Retirement crisis ignoredSanford "beats dead horse" to same old tuneAPRIL 10, 2009 -- Gov. Mark Sanford tried his best this week at a special meeting of the state’s Budget and Control Board to warn everyone about the looming crisis in the state’s retired employees’ pension fund.
 But it was to no avail, as the board voted to adjourn without action on any of the governor‘s suggestions, the biggest one being decreasing the fund’s expected rate of return from 8 percent to a more realistic number.
The upshot being, the state may be forced to look at cutting future benefits to its retirees or increasing the amount of General Fund tax dollars flowing into the fund.
As reported for weeks in S.C. Statehouse Report, the fund has shrunk dramatically from its $29 billion high last fall to where it resides today, close to $19.5 billion. That nearly 30-percent decline was spiked last September when the fund saw a $2-billion single-day drop as the stock market collapse began in earnest.
Heading for the ropes?
For years, Sanford has railed against changes in policies to a retirement fund that more than 225,000 former state and protected employees, such as teachers and cops, expect to benefit from in their dotage.
And this week’s meeting was no different, which may have been why Sanford left the meeting unsatisfied.
There came a moment in the meeting, choked with state agency bigwigs, reporters and retirees wearing “Take the Money, Governor” stickers, when Sanford seemed to have on the ropes both Peggy Boykin, director of the Retirement Division of the State Budget and Control Board, and Bob Borden, the money manager in charge of the dwindling fund.
Sanford was drilling them on the expected rate of return of the fund in the coming years. Borden and Boykin kept springing up to respond, clarify, and sometimes refute the governor’s points.
Sanford, quoting the retirement fund’s own report, said the state pension had dropped 16 percent over the last three months, nearly 29 percent over the last year, was down 5.7 percent since 2006, and down 1 percent since 2004.
Sanford claimed the retirement fund was under-funded by $23 billion and that $700 million in unfunded retirement mandates was created recently.
“What I find frightening in the raw numbers given here, is that to get back to the 8-percent returns, we’ll have to average 14.9 percent,” said Sanford, who called it a “mathematical trap.”
All damning statistics, that is, had governor stuck to them. But Sanford began, in his own words, to “beat a dead horse.”
Out come the charts
Sanford decided to pull out a stack of matted charts. The governor said he knew he was chart-addicted, but went forward anyway. One Statehouse veteran in attendance joked before the meeting began that it was going to be a short one because Sanford only had five charts instead of the 11 charts he brought into a meeting the day before.
 Perhaps all Sanford had to do was ask this simple question: “Considering that the financial tumult that has impacted this state, our country and the world, may not be completely over, is it really prudent to leave the rate of return unchanged?”
Borden, flanked by an actuary representing a national oversight company, said the returns could actually be higher because the market had sunk so low and profits could be easier to realize as the economy rebounded.
Perhaps all Sanford had to do at this point was to ask Borden about the volatility of the market leading down to the Great Depression, when numerous false recoveries dotted and jagged the stock market’s descent.
Instead, the governor began to chew on Boykin and Borden over “smoothing,”an investment technique that allows fund managers to pass massive losses or earnings over a period of time to create smooth investment returns. It seemed to let the duo off the hook, as the more esoteric issue allowed for cover.
Sanford wasn’t alone as state Comptroller General Richard Eckstrom routinely tried to redirect the financial wonks.
Meeting derailed
But the argument over smoothing seemed to derail the meeting, and, perhaps emboldened, Treasurer Converse Chellis praised the work done by the retirement commission in a statement so tightly constructed, the governor thought it was a motion to be voted on.
After the meeting, Sanford was on his game, saying it was “absolutely irresponsible” to expect heightened returns in the coming years.
Quoting fractile theories of doom-saying economists like Harry Dent Jr. and Bob Prechter, the governor said he feared a bigger economic meltdown was forming with the Dow dropping into the 3,000s. [A Greenville News story today reported that experts believed the economy may be leveling off and starting to improve.]
“We are definitely in a false bear rally,” said Sanford, a Goldman Sachs-trained MBA. Not addressing the fund’s 8-percent expected returns at this time, he said, was “ a political cop out.”
Crystal ball: Sanford’s probably right on this one, but the furor over his opposition to accepting a $700-million portion of Obama’s federal stimulus package may have made that point moot. Because of his lack of, or squandering, or political capital, Sanford will continue to be ignored on the issue of the state’s retirement fund. If the market explodes, the 225,000 retirees will be taken care of. If it implodes further, state money will have to flow into the retirement system to support benefits paid out to retirees. Cutting benefits on a significant level won’t be an option because retirees vote.
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One off, one onThe House will be on furlough for another week. In the Senate, there will be a flurry of subcommittee and committee meetings, but most are regarding relatively minor bills. The two significant agendas will both be Tuesday when an Agriculture subcommittee will meet at 9 a.m. in 308 Gressette to discuss a bill that would require a permit for surface water withdrawal. The full committee will meet two days later to discuss this and other bills at 9 a.m. in 308 Gressette.
But the biggest and most salient agenda will be found at the full Finance Committee meeting at 9 a.m. in 105 Gressette when members deal with the House’s version of the proposed 2009-10 state budget. It will be especially important, as so much more has come to light in regards to the requirements that have come attached to the federal stimulus package.
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As Sanford sees it
Word around the Statehouse was that Gov. Mark Sanford, enraged by the “disingenuous” numbers put out recently by the Senate Finance Committee, has been busy drafting a new state budget that takes into account $2.8 billion in accepted federal stimulus package funds.
 Sanford and his allies alleged last week that the committee recently put out a budget that didn’t include $578 million in federal funding and was meant as a scare tactic. Sanford’s new budget will likely finesse the issue of $700 million the governor has been delaying accepting so he can get more state debt paid down.
One Statehouse veteran defended Finance’s recent numbers and said they weren’t an actual budget but a “spending scenario.” Regardless, with the Senate Finance Committee scheduled to take up the budget and debate to hit the floor as early as the following week, infighting between Finance and the Governor’s Mansion should increase.
Bill watch
With both the House and Senate on furlough last week, no bills advanced. Next week, bills requiring voters to provide poll watchers with photo identification are expected to make it out onto the floor of the Senate. The budget debate will begin in earnest in Senate Finance, and is expected to make the jump to the full body sometime the following week. The House will be on furlough for another week.
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Just go ahead and sue
State Sen. Vince Sheheen (D-Camden) announced this week that when the Senate reconvenes next week he will introduce a measure that the Senate and the House pass a concurrent resolution to force Sanford to accept the remaining $700 million in federal stimulus package funds.
 The resolution would also require the governor’s office to create a year-end report dealing with how the stimulus did or did not affect job growth in the state. Sheheen, who is running for governor in 2010, said it was time to stop the dithering and bickering with the governor.
“We need accept back into South Carolina our own tax dollars,” said Sheheen, who also hit on campaign-friendly issues of job growth and education in his announcement.
When asked if he were sued by the legislature to accept all the funds, Sanford said, “I think Senator Sheheen knows how that lawsuit turns out.”
Sheheen snarked back: “Yeah, I do; and the governor still thinks he’d win.”
Education deadline
Typically, public school districts wait until late spring before offering contracts to their current and prospective teachers. This year because of the ongoing fight over whether Gov. Mark Sanford will ask for the remaining $700 million in federal stimulus funds, many school districts are delaying offering contracts deep into May.
Why: it’s hard to know how much money you can spend when you don’t know how much money you’ve got to spend.
 Senate Finance Committee chair Hugh Leatherman (R-Florence) said the governor could end the worry “with a stroke of his pen.”
Sanford countered that he’d requested the funds, but wanted to come to a compromise with the legislature as to how that money is parsed out. Sanford said that because he’d requested all the funds, the state now has a year and a half to debate over how they’re spent. But with a May deadline, that 18-month debate may be too late for thousands of teachers, hundreds of schools, and untold numbers of students.
Money, it’s a gas
Several gubernatorial front runners have already announced impressive campaign donations. Congressman Gresham Barrett (R-S.C.) has claimed more than $1 million on hand, as has state Attorney General Henry McMaster. Barrett is supposed to have raised close to $370,000 in the few short weeks since he announced his candidacy. Democratic S.C. Sen. Vince Sheheen has raised more than $275,000. No word yet on yet on what pro-voucher candidate Sen. Robert Ford (D-Charleston) has raised, but the former used car salesman can probably expect “three lemons” from the video gaming industry.
Split caucus
Wes Donehue should be the happiest man in Columbia. As communications director for the S.C. Senate Republican Caucus, the recent uproar regarding the stimulus funds should have provided him with his favorite element: more politicking.
 When asked questions this week about the stimulus package, Donehue, normally effusive and quick, declined comment. When asked different questions about the cigarette tax, Donehue remained mum.
What gives? A split caucus. With some Senate Republicans glued to the governor’s side on the stimulus issue, and no consensus on cigarette tax in the Senate (much less the House), Donehue has had to sit on the sidelines. Not his element.
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Lending vultures zapping the housing market?By Andy Brack, editor and publisher APRIL 10, 2009 – Good people seem to be getting hurt by what may be an artificially tight home mortgage credit market.
 In short, the pendulum has swung from being too liberal to being too conservative, according to several people in the lending and real estate industries in South Carolina. Prior to the financial crisis, lenders seemed to almost throw money at people who wanted homes, making a whale of a lot of risky loans to people who shouldn’t have gotten them because of insufficient income.
Now people with good credit who should get loans, such as those who want to refinance their homes to take advantage of lower rates, are having tough times.
“The market is infinitely too tight and there needs to be some common sense,” said one noted Charleston bank president. He related the story of a person who his bank wanted to give a loan but couldn’t because of new rules. Seems this guy had one blemish on his credit record – that for some reason he hadn’t paid a $9 medical bill that went to a collection agency.
Mary Riley, chief of staff for the state Senate Banking and Insurance Committee, said she’s heard sad stories like the fellow who couldn’t get a loan because of a $9 mistake.
“Before they [lenders] were loosey-goosey and now they have just tightened to do things that are totally unreasonable. There’s got to be some happy medium.”
This newfound zealous conservative bent in lending may have gone overboard in other ways too:
- Arbitrary appraisal downgrades. One mortgage lender said as many as half of the people who want their homes refinanced are having trouble because appraisal values are much lower than expected. Particularly troubling are cases when underwriters send appraisals for comparative reviews to a desk jockey who doesn’t live anywhere near homes in question. It’s not uncommon for appraisals to be downgraded tens of thousands of dollars. Such downgrades can impact a family’s ability to quality for a loan, which makes it seem like underwriters may be inserting hurdles into the process to keep from loaning money (even though the banks say there’s money to lend.)
- Not using appraisers. A Charleston Realtor tells the story of how some banks, in an effort to save a $400 appraiser’s fee, are now sending outside real estate brokers to give opinions on the value of a property. Such a scenario is filled with conflicts of interest, because an unscrupulous broker could set an artificially low value. If accepted by the bank, it could impact the sale of the property or, in the worst case, “the agent has created an opportunity for one of his clients to pick up a property at a ridiculously low value.”
Carri Grube Lybarker, a staff attorney with the S.C. Department of Consumer Affairs, questioned whether using real estate agents to value homes was legal under state law. She said her agency seemed to be getting more calls these days about mortgage fraud from years back, instead of predatory behavior now.
“Most of the phone calls we’ve been getting are not about the buying or purchasing of property, but from people being foreclosed upon when they believe there may have been fraud two or three years ago when they closed the loan.”
The department (www.scconsumer.gov) offers several online tools, including videos on mortgage fraud and debt collection. It also offers a Mortgage Fraud Hotline (1-800-553-7753) to help state residents.
“There’s crazy stuff going on,” SC Realtors President Nick Kremydas. The lending crisis, he said, is keeping a lot of families from the dream of home ownership.
But he says things may be turning around, as evidenced by an increase in real estate activity over the last few months. And over the past five weeks, the stock market also has gained. Retailers say they expect strong April sales and unemployment filings have recently dropped.
But lending vultures still are out there preying on good people. State lawmakers need to take a look at what’s going on in regular lending – just like they have with predatory payday lending. If they don’t, the vultures could cause neighborhoods to lose millions in value. And that could cost you when you try to sell your home.
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Five letters in this issue4/7: Sanford is a political bully
To Statehouse Report:
You have come closer to describing the real Mark Sanford than most, yet you miss the point that the man is not acting out of either some lofty political ideology of some dream of a libertarian presidency. Mark Sanford is a politically bully who is taking revenge on the legislators and supporters of public schools for refusing to back his scheme to privatize education. I'm not sure what the law enforcement crew did to invoke the wrath of the Kool-aid Governor but it serves to scare the hell out of people who believe that the jails will empty, chaos will reign, and Sanford will leave the state in a mess.
Sanford does not appear to mind a little chaos. He was an apostle of Speaker Newt [Gingrich] and the Contract with American Cult that tried to bully Bill Clinton into submission in 1995. They were willing to force their agenda on the people of America by shutting down the federal government. Since then, Sanford has been at the head of the Howard Rich movement and the school choice cult. The legislators and groups who believe in public schools have been able to keep him at bay the past six years and I see this as an opportunity for payback.
The irony is that President Obama and the Democrats in Congress have created a stimulus package that gave the governor an opportunity to restate his libertarian beliefs, get his revenge on his political opponents in South Carolina, and make himself a icon of the conservative cause. Sanford may be many things, but dumb is not one of them.
-- William C. Heitsman, Darlington, SC
4/6: Sanford and Blagojevich
To Statehouse Report:
It's a sad, sad day when you have a governor that makes [defrocked Ill. Gov.] Rob Blagojevich look good.
-- Name withheld upon request, Columbia, SC
4/5: Media coverage laughable on stimulus money
To Statehouse Report:
Read your article this morning (as usual) and for the first time in a month or so took exception with a few issues being raised. The coverage of all media in relation to the stimulus money has been laughable. Our governor's stance may be Kool-aidish as you suggest but the debate deserves more serious consideration than you are giving it.
People deserve a fair assessment of the facts to make a judgment and the coverage has been shallow and almost silly. Also, by reading your piece today I'd say you Dems have identified the GOP candidate that looks the most electable and will attempt to chip away at his campaign. I thought Gresham's [Barrett’s] response was fairly thoughtful and not the rhetorical populism that the other candidates have repeated over and over. Anyway, enjoy your opinions and hope you have a good week.
-- Ken Ard, Florence, SC
4/5: Brack like pro wrestling promoter
To Statehouse Report:
Clearly you can only reiterate the “Opinions” of others enhanced only by your own imagination. You rely only on expressions with a proven emotional reaction of your audience much the same as professional wrestling promoters. I find no new information in your publication nor do I find any credits for your meaningless plagiarized characterizations of others.
-- Roger Salyer, Florence, SC
4/4: Great reporting by Davis
To Statehouse Report:
Your coverage of "Sanford's Last Stand" has been energetic and capable. Many in state government follow your reportage closely, and it was a state employee who forwarded your latest work to me.
Thank you for your efforts -- your work reaches many who routinely find no attention whatever in The State to matters of vital public importance.
As pundits foresee the death of newspaper journalism, they ignore to their own peril the wonderful potential of the Internet for political publications. The unhidden secret is American journalism is already invested on the Internet, and will find a glorious future there.
Had Benjamin Franklin, Thomas Paine and Samuel Adams had access to the internet, their contributions to the American Revolution would have been published online.
-- Bob Greene, Columbia, SC
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Ups and downs of the week Clyburn. Anybody notice that voucher-loving Gov. Mark Sanford only turned down stimulus dollars that were meant for public education? Yep, Majority Leader U.S. Rep. Jim Clyburn (D-S.C.) sure did.
 Hurricanes. Two major forecasting groups said 2009 will see a drop in named storms. More: The State.
Sanfordville. It’s great fun that dozens “camp out” near the governor’s mansion to protest Sanford’s refusal of federal stimulus funds; it’s great irony they can’t spend the night.
 Shriners. The benevolent organization, hit hard by the stock market drop and plummeting donations, is considering closing its Greenville hospital. More: The State.
Carolinians for Change. First, they accepted $100K in tax dollars from the governor to do campaign work (which they returned), now they’re spending $230K to spread television ads of Sanford defending turning down $700 million. Makes you wonder how many of them are actually “Carolinians.”
Muzak. The Fort Mill-based canned music king has filed for a Chapter 11 bankruptcy, bringing concerns whether anyone knows the way to San Jose; I’ve got a lot of friends in San Jose … dee dee dee … Mmmm … in San Jose … More: The State.
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