Oversight of the state’s pension system is teetering on dysfunction, hobbled by a feud between state Treasurer Curtis Loftis and other members of the S.C. Retirement Investment Commission that has raised questions about how and by whom the $25 billion fund should be overseen.
The vice chairman of the five-member S.C. Retirement Investment Commission called Friday for Loftis to be removed from the panel. However, the commission’s chairman called for everyone to stop and “breathe deep” in the name of saving the public’s confidence in the retirement system.
Meanwhile, the state’s 500,000 employees and retirees, who had expected their deeply indebted pension to be the topic of legislative scrutiny this year, watch their leaders fight.
“It seems like a big morass to me,” said Sam Griswold, spokesman for the State Retirees Association of South Carolina, whose members depend on the system for their retirement. “You like to think you’ve got a team that works in tandem when they are investing your resources.”
Earlier this week, Loftis said the retirement fund’s nontraditional investments put the state’s employees and taxpayers at “excessive risk,” threatening to sue the commission that he is a member of and hinting at possible wrongdoing by the fund’s former chief investment officer.
That prompted a state senator to call for a SLED investigation.
Just hours later, news leaked that SLED, in fact, was investigating and had been for weeks – but it is investigating allegations of a “pay-for-play” scheme that centers on Loftis and a friend, Charleston businessman Mallory Factor. Both have denied any wrongdoing.
Asked Friday if the investment commission was dysfunctional, panel chairman Allen Gillespie said: “It’s hard to say.”
“Does it create a stressful environment for people? I think probably so,” Gillespie said. “But I haven’t seen anything that, with some effort, can’t be overcome.”
Loftis’ tense relationship with the commission dates back to last summer, when it challenged his authority to hire the commission’s law firm. Later, Loftis caused a dust-up by killing a $65,000 bonus for Bob Borden, then the fund’s chief investment officer. Loftis repeatedly has said he has asked the commission for Borden’s travel schedule and expense report but has yet to receive the information, threatening to sue.
All of that led up to a state Senate hearing Tuesday, where Loftis went head-to-head against Reynolds Williams, the commission’s vice chairman.
Williams said Friday that Loftis “appears to act as if he is at odds with the commission” and advocated for his removal from the board.
“There should not be a politician on the commission,” said Williams, who, like everyone else on the commission except Loftis, is appointed by a politician. “Politicians have political obligations that commissioners ought not to have. Politicians are answerable to the voters, supporters and to their parties. We should be answerable only to our fiduciary obligations.”
Through a spokesman, Loftis declined to be interviewed for this story. But he has reveled in the criticism as proving his Tea Party bona fides.
Loftis told the Senate hearing Tuesday that the retirement fund was paying too much in fees to Wall Street investment firms. After SLED’s investigation came to light Wednesday, Loftis dismissed it as the work of South Carolina’s “good ol’ boys.”
“They are going to fight transparency and accountability,” he said. “Twenty-six billion dollars is a lot of money. I mean the average person, me included, can’t imagine how much money that is. A lot of people want their share of it. I will not stop. I work for the people of this state. I don’t work for the elites in Columbia and New York.”
State Sen. Thomas Alexander, R-Oconee, a co-chairman of the Senate panel that Loftis spoke to Tuesday, said of the investment commission, “Obviously, there is something going on there.”
“We’ve got to have a commission that can function,” he added.
Gillespie, the commission’s chairman, agrees. He said Friday that he plans to “remind everybody of their duty and who they serve” at the commission’s next board meeting.
Tension on the commission is to be expected, given the increased importance of state pension systems nationwide, according to Michael Bird, federal affairs counsel for the National Conference of State Legislatures.
A struggling economy, combined with state budget cuts and an aging public workforce have lead to multi-billion dollar deficits at state pension systems nationwide. South Carolina’s fund has a $13 billion deficit – so large that lawmakers have made pension reform a priority for this legislative session.
“In my almost 40 years of doing legislative work, (state pensions) have never been at this level of importance,” Bird said. “Right now, in most states, it is challenging Medicaid for the top issue.”