SC pension overhaul makes progress as bill moves forward
The first step in fixing the state pension system could eat up many of the added dollars in this year’s budget, leaving little money to give state workers a raise or pay for other needs.
S.C. House budget writers are considering using about $160 million from the state’s $8 billion general fund budget to pay half of the added contributions that public-sector employers — including cities, counties and schools — will have to pay into the pension system.
The money would cover the added state agencies’ added pension costs for their workers. It also would cover up to $1 of the added $2 for every $100 that other public-sector workers earn that their employers, including public colleges, will have to pay into the pension system.
Starting July 1, those public-sector employers would pay 13.56 percent of a worker’s pay into the S.C. Retirement System under a plan passed Tuesday by a S.C. House budget subcommittee.
However, putting that added money into the underfunded pension system will come at a cost. State workers will be less likely to get a pay raise, and there will be less money to go around for other state agencies, including schools.
“Everybody sees the writing on the wall,” said state Rep. Bill Herbkersman, R-Beaufort.
The state expects to have $446 million in added — or new — revenue for its budget year that starts July 1. That number could change Wednesday when the state’s economic forecasters meet to reconsider their budget estimate.
Spending $160 million on the state’s pension plan would leave $286 million in added dollars for lawmakers to spend.
But that $286 million quickly could be eaten up by state agencies’ requests. For example:
▪ The Department of Education has requested about $130 million to increase the amount that the state’s underfunded K-12 schools get, based on their enrollment.
▪ The state also faces recovery costs for Hurricane Matthew estimated at $75 million.
▪ S.C. colleges have asked for more than $1 billion in added state money.
Lawmakers are likely to use some of the added money for the hurricane costs. To help colleges, lawmakers also are considering a bond bill, borrowing to pay for repairs at state-owned buildings, including colleges.
But that will leave little for public-sector workers.
“I cannot believe that we’re even having a conversation about a bond bill if we can’t take care of employees,” S.C. State Employees Association director Carlton Washington said.
Last year, state workers received their largest pay raise in a decade — 3.25 percent. But, in four of the last 10 years, state workers did not get a raise.
How much state workers are paid is an issue.
State agencies — from Corrections to Juvenile Justice to Social Services to schools — have told legislators repeatedly that their pay is not competitive, making it almost impossible to hire workers.
If lawmakers do not approve a pay raise, state employees actually will see their take-home pay shrink.
The pension plan passed Tuesday calls for public-sector employees to pay 9 percent of their paychecks into the pension plan. That is up from 8.7 percent this year and 6.5 percent five years ago. It also is well above the national median pension cost of 6 percent.