South Carolina's Teacher and Employee Retention Incentive has become one of the state's most popular programs, with more than 13,000 employees already enrolled. Unfortunately, it's also become a major liability for the state's retirement system. The Legislature should terminate what has become an increasingly costly program.
In its comprehensive report on state government, the governor's Commission on Management, Accountability and Performance singled out the program for particular criticism, saying it has quickly grown to a $650 million liability for the state retirement system.
The program was created as an incentive to keep experienced teachers in the classroom following their retirement. But as it turned out, legally the program had to be offered to all state employees, who can now retire after 28 years. The TERI program is available to retirees for five years.
Critics complain that all retiring state employees have the option to take advantage of the program, while the state has no authority to reject any employee who chooses to participate. Participants continue to receive a state salary while their retirement pay goes into a trust account, which is paid as a lump sum at the end of the employee's TERI term. Meanwhile, employees are eligible for lump sum payments for up to 45 days of unused personal leave when they officially "retire" and again when they leave the TERI program. No wonder the MAP Commission concluded that TERI "has evolved to an employee benefit program."
Rep. Herb Kirsh, D-Clover, has submitted a bill for next session that would close participation in the program, and end it after the current retirees are no longer eligible. Several House budget hawks already have signed onto the bill. Sen. Greg Ryberg, R-Aiken, has submitted a similar bill in the Senate.
Keeping the program will further burden a retirement system that is now paying out more in benefits than it is receiving in contributions. State Comptroller General Richard Eckstrom tells us if nothing is done that "somewhere over the next 20 or 30 years" the retirement system will be out of balance by as much as $10 billion.
The TERI program is contributing to the system's financial problems. So has the Legislature's decision to cut the period for full retirement eligibility from 30 to 28 years, adding a liability of some $700 million, Mr. Eckstrom estimates. And the decision to grant a cost-of-living increase to state employees this year added nearly another $300 million.
Legislators sometimes have difficulty looking beyond the next election, but the looming problems for the retirement system require their attention.
The expense of the TERI program outweighs its value, and the Legislature should scuttle it at the earliest opportunity. Meanwhile, legislators should reconsider the fiscally irresponsible decision to shorten the period for retirement eligibility.
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