Editorial - An idea not talked to death

August 14, 1997

States that invest their employees' pension funds in the stock market reap an annual return of 13 percent. West Virginia, constitutionally barred from investing in anything but bonds, gets 3 percent, according to House Speaker Bob Kiss, D-Raleigh, who wants voters to change that arrangement in a special election to be held on Sept. 27.

We agree with Kiss, not only because the state and its retirees should get the benefit of soaring stock prices, but because without the change, the only alternative is to raise taxes.

That's no idle threat, because West Virginia's employee pension plans are underfunded by $4 billion with $3.7 billion of that total coming from the Teachers Retirement System. It will cost the state $315 million from general operating funds to prop up the system this year. If voters choose to "cling to an archaic investment strategy," Gov. Cecil Underwood told The Associated Press, a tax increase is "certainly probable."

What happens if citizens balk? If teachers begin to believe that the state's retirement system won't have the money to pay their pensions, those who can get out of the system will do so. Those with many years' service would probably file a class-action suit to force the state to keep its promises.

How safe is the stock market? For amateurs with no idea of what they're doing, not very safe. For professional managers who know how to determine (through research) whether a stock is overvalued, it's much safer.

What about other states? Other than West Virginia, only South Carolina prohibits its state government from investing in stocks. That means West Virginia will have plenty of models to look at before it begins its foray into the market.

There will be no intensive media campaign prior to the vote, according to supporters of the change. Instead, the pro-stock forces will depend on business and labor organizations to spread the word. If you're concerned about the state's future in general and your own retirement specifically, we advise you to pay attention to this debate.

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