director of the South Carolina Retirement Systems; Robert Borden, Chief Executive Officer of the South Carolina Retirement System Investment Commission; Dr. Joshua Rauh, Associate Professor of Finance at the Kellogg School of Management, Northwestern University; Wayne Bell, President of the State Retirees Association; and retirees and taxpayers from across South Carolina, among others.
All interested South Carolinians, including state retirees, community leaders, legislators, stakeholders and members of the media are invited to attend. Please call or email Leigh LeMoine (803-734-0067; firstname.lastname@example.org) with any questions and to confirm your attendance.