Governor Vetoes Bill that Adds to Retirement Debt

BILL WOULD HAVE ADDED ANOTHER $2.6 BILLION IN DEBT
TO $20 BILLION IN UNPAID FOR RETIREMENT PROMISES

Columbia, S.C. - May 26, 2008 - Governor Mark Sanford today vetoed H.4876, "because having a retirement system that retirees can indeed depend on rests on paying for the promises already on the table, and not wishfully changing a few numbers as the way of growing the system. This veto, at its core, is about bringing fiscal responsibility and stability to the state's woefully underfunded retirement system, and it is my strong hope that those who care about fiscal responsibility will join me in this veto," the governor said.

South Carolina's retirement system is underfunded by roughly $27 billion, when all retirement benefits and traditionally granted cost of living increases are figured in. This represents a $14,000 debt for every South Carolina taxpayer, which lawmakers did nothing to address on a consistent, year-by-year basis.

"The old saying is that when you are in a hole, quit digging," Gov. Sanford wrote in his veto message.

The bill would have added $2.6 billion to the state's long-term retirement debt, and would cover that shortfall by simply changing the state's assumed rate of return on retirement system investments - a smoke-and-mirrors move that does nothing to truly address the debt.

"If fixing our retirement system was as simple as changing a few numbers on a sheet of paper, someone would have figured it out a long time ago," Gov. Sanford said. "But not only does this bill not really solve anything, it makes the problem worse by adding in yet another spending commitment. In the private sector, not being able to cover real debt with real assets would land you in jail. At some point, the legislature is going to have stop making unpaid for political promises to our state retirees -- or our children and grandchildren are going to end up stuck with the bill. Sustaining this veto would be an important step toward that end."

The assumed real rate of return in the bill would be 11 percent higher than the national median for public funds, 33 percent higher than Georgia's retirement system, and 43 percent higher than North Carolina's retirement system.

Gov. Sanford's Veto Message H. 4876 (COLA bill).pdf