Archive for the ‘ ISSUES ’ Category

My Infrastructure and Gas Tax Articles, Lest Ye Have Forgotten

For the sake of transparency, short memories, and people who think they know what I think or believe that I’m not conservative, the following are the titles to various articles that I’ve posted over the last four years about roads, bridges, the gas tax (or as it should be called, the motor fuel user fee), and other stuff that I enjoyed writing. To read these articles, please look to the right for a list, or use the search function or just  keeping scrolling through the website.

2017 – The Year of Living Dangerously in the General Assembly

A Short Reflection on the Electoral College Effect

Argus,  Ric Flair and the Looming State Pension Debt

Lee Bright and the Defense of Western Values

The Roads Bill – Reform in Progress

The Roads Bill – How We Will Pay For It

Bumping Old Hickory

The Roads Bill Amendment

The SCDOT Chicken Run

$415 Million of Surplus Revenue Applied to Road Repair

Our “Anybody but Donald Trump” Electoral College Fail Safe

Grading the Senate’s Friday Folder

A Short Reflection Upon Myths and Bad Tax Policy

Trumping the Light Fantastic in Greenville

The Planned Parenthood Roundabout

A Day in the Life – 14 January 2016

Star Wars as History Lesson

SC State Pension Plan Mechanics – A Study of the Short Sighted

SCDOT Yields to Roundabout Pressure

Planned Parenthood Investigation – All Apologies?

Office of Refugee Resettlement – Welcome to Obamaworld

Opposing the Blue Ridge Roundabout – My Letter to SCDOT

Marriage and the Modern General Assembly

Planned Parenthood – Abortion’s New Back Alley

Public Shaming, Borrowed Moral Capital and Kicking the CBF to the Curb

The Confederate Flag Vote – My Response to a Constituent

Toleration, Same Sex Marriage and Protecting Religious Freedom

Learning Curves, Senate Time and Doughnuts

DHEC Oversight of Abortion Clinics

“Sooey! Sooey!” – Our Preferred State Bond Approval Method

The Road Funding Bill Vote – By the Numbers

House Road Plan Debate – Snatching Defeat from the Jaws of Victory

Speaking of State Credit Ratings & Income Tax Cuts

The Bond Defeat – Turning Bad Government into Good

The Bond Issue – More Barry than James

Killing Tillman – Part Three: Our State Budget

Killing Tillman – Part Two: Picking Cotton

Killing Tillman – Part One: The College Years

SCDOT Financial Fun Facts as of June 30, 2014

Filing the Governor’s Road Plan

Paving Roads With Good Intentions

Localizing Road Repair

The SC House Marshmallow Test

Bringing Down the House Feudal System

Saving Taxpayers $1.2 Billion

Fun Home at the Fun House

Tax Reform and Gas Tax Articles

And the list goes on . . .

2017 – The Year of Living Dangerously in the General Assembly

The Charleston Post and Courier reported at the beginning of this year that South Carolina was the 5th most popular destination for newcomers relocating to another state in 2016. We were 2nd in 2015.

Though the newspaper refrained from hanging a lantern in St. Philip’s steeple or racing a tourist carriage through the city while tossing out free newspapers carrying the headline “More Yankee Dollars Are Coming,” their point was heard loud and clear. Northerners along with a whole host of others are coming here to work or retire. Some may think it great news; some may not. I guess Yankee dollars are better than Yankee cannon but in either case, we are not prepared for the continued population growth.

Now, I’m not talking about prepared in the psychological, cultural or historical sense. We have centuries of experience and stubbornness to convert all manner of newcomers to our lovely, infatuating, infuriating, sometimes bitter, self-rising Southern existence. Blessedly, we have our music and our literature and our politics and our religion and our manners and our food and that indecipherable subliminal racial bond forged link by link over centuries of sweetness and brutal hardship to bind us together. I bet they don’t have those kind of cultural chains up in Ohio.

When I say prepared, I mean in a governmental revenue policy sense. After you stop laughing, consider this economic threat: South Carolina has two Trident ballistic missile-sized unfunded liabilities pointed at our General Fund. The countdown has begun and firing will commence shortly unless the General Assembly can soon find a way to diffuse them in an effective and orderly manner. I refer to the Tridents to remind us how many nuclear submarines used to be based around Charleston before we got our port back from the Feds, before we thought we could do any better than be a Cold War nuclear target, before BMW and Boeing happened – arguably the most visible cornerstones of our current economic success.

The largest unfunded liability is the deferred maintenance of our roads and bridges. Regardless of how much additional money you believe SCDOT requires for infrastructure repair and upgrades, our current gas tax does not produce enough annual revenue to pay the recommended annual maintenance.

The other unfunded liability is our state pension plan. We owe our public employees and retirees around $20 billion. Our current contribution rates and investment returns within the retirement system are not enough to pay off the accumulated liability even if we stretch it out over 30 years.  That’s assuming a realistic investment return and not the wildly optimistic 7.5% currently used.

Some members of the General Assembly think that we can wait out the problems. They, like the Rolling Stones, believe that time is on their side. Mick Jagger might have attended the London School of Economics but he did not understand the time value of money. Time does nothing but increase our two unfunded liabilities. Time will never be on our side.

Population growth might be on our side if we can sort out our tax code to take advantage of it. The current infrastructure bill filed last week by the House GOP leadership takes advantage of South Carolina’s popularity. The bill contains a gas tax increase that not only draws revenue from those newcomers who settle here; it taxes those just passing through.

Finding a revenue stream to bolster the state pension plan will not be so easy. I do not support a tax increase to eliminate this threat. However, elimination of certain special interest exemptions and credits could create enough of a steady income stream to stabilize the pension plan in the long term.

Politicians understand that citizens do not trust them with tax revenue – and with good reason. Both of our ballistic missile-sized unfunded liabilities resulted from the failure of our past political leadership to address the ongoing revenue requirements of SCDOT and our state pension plan that occurred under their watch.

Now we come asking for the funds necessary to bail out 20 years of procrastination and myopia, funds to protect our public employees, protect our infrastructure, protect our bond rating and protect the economy that has proven to be such a popular attraction for newcomers. Nobody’s going to like it, especially those politicians caught between the past and the future. They will be living dangerously in 2017.

Argus, Ric Flair And The Looming State Pension Debt

As our first meeting of the Joint Committee on Pension Systems Review drifted into the fourth hour, I watched several eyelids in the audience begin to droop. Given the complexity of the subject matter, I was surprised that they were alert for that long.

The audience shouldn’t be held responsible for their somnolence. Having worked in the pension compliance business since I was a graduate student at Clemson, I can attest that discussing the finer points of pension funding would put even Argus to sleep.

Remember Argus? Not Argus Filch from Harry Potter lore but Argus the giant from Greek mythology. He had 100 eyes that never slept and was made to watch over a sacred cow. And no, he wasn’t a Clemson graduate. And don’t confuse him with Hypnos, who personified sleep or Magneto who . . . well, he wasn’t a Greek god; he was an X-Men nemesis. Anyway, each generation has its superheroes. The ancient Greeks and the Millennials have theirs. My generation had Ric Flair and Dusty Rhodes but I don’t see either one hanging around to explain the need for our review committee or the severity of South Carolina’s pension funding problem. So, I will try.

The 2008 market crash accelerated funding shortfalls in governmental pension plans nationwide including the five plans that make up South Carolina Retirement Systems (SCRS). Before the crash, unfunded liabilities of governmental pension plans were off the political radar. After the crash and ensuing recession, unfunded liabilities grew exponentially.

In response, the Governmental Accounting Standards Board adopted new pension reporting standards in 2012 that require state and local governments to report their total pension liability, the fair value of plan assets available to pay pension benefits and their net pension liability. This may seem rudimentary to anyone who has balanced a bank statement, but it takes a crisis to bring clarity to governmental accounting.

The new standards highlighted a serious downward trend in South Carolina’s pension liability. According to SCRS Comprehensive Annual Financial Report for June 30, 2015, we have promised $50.7 billion in retirement benefits to over 550,000 government employees who participate in those plans. We had $29.3 billion in assets on hand. Which means our net pension liability was $21.4 billion.

More simply stated, our system at that time was 57.85% funded. As a reference point, the system was 88.5% funded in 1997. We have experienced a 30% funding decline over the last twenty years. The 2016 report is due before the end of this year but don’t expect much improvement.

Before anyone panics and jumps off of the Statehouse Dome, rest assured that we don’t owe all of the money at once. We have a window of opportunity afforded by the creation of the Joint Committee to stop the downward spiral. We can restore financial soundness to the system if we avoid a few political pitfalls.

State pension plans are political sacred cows and having attended the 2012 pension reform meetings, I recall several Argus-like groups ever watchful that their accrued benefits, contribution rates and cost of living adjustments were protected. They were prudent to do so. Pension benefits are just one part of a governmental employee’s compensation package and accrued benefits are a promise to pay that must be protected. Future contribution rates and cost of living adjustments are not as sacred.

State pension plans are the victims of political schizophrenia. Many variables make up the pension funding formula and each has contributed to our current problem in some way. However, two variables are fundamental to ensuring the long-term self-sufficiency of a pension plan: an annually increasing payroll and an expanding workforce. Here’s where the break with reality occurs. These two variables conflict with political promises to limit government growth and reduce spending.

How then does a small government majority party work with a big government minority party to restore the financial foundation of the plan? Hopefully, with the objectivity that this problem demands and leave the political posturing aside.

We should start with a frank discussion about the future of the plans within SCRS. Are pension plans, which were 19th century creations, still appropriate retirement vehicles for our 21st century mobile workforce? To achieve a self-sufficient plan in the long term, are we willing to expand our governmental workforce or pay them more?

After those questions has been answered, the committee members will need some backbone to issue a report back to the General Assembly that contains a viable solution. The solution will require a hard-bargained compromise on future employee benefits, a long-term strategy that controls every variable of the funding formula, the political will to execute the strategy and the institutional discipline to monitor the strategy over a prolonged period – maybe as long as twenty years.

Political will? Compromise? Institutional discipline? Long-term strategy? Do these virtues still exist in the General Assembly? They must simply because the debt is not some ancient Greek myth. Make no mistake. The dollars owed are as real as the South Carolinians to whom they belong.