COLUMBIA – A state senator wants the group that oversees public workers’ pension funds to also manage retirees’ health insurance money, saying it can get better returns than the treasurer.

Treasurer Curtis Loftis contends the accusations rely on unrelated data, and the state constitution limits the insurance trust fund to conservative investments.

It’s an argument that pits the first-term Republican treasurer – who’s been very critical of the pension commission on which he sits – with a retiring, 20-year veteran Republican senator, who tried unsuccessfully in legislation earlier this year to force Loftis to appoint someone to the commission in his stead.

Loftis argues it’s a purely political fight as pushback for more openness in investments. Senate Labor Commerce and Industry Chairman Greg Ryberg, who’s been pushing for years for pension reform and previously has run for the office, maintains it’s about leaving investment decisions to financial experts.

The long-term unfunded liability in retirees’ health insurance was $9.1 billion as of June 2010, according to a November report from the state Budget and Control Board. The state pays for retirees’ health insurance premiums in the budget each year, but under an accounting standards change several years ago, states must account for the cost of fully funding future premiums of all public workers in the system.

According to the treasurer’s office, which has sole responsibility of the “post-employment benefits” trust fund, its current value is $582 million.

Ryberg bluntly accuses Loftis of not investing well: “I don’t believe he knows what they’re doing over there.”

The fund’s rate of return last year was 3.6 percent, lower than the 5.5 percent annual expected gain. It’s also down from a 7.9 percent rate of return in the fund in 2010 and 9.1 percent in 2009.

Loftis, who took office in January 2011, counters that’s the result of last year’s bond market. The fund is barred from investing in stocks. Voters, by 58 percent, defeated in 2008 a proposed constitutional amendment allowing the more diversified investments. State law also limits how the treasurer can invest. Loftis said he cannot make higher-risk investments with the public workers’ pension funds because such investments are prohibited by constitutional amendment.

“Last year was not a great year for investing in that type of portfolio,” Loftis said. “We’re forced into more conservative investments.”

He said it’s more realistic to consider multi-year returns. He points to a report dated Feb. 29 that shows the trust fund’s annualized rate of return since its May 2008 creation is 6.75 percent.

Ryberg compared the trust fund’s return to the Retirement System Investment Commission’s returns last year on its fixed-income portfolio, at 9.4 percent. The commission, on which Loftis sits as the only elected member, oversees investments for public workers’ pension system, which has a long-term unfunded liability of $14 billion.

Loftis said such a comparison is impossible, since even the commission’s fixed-income portfolio makes investments the treasurer can’t, such as in high-yield securities and foreign emerging market debt.

“What you’ve got is a clear situation of apples to oranges,” he said. “They’re able to take larger risks and get larger returns. ... It’s as if we’re trying to talk about credit card interest rates and a mortgage on the house. They’re two different things.”

He contends what Ryberg’s asking is unconstitutional, noting the proposed constitutional amendment that failed.

The constitution does limit the fund to very conservative investments. But it doesn’t prohibit the investment commission from managing the trust fund money separately, in allowed investments. The Legislature could certainly require that someone else manage the money, Ryberg said.

The issue previously came up when legislators set up the trust fund. The retirement investment commission, which the Legislature created in 2005, didn’t want to manage the fund because members worried state law didn’t specifically allow it, said commission Chairman Allen Gillespie.

“The way the current enabling legislation was written, we didn’t feel we could,” he said, though he agreed legislators could change the law.

He declined to weigh in on whether they should: “It’s a serious issue that takes some thought. I don’t feel the commission should take a position. That’s for the Legislature to figure out.”

Ryberg plans to propose again in subcommittee next week inserting a clause in the 2012-13 state budget that would transfer the fund’s management. That would apply only to a single year and require re-approving in subsequent budgets.

Ryberg said he also plans to propose a bill putting it into permanent state law.

“With the amount of taxpayer money, we ought to have the experts managing it, not a politician who uses it as his political sandbox,” he said.

Loftis said the office has a full-time professional staff that manages $12 billion per night in addition to relying on three national investment firms that consult with the agency.

Sen. David Thomas, who leads the subcommittee, said he absolutely opposes the idea. He applauds Loftis for raising issues about the pension portfolio, including contentions it’s too heavily invested in alternative investments such as hedge funds and that the state lacks custody of many funds.

“We’re going to give them more money? Are you kidding?” said Thomas, R-Greenville. “I won’t support transferring it to a group I have questions about. It’s sort of out of control.”