SC pension solutions: Pay state workers more? Raise the cigarette tax?

Paying state workers more wages and increasing the state’s cigarette tax likely will be among the options analyzed by lawmakers tasked with fixing the state’s ailing pension system.

The group of state representatives and senators, who wrote key legislation that passed this year, set out Tuesday on the second phase of shoring up the state’s ailing pension fund, which owes roughly $20 billion more in promised benefits than it has cash on hand.

The group will recommend whether retirement options need to change for new public-sector employees, including moving toward only offering a 401(k)-style retirement plan. Lawmakers repeatedly have said pension benefits will not be taken away from current state workers or retirees.

State Rep. Gilda Cobb-Hunter, D-Orangeburg, said the panel needs to consider a 2016 wage study that concluded state workers’s pay is uncompetitive.

The pay of state agency workers lags salaries paid by other states by 15 percent and other public-sector jobs, including city and county workers, by 16 percent. State workers’ pay lags S.C. private-sector jobs by 18 percent. That low pay means that state workers cannot afford to save — via a 401(k)-style account — for their retirement, some say.

Meanwhile, state Rep. Tommy Stringer, R-Greenville, said the panel should look into raising the state’s cigarette tax to add more money to the pension system, which covers state, city and county workers, including teachers.

South Carolina’s cigarette tax is 57 cents a pack, ranking among the lowest — 45th — in the nation.

This year, lawmakers approved adding money to the pension system by increasing the amount that public-sector workers and their employers — state agencies, cities, counties and schools — pay into the system.

Starting July 1, more than 200,000 S.C. public-sector employees will pay 9 percent of their salaries into the retirement system, up from 8.7 percent.

The government agencies that employ those workers — and taxpayers support — eventually will pay 18.56 percent of each worker’s pay into the pension fund.

This story was originally published May 9, 2017 at 1:45 PM with the headline "SC pension solutions: Pay state workers more? Raise the cigarette tax?."