Originally created 07/06/06

State to evaluate retiree liabilities



COLUMBIA - South Carolina is beginning to grapple with new accounting rules that could add billions of dollars in liabilities to the state's books to account for future retiree health care costs.

The budget that took effect Saturday requires a report by January on what state Comptroller General Richard Eckstrom calls a $9 billion problem for the state.

"The state has staggering financial issues to deal with," Mr. Eckstrom said last week at a Republican Party event held for its candidates in the November elections.

Apart from $9 billion in unfunded liabilities in the state's main pension plan, the state health plan for retirees has "another $9 billion unfunded as we speak," Mr. Eckstrom said.

"That's $18 billion of commitments that have been made to date for services that have been performed to date that have yet to be funded," he said. "We're facing tremendous pools of blood. The state is bleeding to death in programs like this."

The state's annual budget is about $6.6 billion.

South Carolina is among 30 states that now account for those health costs on a pay-as-they-go basis and don't show the growing costs of future health care benefits.

In 2004, the Government Accounting Standards Board adopted rules prompting that accounting change beginning next year.

GASB can't force states to follow its standards, but credit rating agencies can take a dim view of states that don't follow its lead or address the issue.

South Carolina's potential liabilities aren't as large as some.

In California, a report earlier this year said the unfunded retiree health care tab could be up to $70 billion - costing the state $6 billion annually to pay off over 30 years.

Maryland has estimated its liabilities at $20 billion.

A South Carolina panel that will study the issue could meet later this month.

Drew Theodore, Mr. Eckstrom's Democratic Party opponent, said the state has to figure out how to follow the rules.

"I do think it's premature for the comptroller general to jump out there on this before the study committee has even met," he said.

House Ways and Means Committee Chairman Dan Cooper said he's unsure how the $9 billion estimate was reached or whether it should be treated the same as unfunded pension liabilities.

There are limits to the state's health care liabilities, he said. For instance, the state health plan pays a maximum lifetime benefit of $1 million, Mr. Cooper, R-Piedmont, said.

Last year, concerns about the growing gap between money the state has to pay for retirement benefits and the total tab for current and future retirees prompted Mr. Eckstrom and Gov. Mark Sanford to call for closing the state's traditional pension plan to new workers.