Legislators and Gov. Nikki Haley agree that reforming the pension is a priority when the legislative session resumes in January, as they look for ways to shave the state’s $13 billion debt in benefits promised over the long term. A rough draft on how they could do that faces a vote Monday by a House panel that’s been meeting since September.
Lawmakers will spend next session debating the details, but changes are definitely coming, said House Majority Leader Kenny Bingham, a member of the House panel.
“We all have the same goal to make sure we have a system that’s solvent and secure, because if we don’t, it means the state’s not fiscally secure,” said Bingham, R-Cayce.
Possibilities under discussion include requiring employees to work 30 years, up from 28; setting a minimum age of 62 to collect benefits; basing benefits on employees’ last five years of pay, rather than three; and not rolling money paid for unused vacation and sick days at the end of careers into benefit calculations.
Employees would also see their take-home pay reduced, as their retirement contributions increase from 6.5 percent to 7.5 percent.
The proposed legislative changes follow a vote in November by the five-member Budget and Control Board to increase employers’ contributions by nearly a percentage point, to 10.6 percent.
If lawmakers don’t act, the long-term consequence is that the state won’t be able to meet its obligations to public workers, said Rep. Jim Merrill, who is leading the House panel.
“My goal is to guarantee that people in the future will always get their check. That will require a meaningful fix,” said Sen. Greg Ryberg, R-Aiken, who is leading a separate effort in the Senate. “We need to have one that is financially sound.”
Merrill notes that the issue is not confined to public workers. In the near turn, any downgrade in the state’s credit rating would increase the cost of borrowing money for public projects. If agencies have to pony up increasingly more to fill the liability gap and pay retirees, that means taxpayers pay more, he said.
The state’s $13 billion unfunded liability represents the difference in the pension system’s assets and what the state owes everyone currently in the system, including those decades from retiring.
“It’s what we owe in today’s dollars for the benefits they’ve earned,” Ryberg said. So, it’s not an amount the state has to dole out in any lump sum, but putting off a fix now will make it much harder and more expensive to fix in the future, he said.