Bigger Budget Proposed for S.C. Retirement System Investment Commission

October 3, 2012

Investigative Reports

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Upward trendThe state entity managing the assets of South Carolina’s public retirement system wants to grow its authorized staff by more than a third under a proposed budget for next fiscal year that is nearly 40 percent higher than this year’s spending plan.

Under the S.C. Retirement System Investment Commission’s proposed budget for 2013-14, which starts July 1, the number of authorized full-time employees would grow by 12, or 34 percent, to 47 from 35, according to budget documents provided by the commission to The Nerve.

Its operating budget would increase to $14 million from $10.1 million this fiscal year, a 38.6 percent hike.

Created by state law seven years ago, the seven-member commission manages the retirement system’s investments. The latest value of that portfolio is about $25 billion, according to Adam Jordan, the commission’s policy, planning and budget director.

Jordan in an email last week to The Nerve contended that the proposed additional 12 employees  — six “officers,” three analysts, a director, an IT position and a budget analyst – are necessary.

“The RSIC needs an increase in staff and technology resources to mitigate operational risks associated with managing a $25 billion global investment portfolio,” Jordan said.

In budget documents provided to The Nerve, the proposal includes a seven-member “investment team” made up of a director who would be paid $140,000 annually, three “officers” making $80,000 to $120,000 yearly, and three analysts earning $50,000 to $70,000 per year.

A separate five-member “operations team” would be created, comprised of three “officers in reporting and investment analytics” making $60,000 to $80,000 yearly, an IT staffer who would be paid $70,000 annually, and a budget analyst whose annual salary would be $60,000, according to the proposal.

It’s unclear whether the commission’s proposed staffing increase is a resurrection of “NewCo.” Two years ago, the commission unsuccessfully tried to create a separate, state-controlled investment firm – dubbed NewCo, for “new company” – to handle the retirement system’s private equity, or assets that are not publicly traded, such as working capital loaned to small companies, The Nerve reported then.

At the time, private equity made up about $5 billion of the system’s assets. The NewCo plan called for increasing that amount by several billion dollars in an effort to achieve higher returns for the system.

The commission then contended that by eliminating private-sector managers and forming its own management company, it could save hundreds of millions of dollars in future years and wield greater control over its private equity.

The health of the state retirement system has been the subject of much debate over the past year. Analysts had projected an “unfunded liability” of approximately $15 billion in the retirement fund, meaning that the state would be on course to collect $15 billion less to cover state retirement-income benefits within a 30-year period.

To help reduce the projected shortfall, state lawmakers this year approved measures making it harder for state workers to retire early, and required current workers to contribute more toward their retirement.

Meanwhile, the Retirement System Investment Commission’s budget and staff levels have been steadily growing.

The commission’s payroll, for example, has more than doubled since fiscal 2007-08, from nine employees and about $1 million in salaries that year to 19 employees and $2.4 million budgeted for salaries last year, The Nerve previously reported.

The commission’s operating budget has grown, too, according to budget documents provided by the commission to The Nerve. In fiscal 2008 it was about $4.5 million; it grew to $5.8 million in fiscal 2011, then skyrocketed by about $4.3 million, or 74 percent, to $10.1 million last fiscal year.

The commission submitted its proposed 2013-14 budget to the Office of State Budget to meet a Sept. 21 deadline.

State Treasurer Curtis Loftis, who serves on the commission board by virtue of his office, has been a frequent critic of the commission.

Asked about the proposed budget hike and staffing increase for next fiscal year, Loftis in a prepared statement Monday to The Nerve said the proposed budget was “simply a placeholder,” and that more discussions will be held about it.

“There will be a significant discussion by commissioners to determine the exact budget request,” Loftis said. “The final budget request will require a vote of commissioners, not staff.”

Reach Legette at (803) 254-4411 or derek@thenerve.org.