Gov. Mark Sanford’s plan to tweak benefits offered through the state pension system wouldn’t do enough to curb mounting debt, according to an analysis by state financial experts.

Sanford proposed last month scrapping the TERI program for future employees and increasing the number of years needed for retirement back to 30 years, from the current 28 years.

But an independent actuarial firm hired by the state concluded Sanford’s plan would not head off a looming debt ceiling that threatens to halt cost-of-living adjustments for retirees beginning next year.

In the General Assembly, a growing number of lawmakers say more radical changes to the state retirement plan are inevitable if it is to deal with its $4.2 billion unfunded liability.

Lawmakers considering changes will face a tough road ahead and risk angering the more than 260,000 state and local workers and retirees enrolled in the plan.

“We plan to fight those changes with everything we have,” said Broadus Jamerson, executive director of the S.C. State Employees Association.

‘A GOOD DEAL’

Ray Weinstein, a sociology professor at USC Aiken, said he’s one of those opposed to changes in programs like TERI — the Teacher and Employee Retention Incentive program.

TERI allows state employees to retire, defer their retirement benefits and continue to work up to five more years. Originally devised as a way to retain experienced teachers, it is now open to all state workers.

“The current system is a good deal because it’s provided fairly and equitably, and it’s one of the few plans that benefits even the lower-level employees,” says Weinstein, who has been working for the school since 1976 and plans to take advantage of TERI soon.

“It seems as soon as they come up with something good, they can’t leave well enough alone.”

State Sen. Greg Ryberg, R-Aiken, said the benefits package offered to state employees might be too sweet.

“It’s the best deal in or out of state government,” he said. “The problem is, these programs have a huge economic impact that’s put on the back of the system. We can’t afford it.”

Ryberg said he’ll introduce a bill this week that, like Sanford’s proposal, would eliminate TERI and return to 30-year retirement.

But Ryberg wants to go further by applying the changes to all employees, not just future ones.

While that would reduce the plan’s debt more than Sanford’s proposals, the governor and others say that could open the state to lawsuits from employees who view the benefits as entitlements.

Even so, many lawmakers acknowledge the pension system is boxed into a corner if it wants to continue to give retirees cost-of-living adjustments.

“There’s too many people in the General Assembly that don’t react until the emergency’s upon us, and we’re getting to that point,” Ryberg said.

Sen. Hugh Leatherman, R-Florence, said the overall health of the pension plan is good, but he will propose legislation later this year that would revisit how the system’s money is invested.

Leatherman, chairman of the powerful Senate Finance Committee, said TERI is not the system’s biggest problem.

“I will not be a party to sticking a Band-Aid on it and saying, ‘There, we fixed it,’” he said. “We need to look at the entire retirement system and see what we need to do.”

‘AN EMBARRASSMENT’

It’s not just lawmakers calling for reform this year.

In a speech to the state’s Chamber of Commerce, financier Darla Moore called the retirement system “an embarrassment” and urged changes in how the system’s assets are managed.

Advocates say change would spark a more aggressive, and potentially a more profitable, investment strategy.

South Carolina’s pension system’s investments are widely considered conservative compared with those in other state plans, some of which invest heavily in real estate and large corporations.

Under state regulations, only 40 percent of the pension plan’s investments can be in higher-risk stocks, as opposed to more conservative bonds.

OTHER OPTIONS

Sanford’s budget proposal released earlier this month indicates he might not be content nibbling around the edges of pension reform.

Sanford said he would support legislation that would change the retirement plan for all new employees from a “defined benefits” to a “defined contribution” package.

That means future state employees no longer would have guaranteed retirement benefits. Instead, they could set aside a portion of their paychecks into an investment plan that resembles the 401(k)s offered by many private businesses.

State employees already have that choice under the Optional Retirement Program, but few take that route.

Sanford wants all new employees enrolled in that plan, arguing it offers workers more control over how their money is invested and can provide bigger returns.

Gov. Arnold Schwarzenegger proposed the same idea last week for California’s 2 million state and local employees.

Jamerson of the Employees Association said that would be a bad idea, adding that guaranteed retirement benefits is a great recruiting tool for state agencies.

“Not everybody is capable of dealing in the stock market — or even wants to,” he said.

Reach Stensland at (803) 771-8358 or jstensland@thestate.com.