State and local government stock investments considered

COLUMBIA -- South Carolina will ask voters to take a gamble on the stock market this Election Day.

At issue is whether the state and local governments should be allowed to invest in stocks to pay for future

retirees' health care and other benefits, something already done in many other states.

Supporters say stocks remain one of the best ways to make money over decades, but acknowledge voters might be thinking of the huge losses they saw when they opened up 401(k) statements in recent weeks.

"I'm sure with what's going on now, there will be a lot of apprehension. But if you separate it from your personal finances, you see this is by far the best move. It's lots of money spread out by bright investors over a long period," said Broadus Jamerson, executive director of the South Carolina State Employees Association.

The investments will appear as two separate amendments for voters to consider Nov. 4.

One would allow state government to invest the benefit money in stocks.

The other would give similar power to local governments.

While actual pension money is invested partially in stocks now, the benefit funds only can be put in investments such as bonds and certificates of deposit, which are less risky but tend to grow slowly.

While the sputtering stock market might harm the investment amendments' chances, both have South

Carolina's political history behind them. Such amendments, which have been discussed little before Election Day, usually pass with at least 60 percent of the vote, said Blease Graham, a University of South Carolina political science professor who has taught at the school for nearly 40 years.

The amendments must get support from two-thirds of lawmakers just to get on the ballot, so the measures already have overwhelming support from some of the most politically active members of their

communities.

Lawmakers put the investment proposals on the ballot earlier this year after a federal regulation required governments have enough money to pay the benefits of all employees at one time, even if the workers are years away from retirement.

Officials used to just pay benefits such as health and dental insurance for retirees as the bills came in.

If the amendments don't pass, governments warn they will have to raise taxes or trim spending to make sure they have enough money to abide by the new rules.

"If this doesn't pass, it's going to cost a lot of governments in South Carolina a lot of money," said Stephen Bedard, chief financial officer for Charleston.

Voters have given the state more latitude to invest before.

In 1996, more than 73 percent of South Carolina's voters decided to allow pension money to be put into stocks, overturning the 1895 state constitution ban on such investments instituted after South Carolina lost money in a post-Civil War

railroad swindle.

In 2006, 71 percent of voters agreed to let pension money be invested in overseas companies.

The market's recent downturn has affected the South Carolina retirement fund, which lost 2.6 percent of its value in the 12 months ending June 30, according to the most recent data available from the state Retirement System Investment Commission.

But the figures also show better long-term news. In the past five years, the fund has earned 6.3 percent on its investments, with even higher rates of return on its stocks. At the end of 2007, the five-year return nearly was 9 percent.

Rep. Herb Kirsh, who sponsored the amendments in the House, is telling anyone who asks that the stock market is a great deal long term.

He talks about his stock club, which has made $1.7 million in the past 20 years by requiring its 42 members to invest at least $40 a month.

Kirsh and his friends usually put in more money than required, and the lawmaker said he just bought 1,000 shares in several troubled stocks he expects to soar once the economy starts to go back up.

"I've got a lot of money in this. I'm like the state. I'm in it for the long haul," said Kirsh, D-Clover.