Two amendments lose

The defeat of state constitutional Amendments 2 and 3 on Tuesday undoubtedly was a matter of unlucky timing. South Carolina voters were in no mood to allow state and local govern-ments to invest in stocks to pay for retiree benefits when the stock market is in disarray.

Unfortunately, voters might come to regret that decision in the months ahead.

One big reason lawmakers had sought to extend the right to buy stocks to state and local governments is because, historically, stocks are a great investment. Over the long haul, even with the ups and downs of the market, stocks usually yield a higher return than safer investments such as bonds or certificates of deposit.

But another big reason for these two amendments was to give state and local governments flexibility in dealing with a new federal regulation. Earlier this year, the federal government adopted a requirement that governments have enough money on hand to pay the retiree benefits of all employees at one time -- even if those employees are years from retirement.

In the past, state and local governments usually just paid benefits such as health and dental insurance for retirees as the bills came in. Requiring them to amass enough money to pay for all benefits for both retirees and workers still on the payrolls will be a challenge.

The city of Charleston, for example, would need to put an additional $800,000 a year into its benefit fund for retirees if it can't invest in stocks. That comes on top of the $1.1 million the city currently salts away each year for that purpose.

The state and other cities are likely to be hit with the same dilemma. And where will the extra money come from? The only choices might be to raise taxes or trim spending -- neither of which is a pleasant prospect in today's economic climate, which already has resulted in severe cuts at all levels of government in the state.

South Carolina voters might have believed they were doing the sensible thing Tuesday in barring governments from investing in a risky stock market. But their caution is likely to cost them in the long run.

Failure to allow state and local government to invest in stocks could be costly.