Reform of retirement system a major legislative achievement
In a legislative session defined largely by the failure of its reform agenda, the financial rescue of the state retirement system stands out as a major accomplishment. Pension reform moved the system off the track for fiscal disaster while that goal could still be accomplished without draconian action.
And it was accomplished by a bipartisan effort led by committees in the House and Senate created solely to consider solutions to the system, which was facing a $15 billion liability and the prospect of insolvency.
The solution was crafted to retain benefits to current employees in areas where changes could be expected to draw legal challenges. Consequently, the ill-considered 28-year retirement approved by the Legislature in 2000 will remain in effect for current employees. New hires generally will be required to complete 30 years of service for full benefits.
Higher contributions to the retirement fund will be required of current state employees, and from the state as well.
Cost-of-living allowances, formerly granted without consideration of what could be sustained, will instead be capped at 1 percent a year, but no more than $500 per retiree.
Future hires will not be allowed to boost their retirement benefits with unused personal time and sick leave. And new legislators will have access to the same retirement benefits as new state hires. That means the sweetheart retirement system legislators now enjoy eventually will be phased out. Too bad the committee couldn’t bring itself to jettison the existing system.
Provisions that allow retirees to return to work for the state were sharply modified.
Rep. Jim Merrill, who chaired the House committee, says the bill is expected to save $175 million a year. In terms of money, “this is the largest reform bill in South Carolina history,” the Daniel Island Republican says. Retiring Sen. Greg Ryberg, R-Aiken, led the Senate effort.
State Comptroller General Richard Eckstrom cautions, however, that the changes don’t go far enough. The unwillingness to reduce benefits for current state employees could mean financial problems down the road.
The system’s board of advisors should maintain close scrutiny of the situation and recommend revisions accordingly.
The retirement system rescue demonstrated the capacity of legislators to successfully take bipartisan action on a particularly difficult issue. The changes should eliminate a fiscal disaster waiting to happen.