By Sarah Robbins
Edited by David Purtell
Retired state employees will get half the cost of living increase they anticipated and some will no longer get one at all, the State Budget and Control Board decided Thursday as it tries to close what was the $17 billion gap in the state retirement system.
"We've all known this year is going to hurt, and we're not going to bury our head in the sand," Gov. Nikki Haley said. "The Legislature is committed to a solution."
Retired teachers and state employees will get a 1 percent increase instead of 2 percent. Retired police officers and firefighters will no longer receive a cost of living increase.
The decision by the five-member board also increases the amount taxpayers contribute to the retirement system.
Retired schoolteacher, Marilyn Montgomery, one of dozens of retirees who packed into the small conference room in the Brown building, said beforehand that she was worried about what the board would decide.
"This is our bread and butter. This is what we live on," she said.
The changes will go into effect July 1, the start of the new fiscal year. This gives legislators time to make further changes.
The S.C. Retirement Systems said the average payout to retirees is $18,000 a year. The difference between the investments the state has in the retirement system and the amount promised to retirees in their pension plans is now $13 billion. Since the board voted to decrease the cost of living adjustments, this helps close some of the gap. The cost of living increase had to be lowered when the Budget and Control Board lowered the expected earnings from the retirement system from 8 to 7.5 percent per year given the slow recovery from the recession.
Senate Finance Chairman Hugh Leatherman, R-Florence, and House Ways and Means Chairman Brian White, R-Anderson, both have subcommittees working on further fixes.
"I've told them, 'Don't bring me a Band-Aid, you bring me a solution,'" Leatherman said.
The board, which consists of the governor and the state's top financial officers, had an obligation to act so the changes would go into effect by the next fiscal year, Comptroller General Richard Eckstrom said.
The numbers the board approved were based on a state-commissioned study by Gabriel Roerder Smith and Co, a consulting firm.
But Treasurer Curtis Loftis said he thinks the state's liabilities were overstated, resulting in incorrect adjustments.
"It is unwise to accept these very important assumptions," said Loftis, who abstained from the vote.
But Haley said these changes will bring predictability and stability to the system. This action had to be taken "for the feds, the rating agencies and for the taxpayers," she said.
Joe Palmer, executive director of the State Firefighters Association, said he is unhappy with the changes, but would speak with other members of the S.C. Public Safety Coalition before further comment.
The S.C. State Employees Association and S.C. Education Association submitted a plan to the House and Senate subcommittees earlier this week saying they would be willing to pay more into the system, but only if that would help decrease the deficit. Law enforcement officers also understand that the retirement system needs to change, but are only willing to compromise if it will actually create a solution and still take care of retired staff, the South Carolina Law Enforcement Officers Association said in a recent email to their members.