WINNSBORO – Fairfield County received an “unmodified opinion” from Elliot Davis, LLC on its 2013-2014 fiscal audit, presented to Council at their Dec. 15 special called meeting.
Representing the Columbia accounting firm, Brian D’Amico told Council that the opinion represented a “clean audit,” with no “material weaknesses” in this year’s audit, which D’Amico said was a tremendous improvement over the previous year’s audit where material weaknesses were uncovered in three areas, with two of those being repeat findings from the year prior. But the news wasn’t entirely good , and not only for Fairfield County. D’Amico said counties across the state are girding themselves for a numbers game being passed down from a State Legislature that has left the state retirement system as much as 40 percent underfunded.
State Retirement System
D’Amico reported to Council that the State Retirement System is only about 60-70 percent funded, leaving 30-40 percent hanging in the balance. That balance, at least for the time being, is being shifted from the state down to the counties.
“It’s really not good news, but it is something we are going to have to tackle in fiscal year 2015,” D’Amico said. “What the Governmental Accounting Standards Board (GASB) is requiring us to do is that liability, that difference, that unfunded amount is going to be pushed down to all of the employers that make up the retirement system.”
Fairfield County’s portion of the balance is approximately $14 million, D’Amico said, but noted that it is not something the County would be expected to pony up in real dollars next year.
“It’s really a paper adjustment,” D’Amico. “It’s going to be reflected as a restatement. Your beginning balances are going to be restated to report this, but there’s no cash transaction other than the contributions you are withholding from your employees and your employer contributions you are making to the retirement system like you’re doing now.”
The immediate impact, however, might show up in the County’s bond rating.
“The biggest impact you might see is in your bond rating and how creditors are going to react to a S.C. employer who has a much larger liability than an employer from N.C.,” D’Amico said. “We don’t know how they are going to react to this number. Are they going to look at it as just a paper number realizing that over the next five years nothing really is going to change, or are they going to discount you more than say someone in another state? I think we’ll start to get those answers probably come this time next year when local governments like you are finishing up your financial statements.”
“We won’t have to present or prepare some type of financial plan to offset the $14 million,” Milton Pope, County Administrator, clarified later. “What it is going to be is a paper or journal entry on our numbers, which could potentially make our numbers look worse and that could impact our ability when we need to issue bonds or look at our credit rating … We’re totally at the mercy of (the state retirement system) when it comes to what our actuarial liability is, and I think all local governments are probably going to receive a huge does of indigestion about this until we can work something out or hopefully get the state to accept that liability, and at this point they don’t want to accept that. … we have absolutely no choice in this. We are totally at the mercy of the state and what the state says.”
Councilman David Brown (District 7) said there is nothing new about the state fobbing its responsibilities off onto local governments, noting that a plan is currently afoot in Columbia to turn over state road maintenance to county governments.
“They’re wanting to give us back about 30 percent to 40 percent of the highways in the state of S.C. for the counties to maintain, but at the same time they’re cutting the money they’re supposed to give us to help run the counties,” Brown said. “We might be able to go out and buy a patching truck and keep our roads halfway up to date, but the first bridge that goes out and costs $20 million, that’s our budget.”
Brown, who is retiring after 32 years on Council, offered a word of warning to his successor, Billy Smith, and to incoming Council members Dan Ruff (District 1) and Marion Robinson (District 5) to be prepared for a State Legislature that “has the idea they can run a government without taxes and they aren’t adding new taxes.”
State Sen. Creighton Coleman (D-17) said he was not in favor of turning over state roads to the counties, adding that he did not think the plan would muster enough votes to pass.
“It’s a pretty radical idea,” Coleman said. “To me, it’s a state problem and the state ought to find a solution.”
Coleman was similarly optimistic about the funding of the state retirement system.
“The state will figure something out,” he said.
