Board endorses Daugaard’s plan to merge cement-plant, state retirement funds
PIERRE — Trustees for the South Dakota Retirement System gave their endorsement Wednesday for the governor’s plan to fix the state cement-plant retirement fund.
The vote was 12-2 in favor of the concept that Gov. Dennis Daugaard had outlined publicly for the first time on Tuesday in his budget speech to the Legislature.
Daugaard wants lawmakers to appropriate $5.6 million to bring the cement-plant fund into fully funded status — 107 percent, to be exact — and merge it into the much larger SDRS pension fund.
SDRS covers state government, many cities, counties and school districts, many public safety organizations and various special districts.
State government sold the cement plant at Rapid City and its related operations in 2001 at the request of then-Gov. Bill Janklow.
But its pension fund fell behind financially and the benefits were negotiated under union contract, removing much of the flexibility on the spending side.
In 2010, the SDRS central office took over its administration and the Legislature, so far, has put $2 million into its investment pool.
A third-party vendor handles day-to-day matters on a $25,000 annual contract.
One of the SDRS trustees opposed to the governor’s proposed consolidation, teachers representative Bonnie Mehlbrech, of Sioux Falls, asked why SDRS members should face potential financial liability for the cement-plan system’s members.
“That whole sale of the cement plant, SDRS didn’t have anything to do with it,” she said.
Supreme Court Justice Steve Zinter, of Pierre, a trustee representing judicial members, said he wants the plan to work, but doesn’t want SDRS members to bear “the drip, drip, drip” of financial effects.
Zinter recalled the plant’s sale coming up for the SDRS trustees’ discussion in 2001. “The board was very concerned about it. We were promised this day would never come,” he said.
Rapid City Police Lt. James Johns, who represents public safety employees on the board, said the cement-plant fund represents “six-tenths of one percent” of the value of the SDRS investment portfolio.
“Sometimes, the devil is in the details. Sometimes, you have to do the right thing,” Johns said.
Another trustee, David Merrill, of Plankinton, who represents school board members, said the board should support “our countrymen.”
“Sometimes, we forget these people are our fellow South Dakotans,” Merrill said. “We’re getting all excited about this teeny, teeny, teeny percentage.”
As of June 30, 2013, the cementplant system had 239 retirees and beneficiaries, 26 active members and 77 inactive members who were vested. SDRS, by contrast, has more than 400 participating units of government and more than 75,000 members, including 22,408 members who received a benefit in 2012.
“I don’t see the real downside here,” said trustee Eric Stroeder, of Mobridge, a state Department of Transportation engineer who represents state government employees.
As the debate closed, Zinter said he didn’t feel as bad about it as when the discussion began. “Maybe this is much ado about nothing,” he said. “It’s a matter of principle versus math and practicality.”
The plan needs the Legislature’s approval.