THERE WAS a time, just a decade ago, when one of the five people deciding how to invest South Carolina’s $29 billion pension fund was using cocaine.
Remember that the next time the current state treasurer complains about how those nasty legislators are trying to kick him off the state Retirement System Investment Commission.
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A lot of people think the Legislature gave the treasurer a seat on the investment commission in order to protect the public. In truth, the Legislature allowed the treasurer to serve on the commission in spite of the public interest.
This story begins long before Curtis Loftis was elected as South Carolina’s treasurer. And it revolves around a previous treasurer (not the one on cocaine) who was similarly determined to maintain a far more important role for the treasurer than ever made any sense.
South Carolina didn’t allow pension funds to be invested in the stock market until 1998, and then there were strict limits on how much could be invested and how. Each member of the Budget and Control Board — the governor, treasurer, comptroller general and chairmen of the House and Senate budget committees — appointed a member of an investment panel, which recommended how to invest the money. But the final decision was up to the board.
Then in 2005, the Legislature decided to let the state invest more of the pension fund in the stock market, and to include overseas investments. Since this required more expertise, lawmakers wanted to make sure the people making the decisions knew what they were doing. So they planned to replace the politicians with investment professionals — still chosen by those same five politicians, but not the politicians. Essentially, the investment panel would now have final say.
There was just one problem: Treasurer Grady Patterson. Mr. Patterson had been defeated in 1994 by Richard Eckstrom, who was instrumental in getting South Carolina into the stock market. When Mr. Patterson defeated Mr. Eckstrom four years later, he was no fan of the new investment plan. And even seven years after that, he wasn’t about to give up his direct role in directing state investment policy. (The treasurer invested all the state’s money when our only option was bonds.)
So he hounded the Legislature to let him serve on that professional panel, instead of merely appointing a member. The result was that while the other four commissioners must have at least 10 years of experience in the investment industry, and no business dealings with the state, the treasurer gets an automatic seat, whether he’s an investment expert or an exterminator.
I never thought Mr. Patterson should have been granted that special exception. And to be clear, it was not granted out of any belief that we needed to make sure that the state treasurer served on the investment panel. Like so many bad decisions in this state, it was entirely personal. It was specific to Mr. Patterson — made by legislators who held him in high esteem and by legislators who just wanted to stop hearing about it.
The next year, Mr. Patterson was defeated by someone with a taste for cocaine. Read that again, because we have short and selective memories about our own bad choices. (And I admit, I endorsed the cocaine aficionado.)
Thomas Ravenel — who served as state treasurer and so as one of five members of the state Retirement System Investment Commission until he was indicted on federal drug charges just six months into his term — insisted at his guilty plea that using cocaine every couple of weeks for two years did not make him an addict. Which is what you’d expect someone like that to say.
Now, you can say we just ended up with someone with a cocaine habit deciding how to invest billions of dollars in state retirees’ money because the voters made a bad decision, and I agree. But that’s the point.
When commissioners are appointed, there is a way to remove, say, a cocaine user, without a federal indictment. There’s also a way to remove commissioners who use their position to benefit their friends, or their business associates, or themselves.
With an elected official, you can’t do that unless he gets indicted, which is a more difficult thing to accomplish.
Curtis Loftis raised alarms about the pension system’s investment strategy before most people were paying attention, and that was useful. But he has felt compelled to augment his warnings with innuendo that impugned the integrity of anyone who disagreed with him about investment policy and, frankly, made it difficult for serious people to take him seriously.
Are lawmakers again talking about demoting the treasurer to the same status as the governor, comptroller general and two budget chairmen because they’re tired of all that? Perhaps. Ditto eliminating his dual role as custodian of the pension funds and the person who selects the custodial bank — another bizarre legacy of the Patterson era.
But these are all just Good Government 101 changes to correct bad laws that never should have been passed. Mr. Loftis’ position as treasurer simply might make lawmakers more willing to finally act.
Ms. Scoppe writes editorials and columns for The State. Reach her at email@example.com or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.