Comptroller General Eckstrom’s remarks on pension crisis

Tuesday, September 27, 2016 10:00AM
Joint Committee on Pension Systems Review
Remarks from the Comptroller General: CHRMN: We’re going to open it up with the Comptroller General. Thank you for being here.   ECKSTROM: Thank you very much. I can’t think of an issue that is more urgently in need of attention and resolution. Now, I am going to be totally candid with you all this morning. If I say anything that offends any of you, I apologize for that upfront, that’s not my intention. I regard each of you as my friends. But I do think that we need to be very frank about the state of the retirement system and how we got to where we are. Our roles differ a pretty good bit and because of that I think that we can look at similar events and reach vastly different conclusions‐‐that’s only natural. A hotel owner might look at a gathering rain storm and frown because it’s going to impact his occupancy, while the groundskeeper can look at that same rain shower and smile because of the impact it will have on the grounds and the plants that he’s responsible for. Two events, two people, two different responsibilities, two entirely different responses. That’s natural. You may ask, “What does this young whipper‐snapper know about the retirement system, about actuarial accounting?” I want to assure you that I’m not young; in fact, I attended my 50th high school reunion this summer. People had changed a whole lot in 50 years. Just think about how people can change‐‐I had hair 50 years ago, believe it or not. Representative Stringer probably did, too‐‐except, he wasn’t born then, but he would have. I ran into one of my best friends in high school and I couldn’t believe it. This guy was the jock, he lettered in three sports‐‐ agile, trim, fit, and healthy, and the girl cheerleaders swooned over him. He was “the guy.” 50 years later, he shows up and I hardly recognize the guy. He had moved on, moved out West and married someone he met in school, they moved west. I hadn’t seen this guy in decades. He had gained 100 pounds and was having these serious health problems because of that. I asked him, “How could that have happened?” You know what he told me? He said, “It all happened so slowly, I didn’t even realize it. I finally came‐to when my doctor diagnosed some really serious health problems. But it all happened in bits‐‐a pound here, and a pound there. There was never a year when I gained a lot of weight. It was just a problem that occurred incrementally over time.”

I wonder if you all recognize that that is kind of the situation we have on our hands with the retirement system. You all have, in the material I provided, a table‐‐and I know that the table is very, very busy‐‐it goes back to 1997 and comes forward to 2015. We’re waiting for the 2016 actuarial evaluations. But it shows that in 1997 we were in pretty good shape. In 1999 in fact the state had an unfunded liability of about $200M. The actuaries were projecting based on contribution rates it would take about 2 years to liquidate that unfunded liability. The charts that follow that table, the first one shows that the unfunded liability grew dramatically, and those are the green columns. It grew from almost nothing in 1999 to about $16.8B in 2015, and that our amortization period for liquidating that liability has, well our funding percentage, rather, the percentage that we’ve funded into the system to cover the liability has dropped from nearly 100% in 1999 to just over 60% today; meaning, that of the dollars that are supposed to be there, or, for every $10 that we should have in the system, we have only $6, [meaning] $4 of the $10 are missing and need to be replaced. They’re missing because they were never put in. How could that be? Well, the next chart shows essentially the same thing. It shows the percentage that the plan is funded but compares it to the liability amortization period and it shows that it’ll take us 30 years to amortize the existing liability, if we’re lucky. We’re right at that point where the actuaries tell us, and the accounting standards tell us, our plan is actuarially unsound if we breach that 30 year amortization period. And we’ve been there essentially since about 2004. The next slide shows some of the factors that have contributed to the system’s underfunding, some of the factors that have built up this unfunded actuarially‐determined liability. Now that’s a really fancy term, “unfunded actuarially accrued liability.” That’s a term that we don’t use in everyday life so I’ll give you a term or two to substitute for it.  You could replace that term “unfunded actuarially accrued liability” with the term “deficit.” Or if you have any questions over what a deficit is, you can use the four letter term “debt.” You might say “But that’s the retirement system’s debt.” Not really, that’s state debt. That’s debt that the state has an obligation to make up. It’s debt that the state has an obligation to liquidate. It is money that the state has an obligation to pay into the system, has to put into the plan. Now you might ask, “What’s the problem here?” Let me tell you upfront not to jump to the easy conclusion that the RSIC [Retirement System Investment Commission] is the cause of all this problem. That’s an easy horse to kick. It’s an easy entity to point the finger of blame at. Now some of that blame might be justified, but to look at the RSIC as the primary cause of the growth in the unfunded liability just does not square with the facts. There are many other contributors, many other factors that have created that debt, which is the state’s debt.

One of them is the way we oversee, the way we assign responsibility, for the retirement system. It’s one of the most fragmented, patchwork systems of oversight conceivable. If you wanted to design a less effective system of oversight and responsibility, you’d have to try pretty hard. In fact, I don’t know how you could do it. The retirement system itself has a piece of responsibility. PEBA has a piece of responsibility. The Fiscal Accountability Authority, the authority that I’m on, has a piece of that responsibility. And you all in the General Assembly have a piece of that responsibility. No one has total responsibility, no one has total access, no one has the ability to make decisions overall to provide for the absolute needs of the retirement system because we have fragmented this oversight and responsibility. This [assigned oversight] has changed over the years. The Budget and Control Board, the predecessor of the Fiscal Accountability Authority, used to have the ability to control employer contributions, while you all in the General Assembly retained the authority back then to control employee contributions. So there was this bifurcated responsibility back then that didn’t work out all that well. But there have been other changes, especially when PEBA was created by the General Assembly and given the opportunity to set contribution rates [for both employers and employees]. But the General Assembly retained the responsibility to control one of the most critical estimates used in projecting the liabilities of the retirement system‐‐ and that is the critical estimate for the discount rate used to calculate the present value of the future liabilities of the plan. It seems to me that the intention was very clear that the General Assembly did not want others making decisions that could impact annual funding of the retirement plan. But you all have artificially held high the discount rate, the rate that’s used in calculating the liability, and by doing so are understating the liability. I know that’s not been the intention of any of you, but I call it almost “benign neglect” to tolerate that. Those of you who are interested in solving this problem will never get it solved without giving up that responsibility [to PEBA]; because, like the hotelier and the groundskeeper, you all [as the plan’s funders] have a very different outlook [than the plan’s primary overseer] on retirement system decisions. You all are looking at the retirement system on a year‐to‐year basis. You’re making decisions in order to help craft an annual budget and I applaud you for that. I know that that’s something you’ve got to do, to pass an annual balanced budget for the state. But in connection with that, you’ve limited the funding needed by the retirement system which, by the way, has provided you all with the opportunity to free‐up a little funding for projects back in your districts. That’s always required a tradeoff with the retirement system’s funding needs. Really that’s what the supplemental appropriation bill is all about, giving so many of you an opportunity to fund projects in your districts. When, in my mind, the state has this very high priority funding need that’s been largely ignored because it’s been suppressed by the differing views, the annual view as opposed to the long term view. In the long term view that I take as a member of the Fiscal Accountability Authority – looking at the long term health of the plan – it is abundantly clear that the long term health of the plan is in peril, and I don’t know how in looking at the growth of the unfunded liability anyone could escape the conclusion that there’s a trajectory that’s been set that’s damaging the plan, and that the state has really missed the mark in operating it. I know some of you here today have been deniers of that by saying that it’s not a problem. I’m very glad we’re now all on the same page and that we all admit that yes, there is a problem. And the question now is “How are we going to fix it?” We’ve willingly received information, and used information, that just doesn’t seem that reasonable. We’ve received it from our experts. I think that there are times that we’ve driven experts to give us information that’s favorable and user‐friendly to keep the retirement system debt, the unfunded liability, down to a lower level. I’ve seen it happen, I’ve seen the actuaries provide information which results in not what the state wants, and the actuaries reconsider and come back with more favorable information. This “getting by” approach that we’ve taken has gotten us to where we are today. How do we get out of it? I don’t think that we ever will [get out of it] without addressing the oversight problem, without addressing the “who controls what” problem. I think the state has to provide for competent oversight, and give that competent oversight the [necessary] authority to be able to hold it accountable for the system. We’ve had people who have been responsible [to one extent or another], but I think that there’s too much blame to go around to start pointing fingers at any one party, because there’s been a lot of complicity in the very big problem that we have on our hands today. Just think about, years and years from now, when you retire, your grandchildren, maybe your neighbors, asking you, “What did you do to fix the retirement system? We heard the retirement system used to be in trouble, tell us what you did to fix it.” What are you going to be able to tell them? What will you be able to say? We now realize it has to be fixed. The question is “When do we want to fix it, and who will?” You all control that part. Thanks for letting me speak today. We’re all in this together.

Dunktoberfest 10.22.2016 at the Uptown Lounge

2016-10-22-dunkfestI’ve been asked to sit in the dunk booth for a great cause! Saturday, October 22nd at the Uptown Lounge in Anderson. It’ll start at 4:00pm. Ya’ll come!

Duncan’s victory party 11.08.2016 @ Bleckley Inn

Election Day is just around the corner and our campaign team is hard at work preparing for it. Hopefully you’ve seen some of our campaign signs around the district.

I wanted to reach out and let you know about our Election night party taking place at the Bleckley Inn in Anderson from7pm to 10pm on November 8th.

All of our supporters are welcome to attend, but would appreciate it if you’d RSVP so we could get a proper head count. We’ll have plenty of food and refreshments, along with TVs to watch the results come in.

I hope you’ll consider spending Election night with us this year at the Bleckley Inn, and I look forward to hearing from you!

Blessings & Liberty,


Jeff Duncan

Jeff Duncan is from Laurens, South Carolina and serves as the Congressman for the Third Congressional District. Jeff has been recognized as a defender of the Constitution, a fiscal conservative champion, and a protector of family values.  Jeff is married to his high school sweetheart Melody, and they have three sons.

school bus safety week

Counseling available for Townville Thursday 09.29.2016 6pm-8pm


support Jeff Duncan!

Save the Date

ACRP – Jeff Duncan at Oxford Farms
Monday, Oct. 17th
At Oxford Farms
Doors open at 5:30 (event at 6:00)
Featured Speaker: Jeff Duncan
Caterer: Creekside BBQ
Oxford Farms (312 Five Forks Road, Anderson, 29621)

Bluegrass music
More information to come

c4L’s take on Anderson’s hospitality tax hike

The Anderson Independent-Mail is reporting that members of the County Council are feeling the heat about the proposed food and drink tax hike.

In fact, one Councilman who previously supported the tax hike admits he’s now having second thoughts. Your pressure is working.  But the fight is far from over.
While some members are considering changing their positions, County Councilman Ken Waters is digging in his heels — publicly calling our efforts to stop the tax hike “inflammatory” and “misleading.”
That’s why you and I must PACK THE HOUSE when the Anderson County Council meets on September 20 to consider passing the food and drink tax hike.
Can I count on you to be there to voice your opposition to raising taxes?
The details of the September 20 meeting are as follows:

Anderson County Council Meeting
Tuesday, September 20th at 6:30 p.m.
The Historic Courthouse – Council Chambers, 2nd floor
101 South Main Street
Anderson, SC 29624
As you know, the proposed Food and Drink Tax is estimated to cost roughly $350 per household — or $130 per person in the unincorporated areas covered under the current proposal.
Such a massive tax hike would hurt families already struggling to make ends meet, crush local businesses and destroy jobs in the process!
Here are some of the many comments we’ve heard from business owners and Anderson County residents about the devastating impact a food and drink tax hike would have on our community:
“Mom and Pop restaurants are going to find it hard to comply and may face huge fines and jail time if they fail to correctly do so.”
“Local charities are going to feel the pain of this.  They are going to have to pay hospitality tax at their catered events.”Because they are purchasing prepared food for their guests.
“Less people will be eating out and restaurants are going to have to close and lay off their employees.  How will that help the economy?”
And regarding the water slide park the tax will fund, one frustrated tax payer said:
“When have water slides ever helped grow the economy?  It isn’t a year round business and they are never profitable.  The maintenance on those things is unbelievable!”
As you can see, the proposed food and drink tax hike would be a disaster to say the least.
Here’s what you can do to help stop it:

  1. Mark your calendars for the September 20th County Council meeting and do your best to be there and voice your opposition;
  2. If you haven’t yet done so, please sign your “NO! Food and Drink Tax Hike” petition immediately.

    If you’ve already signed your petition, please forward the link to your friends, family members and neighbors in Anderson and ask them to sign their petition as well;

  3. Chip in $10 or more to help offset the cost of this critical program.

    Any amount you can afford at this time is greatly appreciated and will be put to immediate use to stop the food and drink tax hike.

Kevin , thank you in advance for helping fight back against the proposed food and drink tax hike.
I’ll be sure to keep you updated as the fight progresses!
Don’t forget to mark your calendars for September 20th!
In Liberty,

Talbert Black, Jr.
Palmetto Liberty in Anderson

P.S Palmetto Liberty operates solely on the support and generosity of patriots like you.
So after you sign your petition, please chip in a gift of $5 or $10 to help fund these types of critical programs and roll back the tide of big government.

Lake Hartwell Annual Meeting

LHA Logo & Name
Dear LHA Members: 
Please RSVP for the LHA Annual Member Meeting on Saturday, September 24!
Join us to stay current as a Lake Hartwell advocate!
LHA Annual Member Meeting


 a.m. on Saturday, September 24, 2016
Chickasaw Point Clubhouse


* 9:00am  – Doors open
* 9:30 to 11:30am – Meeting & Forum with guest speakers:
– Rob Germann, Chief of Operations, Corps of Engineers District office in Savannah
– Mike Sabaka, South Carolina Dept of Natural Resources
Sandy Campbell, Corps of Engineers Hartwell Project Office
Shoreline Management Plan update
Eric Krueger, Southeast Director for The Nature Conservancy
    Comprehensive drought study update

Directions to Chickasaw Point:

From Exit 1, I-85 take route 11 North for about 3.5 miles. Just past the EXXON Station, across from the Dollar General, turn left onto South Union Road. The entrance to Chickasaw Point will be on the left. The gate attendant will direct you to the Community Center for the meeting. Gate phone is 864-972-3069

Space is limited – RSVP today!
To make a reservation, please reply to this email with: 
     1.  LHA Member Name(s)
     2.  Contact phone number
     3.  Email


We hope to see you there –
For the Sake of the Lake!

Anderson Independent Mail: SC Senate 3

independent.mailMudslinging caps Anderson GOP race between Bryant, Burdette

Voters received fliers in their mailboxes this week attacking both candidates in a high-profile race for the South Carolina Senate District 3 seat.

Sen. Kevin Bryant and former Pendleton Mayor Carole Burdette will meet in the Republican primary on Tuesday. The
winner is not expected to face any opposition in the November general election to represent the district that covers the northern half of Anderson County.

A group called Free Speech Unites went after Bryant in a mailer that says he has “raked in over $15 million for his company doing business with and getting contracts from the state of South Carolina” since he was elected 12 years ago.

“Is it any wonder Kevin Bryant opposed Ethics Reforms that would make this type of personal profiteering while in public office illegal?” states the group’s flier.

Bryant fired back with own flier seeking to discredit the “dirty, dishonest attacks.”

“Anonymous, dark money groups aligned with Kevin’s liberal opponent and the Establishment are using last minute attacks to smear our conservative fighter, Senator Kevin Bryant,” his mailer states.

Bryant, 49, is president of Bryant Pharmacy and Supply on North Main Street in Anderson. His business and other pharmacies in Anderson and throughout the state have nonexclusive contracts with the Medicaid program and the South Carolina Public Employee Benefits Authority.

The state contracts are not particularly profitable, Bryant said in an interview Friday. He said 87 percent of the fees that he receives for Medicaid prescriptions go to drugmakers.

Bryant has voted for ethics bills that would force elected officials to disclose private sources of income and also require independent investigations of complaints against legislators. He opposed a measure calling for groups like Free Speech Unites to identify their contributors, arguing that such a rule would infringe on free speech.

Bryant said he suspects Burdette helped coordinate the delivery of the Free Speech Unites flier.

“If you can’t defend your liberal record, you resort to this,” he said. “If you can’t attack my very conservative record, you resort to this.”

Burdette, 56, denied the charge.

“I didn’t have anything to do with it,” she said. “My goal has been to run a very clean campaign.”

But Burdette said she does have concerns about Bryant’s pharmacy doing business with the state while he is serving as a senator.

She also criticized him Friday for failing to support legislative term limits.
Bryant said he has sponsored a bill that would impose a two-term limit on senators but that the measure failed to pass. He said he is seeking a fourth term because current Senate rules place a priority on seniority.

According to the latest state disclosure reports, Bryant has raised more than $116,000 in campaign cash for his re-election bid. Burdette has received nearly $50,000 in campaign contributions.

In his campaign mailers, Bryant has criticized Burdette for approving tax increases and water-rate hikes and abolishing Pendleton’s police department while serving as the town’s mayor. Besides accusing her of wasting $24,000 in tax money to buy a plastic Christmas tree, he claims that she supports Planned Parenthood, a national group has come under scrutiny for allegedly selling fetal tissue harvested during abortions.

Burdette said she does not support Planned Parenthood.

She expressed pride in her 12-year tenure as Pendleton’s mayor, citing her success in obtaining $13.4 million in grants for public improvements and the paving of 40 streets in the town. She said the decision to have the Anderson County Sheriff’s Office take over law enforcement in Pendleton worked well initially, though town officials subsequently decided to re-establish the Police Department. She also said buying an artificial tree for the town was a wise investment.

“The town of Pendleton was better off when I left,” she said.

Burdette has held leadership positions with the Anderson Area Chamber of Commerce, the Municipal Association of South Carolina and South Carolina Association of Non-Profit Organizations. She has worked to promote child literacy and lessen teen pregnancies.

“I not a talker, I am a walker,” she said.

She said she would be more effective than Bryant in working with other legislators and state officials to tackle problems such as the need to improve South Carolina’s roads.

Bryant said he succeeded this year in building a consensus in the Senate for legislation that would make groups that resettle foreign refugees in South Carolina civilly liable for crimes committed by the refugees. The bill died in the House after winning Senate approval.

But he said he is unwilling to compromise on tax increases and measures that boost the state’s debt. He has opposed efforts to raise the state’s 16-cent per gallon gas tax and he was one of 10 senators who voted against a road-bonding bill that Gov. Nikki Haley signed into law on Wednesday.

Bryant has been endorsed by U.S. Rep. Jeff Duncan while Anderson Mayor Terence Roberts is backing Burdette.

Burdette said her campaign has momentum heading in the GOP primary. She is hoping for support from some Democrats on Tuesday.

“I am encouraging everyone who wants to have a voice to come out and vote in this race,” she said. “I probably will need some people to cross over.”

Follow Kirk Brown on Twitter @KirkBrown_AIM

response to dark attacks