State retirees could lose pension raises

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But she said the possibility that the yearly increases will stop in 2006 because of a projected shortfall in the state's retirement system will still hurt many retirees who need the increases to fight inflation in medicine, medical services and energy costs.

"Money is not the most important thing, but you do have to live and pay your bills," she said.

State Comptroller General Richard Eckstrom said the problem is a projected shortfall in the retirement system of $3.4 billion, which if left unaddressed could stop pension adjustments for 84,000 retirees in two years. Eckstrom wants to appoint a task force of retirees and others to study the issue and make recommendations to lawmakers.

State Sen. Verne Smith, a Greer Republican who sits on the Senate Finance Committee, said the information given to lawmakers is that the system is fiscally sound.

Talking about problems with future annual increases "unnecessarily scares people about their retirement," he said. "I don't think retirees or future retirees need to be worried about that because the state of South Carolina will absolutely meet its obligations."

Eckstrom said options for lawmakers include raising the contribution rates for agencies and employees, reducing benefits including the annual increases and scrapping or changing a program that allows workers to continue working past retirement without paying anything into the system.

"It's a huge financial problem," Eckstrom said. "We've either got to put more into the retirement system or take less out."

Theron McCants, a 61-year-old retired state auditor living in Greenville, said he wants somebody to tackle the issue, which has been debated for years by politicians.

"It seems like nobody really wants to take any action," he said.

Gov. Mark Sanford, who sided with Eckstrom earlier this year when the issue surfaced before the State Budget and Control Board, voted against cost-of-living increases this year and has called for reforms in the TERI program, the program that allows teachers and state employees who retire to continue working.

The Legislature hasn't passed the reforms and others on the five-member Budget and Control Board approved the cost-of-living increase.

"It's another example where folks in government spend, spend, spend without taking into account financial realities that are out there," said Sanford spokesman Will Folks.

But state Treasurer Grady Patterson, the lone Democrat on the Budget and Control Board, said while lawmakers should examine the issue of the adjustments, retirees are being unnecessarily scared.

"This situation reminds me of Chicken Little," he said in a statement, "However, the sky is not falling and the retirement system will meet its obligations."

Broadus Jamerson, director of the S.C. State Employees Association, said he believes the system is sound.

"That's not to say that aren't some adjustments that are needed," he said. "But the question is how you go about doing that. In doing that, we certainly wouldn't want to see a retraction or reduction of benefits."

Peggy Boykin, director of the State Retirement System, said the issue is one that is being watched closely not only by retirees but also the 199,000 state and local government employees who pay into the system.

"They definitely take it seriously," she said.

McCants said in the three years of his retirement, the costs of insurance increases alone have left him with a smaller pension check than he started out with, even with the cost of living increases.

Culp said the increases create a "buffer" to help soften the blow of inflation.

"It may not be a humongous amount," she said, "But to some people, that cost of living may make the difference."

Options for lawmakers include paying more than $200 million a year to continue the adjustments, asking agencies and those paying into the system to pay more, or changing future benefits. Workers could also be asked to retire later.

One of the most popular targets has been the program allowing workers to continue working past retirement without paying into the system.

The system was created for teachers but was expanded for state employees. Eckstrom said the program has cost the system more than $700 million. But he said any changes now could only impact future retirees who want to work in the program and won't save the system money that already has been paid out.

Culp, who worked in the TERI program for three years, said she hopes lawmakers leave the program alone.

McCants, who also briefly worked in the TERI program, said there are plenty of sources of revenue, such as sales tax exemptions, which lawmakers should look at first before messing with the cost of living increases or raising contribution rates.

House Speaker David Wilkins of Greenville said he doesn't think the Legislature will reduce benefits, though lawmakers will continue to debate the TERI program.

"I think you're going to continue to see a real effort to fund the cost of living," he said.

"We will not turn our backs on the retirees. Whatever it takes to make the system work, we will do, whether it's appropriate additional funds or reduce TERI."