Board moves money to shore up state retirement balance sheet

• Jason Dilges

Jason Dilges

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PIERRE — The board of trustees took two steps Wednesday to make the South Dakota Retirement System appear to have finished its 2012 fiscal year on June 30 in somewhat better condition than was actually in place that day.

The trustees agreed Wednesday that $64 million should be taken from a $92 million cushion and applied against existing liabilities.

They also made a change in an accounting procedure that had been in place since 1994. The result was extending the pay-off time to 29 years for $163 million of liabilities that previously were on a 10-year schedule.

The changes were described during the trustees meeting as akin to reworking a home mortgage because the current payments can’t be met.

“It’s time to appraise this house and consider new financing,” said board member K.J. Peterson, the Pennington County deputy auditor.

Another trustee, state Finance Commissioner Jason Dilges, said the board four years ago changed the general schedule for most liabilities from 20 years to 30 years as a way then to make the system appear to be better funded.

Dilges said he wasn’t comfortable pushing more of the liabilities onto a 30-year schedule.

“I’m not ready to do that yet, guys. If you are, fine,” he told other trustees around the table. “That’s a significant change in how we’re managing this plan.”

SDRS Administrator Rob Wylie said he had spoken individually to the trustees in recent weeks to outline the proposals.

Actuarial consultant Doug Fiddler explained them in detail Wednesday.

Fiddler defended the change in the accounting approach.

“This is a recognized actuarial practice. It is done time to time,” he said.

The changes received unanimous approval after the board agreed to an amendment from Dilges.

It calls for using a portion of any available cushion to pay down the difference in the long-term costs that result from changing to 30 years from 10 years.

That move took $13 million from the cushion Wednesday beyond the original plan to use $51 million from the cushion.

Even with those steps, the public pension fund will have finished the 2012 fiscal year short by 7 to 8 percent of what was estimated necessary to cover the expected liabilities over the next 30 years for the current 75,000 members.

The fund’s status deteriorated during the 2012 fiscal year. It finished 2011 short by about 3.6 percent.

Because the program is further out of financial balance, the retired members probably will see only a 2.1 percent cost of living adjustment in their benefit payments for the coming year.

That is the minimum COLA allowed under state law. The trustees will make the COLA decision at their next meeting Dec. 5.

The system is open to public employees of state government, state universities and more than 400 participating units of local government such as school districts, counties, cities and others.

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