SANFORD VETO: Governor says measure to double annual raise would be problem for taxpayers

By Bill Robinson and Joy L. Woodson

May 27, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- Bill to help fund retirees rejected

Gov. Mark Sanford issued a Memorial Day veto to block a bill that would double the guaranteed annual cost-of-living raise for retired state workers.

Sanford wrote in a letter to House Speaker Bobby Harrell that he worries about the solvency of the retirees' pension plan, which he says in underfunded by billions of dollars.

"This bill is fundamentally flawed, and as such will prove to be a real problem in the long run to both taxpayers and retirees," Sanford wrote, adding "We have absolutely no plan for addressing the existing liability -- which would put you in jail if you did this with private pension fund assets -- and yet we are going to add to spending commitments."

With food and gas costs rising sharply in recent years, proponents wanted to increase the guaranteed annual cost-of-living adjustment guarantee to 2 percent from 1 percent for the state's roughly 100,000 retired employees.

Retirees have received full cost-of-living adjustments yearly for nearly four decades.

S.C. Rep. Joe Neal, D-Richland, said Monday he was disappointed but not surprised by Sanford's decision.

"State retirees who are dependent on cost-of-living adjustments deserve to have their increases," Neal said. "Their need is an immediate one. We can't leave them in a situation where they can't survive."

Harrell, a Charleston Republican, predicted on Monday the legislature will override the governor's veto on the retiree cost-of-living increase before it adjourns for the year in two weeks.

"I'll have to talk to him to see what his concerns are," Harrell said.

Sanford also took issue with the rationale for raising the projected annual return on pension plan investments from a current projected level of 7.25 percent. He wrote that it was "out of line with other states facing similar retirement issues."

"The old saying is that when you are in a hole, quit digging -- yet this bill artificially and arbitrarily raises the projected rate of return for the retirement fund so that more spending can take place now," Sanford wrote.

Voters gave state government leaders who are responsible for managing pension funds the OK in 2006 to put that money in a variety of investments in hopes of improving the return.

"This legislation was designed to shore up the retirement system," Harrell said. "That's why governor's arguments don't make sense."

Wayne Bell, vice president of the State Retiree Association of South Carolina, said he had hoped the governor would sign the bill, given the wide-range of support it had. But, Bell said he wasn't surprised.

"We don't want the taxpayers of South Carolina to fund our old age -- that's not what this is about," he said. "This is about making sure that the state retirement system is strong."

Bob Sealy, also a member of the retiree association, said he, along with several others, called the governor's office Friday to persuade him to sign the bill.

"The retirees are just hoping, in these days of raging inflation, that they are going to override this veto this time," he said.

Another key budgetary decision is expected today from the governor.

Sanford said Monday he will announce his decision regarding a bill that would raise the state's cigarette tax by 50 cents a pack. The money would be used primarily to expand the Medicaid program.

Reach Woodson at 771-8692. Reach Robinson at 771-8482.

Newstex ID: KRTB-0044-25546397