Future state employees would not be eligible for the TERI program and would have to work 30 years, not 28, before they could retire, under a proposal Gov. Mark Sanford pitched Monday.

The plan is part of Sanford’s executive state budget, which he will release Wednesday, and is designed to combat mounting debt in the retirement system.

Benefits offered to current employees would not change under the proposal.

Sanford admits the move would do little in the short-term to help the retirement system, but he said it would “stop the bleeding” over time.

TERI is a program that allows state employees to continue to work — collecting a paycheck — for five years past their retirement date.

The program, created in 2000 to keep select, critical state employees on staff, was expanded by court rulings to include any state employee who qualified.

Critics say TERI — coupled with a 2001 change requiring only 28 years of service for retirement instead of the original 30 — is partly responsible for a spiraling $4.2 billion unfunded liability in the state’s retirement system.

Officials estimate the liability is so high that by next year the system won’t be able to pay current retirees’ annual cost of living adjustments.

“This may have been great politics,” Sanford said of the current benefits, but “it’s horrible policy, and I really think it’s a ticking time bomb.”

It’s not clear how much Sanford’s plan would reduce the system’s liability over time, but a study is under way to find out, spokesman Will Folks said.

A panel of retirees brought together by state Comptroller General Richard Eckstrom is expected to issue a separate set of recommendations for strengthening the system in a few weeks.

Eckstrom said he expects those also will call for changes to the benefits package offered to future employees.

Kent Phillips, president of the Association of South Carolina State Retirees, said while he’s glad Sanford is looking for ways to make the system healthier, lawmakers should proceed with caution.

“You need to weigh the impact over time and the effects it may have on something like teacher recruitment,” said Phillips, a retired high school teacher. “There are teachers that would stay for the 28 years, but not 30.”

Sanford also urged legislators to keep spending in check by issuing a “Fiscal Fitness Challenge.” That includes restoring money to the state’s reserve fund and reducing debt, which Sanford says has skyrocketed in recent years.

House Ways and Means Committee chairman Bobby Harrell, R-Charleston, said he agrees debt is too high, but said lawmakers have been thrifty.

“If you look at the last couple of years, there’s no question that we’ve been fiscally responsible.”

Sanford outlined two other specific budget proposals last month. They included spending $54 million to hire more than 300 new law enforcement officers and halting increases in state health insurance costs in 2006.

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