- Associated Press - Tuesday, December 13, 2016

COLUMBIA, S.C. (AP) - Pension costs will dig into the paychecks of South Carolina’s public workers for a sixth consecutive year, and state officials warned deeper cuts are coming.

The State Fiscal Accountability Authority voted 3-2 Tuesday to increase the rates workers and their employers pay for retirement benefits. Beginning July 1, both will pay an additional half of a percent.

Workers in the state’s main retirement plan will contribute 9.2 percent of their salaries while officers and firefighters in the smaller, law enforcement plan will contribute 9.7 percent. The rates paid by their employers will increase to 12.1 percent and 14.7 percent, respectively.

That means an additional $56 million will collectively come out of the paychecks of about 223,000 employees in the two plans next fiscal year. Another $56 million will come from their 850 taxpayer-supported employers, which include school districts, local governments and colleges.

Carlton Washington, director of the State Employees Association, called the impending increase “another slap in the face” to employees.

According to a state-paid study released earlier this year, state workers already are paid less and give up a greater percentage of their salaries for pension benefits than their counterparts in other states, who contribute less than 6 percent of their salaries on average. Washington noted that study never came up Tuesday.

“All we’re doing is playing political games when people are suffering,” Washington said.

Treasurer Curtis Loftis said he voted no because the increases don’t go far enough to reduce the state’s pension debt.

Without a major fix, the increases will continue indefinitely, forcing layoffs, he said.

“What we really need to be saying is, ‘How many teachers can we take out of the schools? How many policemen can we take off the street? How many guards can we take out of the prisons?’ - because that’s where we are,” Loftis said. “Their only crime is they showed up for work.”

The vote comes as legislators try to figure out how to reduce a projected pension debt of roughly $20 billion, which has amassed since 1999 because of a combination of legislative decisions on benefits, underfunding, investment underperformance and fewer workers supporting more retirees.

That figure represents the state investment portfolio’s current worth of $28 billion, compared with benefits likely owed to all 550,000 people in the system until they die, estimating - among other things - end-of-career salaries of current employees.

“The General Assembly recognizes we have a real issue here,” said Senate President Pro Tem Hugh Leatherman, R-Florence, a member of the financial oversight board. “We’re committed to making our retirement system whole. It will take time, and it will be painful.”

Comptroller General Richard Eckstrom countered he’s heard that pledge before, yet the debt keeps growing.

“We had this conversation last year and the year before and the year before that,” said Eckstrom, the state’s chief accountant.

Only the Legislature can make pension system changes. In 2012, legislators applauded themselves for passing reforms they said at the time would keep the system solvent for generations. But that depended on 7.5 percent annual returns on the state portfolio’s investments.

That’s a benchmark many call unreasonably high for any pension system, especially in today’s investment climate.

The state’s investment commission has surpassed it just five times since its 2005 creation, for a 10-year average of 4.5 percent.

But reducing the assumed return on investments - which only the Legislature can do - would increase the projected debt, which is essentially financed over 30 years.

Once the state starts using realistic figures, Eckstrom said, “I think we’re in for quite a wake-up call.”

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