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May 27, 2008

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.

The bill:

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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