GOVERNOR MAKES INDIGO STATE COLOR WHILE RETIREMENT SYSTEMS FACES RED
For Immediate Release
May 26, 2008
COLA Bill is a positive financial step for state…while “Indigo’s” financial impact remains uncertain
(Columbia, SC)….It’s extremely unfortunate that the Governor vetoed H.4876, but chose rather to
focus his attention on a decree making the State’s official color indigo.
State Treasurer Converse Chellis said, “H.4876 is a positive financial step forward for South Carolina. The only
explanation I can find for the governor’s veto is that he fails to fully understand the impact of the legislation. His
veto message could not be further from the truth.”
The bill is a comprehensive long-range solution to a major financial problem. Without this legislation, the General Assembly
will have to find additional funds, or raise taxes to pay for a COLA for retirees. The other option would be to not grant
retirees an additional COLA for the first time in 40 years.
Protects the financial stability of the State Retirement System.
Decreases the $9 billion unfunded liability of the Retirement System.
Stops the granting of costly ad hoc COLAs that are unaffordable.
Guarantees retiree’s a 2% COLA without any additional funding.
Protects our State’s Credit Rating by addressing $9 billion in liabilities.
Places severe restrictions on Budget and Control Board’s ability to grant ad hoc COLA’s.
The bill is supported by:
Teachers and the Education Association
SC Sheriff’s Association
SC Troopers Association
SC Chamber of Commerce
State Retiree’s Association
State Employee’s Association
The State Treasurer
The Governor’s appointed interim State Treasurer Ken Wingate
The State Comptroller General
State Budget and Control Board
State Financial Experts
The bill accomplishes two very important purposes. First, as recommended by the COLA Task Force,
the bill imposes severe restriction’s on the Budget and Control Board’s ability to grant ad hoc COLA’s.
The Retirement System currently has a $9 billion liability and despite the fact that investments have
grown an average of 10% annually over the past 25 years, the unfunded liability has continued to increase
largely in part to granting ad hoc COLA’s. In this bill, the B&C Board cannot grant an ad hoc COLA until the
amortization period is at or below 25 years, AND the amortization period will still be reduced one year after
the granting of any ad hoc COLA , AND that the funded ratio has to improve. Vetoing these restrictions is
not fiscally responsible.
Secondly, the bill allows for an additional guaranteed COLA ONLY IF the B&C Board believes it can increase
the assumed rate of return on investments to 8%. If the Board raises the assumption and then lowers it,
the additional one percent COLA is suspended. These restrictions ensure that future ad hoc COLA’s are affordable
,therefore nothing could be more responsible.
This bill gives retirees an opportunity to receive additional COLAs as funding permits and imposes
strict financial requirements for doing so. Nothing the Governor’s Office has said or proposed meets
the same criteria.
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