Rising pension costs hurting SC employees

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COLUMBIA — South Carolina’s 32,442 state employees are contributing more of their paychecks than ever to the state’s pension system, yet a deficit of $16.8 billion is projected to grow even more, representatives of state employee groups told lawmakers Tuesday.

The impact on paychecks, which aren’t high to begin with, has gotten so big that teachers, police, parole and corrections officers are leaving their jobs in droves, according to many of those who testified.

“It’s not right to make state employees shoulder this burden,” said Carlton Washington, executive director of the S.C. State Employees Association. “Many are working for less now than when they first started working for the state.”

Testimony came at a hearing of a joint committee created by S.C. House Speaker Jay Lucas and Senate President Pro Tem Hugh Leatherman to hear about the magnitude of the problem and then propose solutions for the legislature to consider in the upcoming session.

Washington said lawmakers have approved increases in employee pension contribution rates each year since 2010-11, when it was 6 percent, to 8.66 percent this year. Further, he said cost-of-living increases for retirees have been cut from 2 percent in 2012 to 1 percent currently, and he’s been told that is in danger of being eliminated altogether.

It’s not just employees who are struggling. Employers are also being required by the legislature to contribute more each year at the same amount, several officials said.

Harry Miley, financial officer for one of the state’s largest school systems, Richland School District 2, said rate increases in the past three years have cost his district $3 million. Without state funding for the increases, the only options are cutting programs or positions, or seeking local property tax increases.

With more money being taken from teachers’ paychecks, he said, morale, retention and recruitment are hurt.

Jane Turner, executive director of the S.C. Center for Educator Recruitment, Retention and Advancement (CERRA), said each year South Carolina colleges and universities produce 2,000 teachers, but the state has 4,000 teacher vacancies each year.

“Many of us would call that alarming,” she said.

Without higher salaries to compete with other states, she said nearly 40 percent of new teachers leave their jobs within the first five years.

Jarrod Bruder, executive director of the S.C. Sheriffs’ Association, who was representing the S.C. Public Safety Coalition, said many employees are paid $24,000 a year or less, and cannot continue to pay more into the pension system.

He said South Carolina’s contribution rate of 8.66 percent is higher than the national average of 7.52 percent.

“Quite frankly, I don’t know that we have any more to give,” he said.

Since the system relies on employee and employer contributions, as well as return on financial investments, he suggested lawmakers take a closer look at how the Retirement System Investment Commission is investing pension funds.

“We need to reverse the trend on returns of investments and place accountability on those who invest funds, rather than those who (contribute to the system),” he said.

Kathy Maness of the Palmetto State Teachers Association said teachers were grateful to the legislature for a 2 percent across-the-board pay increase this year, but then saw part of that eaten up by a .5 percent increase in pension contributions.

Tim Winslow of the S.C. Association of Counties said rising pension contributions cut into general fund budgets and “cuts into the packages we can offer our employees.”

State Comptroller General Richard Eckstrom said pension fund benefits are a state obligation to employees. Although the system is not in danger of collapsing in the near-term, the funding problem could get worse as more employees retire and fewer are contributing.

The committee took no action Tuesday, but will schedule further meetings this year, according to state Sen. Kevin Bryant of Anderson.

Bryant said he believes the pension fund deficit — projected to grow to $18.2 billion — is as big a problem as the state’s crumbling roads, which have an estimated $40 billion in needs.

“We’ve identified the problem,” he said. “The hard part is solutions.”

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http://www.goupstate.com/news/20160927/rising-pension-costs-hurting-sc-employees