COLUMBIA, S.C. - The state treasurer would no long handle investments for the South Carolina Retirement Systems under a proposal aimed at repairing a pension system Gov. Mark Sanford describes as a "ticking time bomb."

The proposal approved Tuesday ultimately would put about $2.3 billion into the system and cut 20 years from a gap between money on hand and what has to be paid to retirees, said Sen. Thomas Alexander, R-Walhalla and chairman of the Senate Finance subcommittee dealing with retirement system problems.

Earlier this year, the South Carolina Retirement Systems reported a flawed estimate had increased the number of years required to pay off retirees to 28. That threatened the state's ability to pay the annual cost of living adjustment that retirees need to keep ahead of inflation.

In 2000, the system had a two-year payoff gap, but smaller than expected returns on investments and increases in benefits added to the program's liabilities.

To fix the problems, the panel said the state should:

_ Approve an amendment to the Constitution allowing investments in stock of international companies.

_ Allow the state to invest more than 40 percent of its retirement plan money in stocks.

_ Require people who retire from state jobs and return to the state's payroll to continue making retirement plan contributions.

_ Eliminate an unintended perk that let people taking advantage of the Teacher Employee Retirement Incentive program cash in twice on unused annual leave.

_ Let employees decide whether to pay more into the system to be able to retire after 28 years or pay less and retire after 30 years.

Changing the mix of investments "will have a tremendous impact" on the system, Alexander said.

Other changes would, too. For instance, requiring contributions from retirees returning to the state payroll cuts five years from the system's liabilities, Sen. Linda Short, D-Chester, said.

Sanford wanted the TERI plan eliminated and to close the traditional pension plan to new employees or require newcomers to stay on the job for 30 years to get full benefits. But the committee didn't adopt those.

Sen. Greg Ryberg, R-Aiken, voted against the proposal, which cleared the Senate Finance Committee with a 15-7 vote. "I think we've got a half-loaf here," he said. Ryberg favors eliminating the TERI program.

Sanford is skeptical, too, his spokesman said. For instance, the legislation calls for the state to get an 8 percent return on investments. But the system now generates a little more than 7 percent.

"We've got to be cautious with assumptions like that because until these gains actually materialize, it's a long way from being money in the bank," Sanford spokesman Will Folks said.

The Legislature would have to approve most of the changes before June for state retirees to get a cost of living increase this year.

While the legislation is an attempt to put the system on firmer financial footing, "our whole goal is to be able to fund the COLA this year," said Sen. Nikki Setzler, D-West Columbia.

In the long term, Setzler said, the way the state handles investments needs to change. He supported moving the investment responsibilities from the state treasurer's office and into a new Retirement System Investment Commission. Treasurer Grady Patterson, a Democrat, oversees 60 percent of the retirement systems' holdings.

"We strongly support unifying the management of the portfolio," Folks said.

The panel didn't talk to Patterson about those plans before Tuesday's meeting, Trav Roberts, Patterson's spokesman said.

"It should scare the retirees of this state that legislation is being proposed to give an investment panel sole fiduciary responsibility for investing $25 billion without being held accountable to the people of this state," Robertson said.

"We need to put the health of this system above political turf wars, and we hope that's something the treasurer's office ultimately realizes in this process," Folks said.