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Gov. Haley: S.C. retirement system fix will ‘hurt’

MCT

South Carolina finance leaders are weighing whether to require state employees to pay much more for their retirements to cover $16.75 billion in unfunded debts in the state’s pension system.

Officials with the state Public Employee Benefit Authority, the state’s retirement system, laid out several scenarios to state leaders Tuesday to help pay down the retirement system’s debt.

The scenarios include requiring state employees to pay 11 percent of their salaries annually into the retirement system. Those workers now pay in slightly more than 8 percent of their salaries, according to a PEBA presentation.

The higher pension costs would affect more than 200,000 S.C. employees who work for state agencies, public schools and local governments, and are paying into the retirement system now. (Judges, law enforcement officers and members of the General Assembly have separate, smaller retirement programs.)

Representatives of S.C. teachers and state employees Tuesday criticized discussion of raising state workers’ retirement contributions, noting their pay has been stagnant since the Great Recession.

“They’re (the state is) not going to have any competent employees left because they’re going to run them all off,” said S.C. State Employees Association executive director Carlton Washington.

Retirement officials described the increased pension cost increase for state workers as aggressive, adding it could be phased in over time if state leaders choose that approach.

Under that scenario, the public-sector workers’ employers — state agencies, city or county governments, or school systems — also would pay more into the system.

In another scenario, retirement officials said state employees may have to contribute even more – more than 12 percent. That money is needed to make up for investment losses and to offset lower projected earnings by the pension system.

Past aggressive projections of how much the pension system would earn on its investments have not panned out, contributing to the pension system’s $16.75 billion in unfunded liabilities.

But Employees Association head Washington said asking workers to pay higher retirement costs would make the state even less competitive as an employer.

S.C. employees already pay more for their pensions than in any other Southeastern state and more than many private-sector employees, Washington said, referring to a compensation study released in January.

"I've had some teachers say their paycheck now is less than in 2002,” said Palmetto State Teachers Association executive director Kathy Maness, adding increases in what teachers pay for their health insurance and retirement have outpaced salary increases and cost-of-living adjustments.

In the budget that starts July 1, the S.C. House has proposed a 2 percent cost-of-living pay increase for state employees. But, under that plan, state employees also would have to pay 0.5 percent more for their retirement contributions.

Officials with a commission that invests the state’s retirement money also testified Tuesday before the State Fiscal Accountability Authority.

That commission’s leaders said the investments – intended to raise money for the state pension system – have underperformed.

Of the ailing retirement system, Gov. Nikki Haley, who chairs the State Fiscal Accountability Authority, said she does “not want to leave to the next administration anything that they feel is not solid, consistent and good.”

Haley said she would like to “start righting the ship, and decisions hurt. Hard decisions are not easy.”

House Ways and Means chairman Brian White, R-Anderson, said the state has put off for long enough deciding how to pay the pension system’s “unfunded liability” – the amount by which its projected costs to pay pensions exceed the projected value of its investments and their earnings.

State finance leaders tentatively plan to meet again next month.

Haley said if the state is “going to make major changes” to its retirement system, the changes need to be “right the first time.”

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