Governor: Retirement Bill, Corrections Deficit
Show Need for Fiscal Responsibility

GOVERNOR SAYS ISSUES SHOW MORE FINANCIAL RECKLESSNESS

Columbia, S.C. - May 13, 2008 - Governor Mark Sanford today highlighted two issues that point to fundamental flaws in our state’s spending practices, and urged people to make their voices heard on the budget as it heads into its final stages.

“We’re heading into the final stretch on the budget, and now is the time for people to speak up if we’re going to impact this practice of borrowing from Peter to pay Paul,” Gov. Sanford said. “Whether it’s with the Department of Corrections’ deficits or with passing on the cost of retirement raises to future generations, today there have been two unfortunate examples of poor budgeting practices - failure to set priorities, and passing on unpaid for political promises for another group of people to deal with.”

This morning, the Department of Corrections requested approval for up to a $4.3 million deficit - a move needed because lawmakers have failed to adequately fund the agency. The agency has repeatedly warned lawmakers about their financial situation, but was told to run deficits rather than getting more funding. Instead of addressing these needs, the Senate budget leaves untouched an $18.5 million pet project fund and spends $20.5 million to create “mini farmers markets” around the state. To its credit, the House has already proposed eliminating and re-allocating $10 million from the Competitive Grants program and $14.5 million from the mini-markets.

Meanwhile, the House approved changes to the state’s retirement system that promote a false image of stability when it comes to the woefully under funded system, while at the same time adding $2.6 billion to the state’s long-term retirement debt. The bill seeks to 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. In fact, the new assumed 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.  When all retirement benefits are figured in, South Carolina’s retirement system is under funded by $20 billion - and when traditionally granted cost of living adjustments are included, it jumps to $27 billion. This problem is compounded by the Senate’s taking of money that was meant to address this liability in an effort to balance this year’s budget.