More than 84,000 South Carolina retirees enrolled in the state’s pension system could see their last cost of living adjustment this spring, state officials warn.

That would mean that, starting in 2006, seniors would not get the bump of hundreds of dollars they expect to keep up with inflation unless the General Assembly makes big changes to the system.

But all options to save the adjustments — known as COLAs — are politically and financially costly, and some officials say retirees have reason to worry.

“My fear is that Nero is fiddling while Rome is burning,” said state Comptroller General Richard Eckstrom, who, as a member of the State Budget and Control Board, is a trustee of the pension system.

Eckstrom has called for reforms in the retirement system for years. He paints a dour picture.

“At some point, the state is going to face a financial crisis of epic proportions,” he said. “There’s not an easy fix, but we need to proceed with our eyes open. Right now, they’re closed.”

Some call those claims irresponsible and insist the retirement system is doing fine.

But the immediate problem is not in dispute. The state retirement system has a $3.4 billion unfunded liability that has placed COLAs in serious jeopardy.

Beginning next year, it’s expected to take 30 years to pay off all the state’s obligations to those enrolled in the system. It is that 30-year debt ceiling that blocks the retirement system from spending on anything but the benefits promised to retirees.

According to state law, retirees are not entitled to cost of living adjustments, although they have always been provided in the past.

“COLAs are not guaranteed, although I know some people have said they’re guaranteed,” said Peggy Boykin, director of the S.C. Retirement System.

Boykin said projections show 2006 will be the first year the retirement system can’t pay adjustments.

“We are approaching a time when a decision has to be made” by the General Assembly, she said.

To pay COLAs in 2006, the General Assembly has few good options. Lawmakers could:

• Raise the amount of money deducted from state and local agencies and the 199,000 current employees enrolled in the plan. Agencies already are stretched thin, and a change would double paycheck contributions for current workers to about 12 percent.

• Spend more than $250 million a year in state funds to pay for the adjustments. This would almost certainly require a tax increase or further slashing of state agency budgets, already subjected to three years of across-the-board spending cuts due to lagging state revenues.

• Change the benefits future retirees are entitled to. That could include scrapping the popular TERI program and raising the number of years an employee must work before collecting benefits. The TERI program allows longtime employees to continue working for five years without paying into the system. They collect full benefits when they finally retire.

House Ways and Means Committee chairman Bobby Harrell, R-Charleston, said lawmakers are committed to finding a way to pay COLAs.

“I can’t imagine anyone, from either the House or the Senate, not working to protect the incomes of retirees,” he said, adding he would not support altering the current benefits package.

Retirees aren’t going to let COLAs vanish without a fight, said Broadus Jamerson, executive director of the S.C. State Employees Association, which represents current and retired state employees.

“Folks who are on fixed incomes depend on those adjustments,” he said. “It’s a very big deal to them.”

For a person who retired at a salary of $50,000 a year, last year’s 3 percent cost of living adjustment equaled $765.

“It’s a lot of money,” said Jimmie Campbell, a retired planning director from the Department of Transportation.

Campbell said he’s received a COLA since he retired four years ago and it helps cover the rising cost of prescription drugs and insurance.

“I may not need it as much as some others, but it’s getting harder to keep up. A lot of people are barely doing it,” he said.

Retiree Charles Case, a 28-year veteran administrator of several state agencies, also said the adjustments are important.

“The cost of living adjustments over the last two years have not covered the increased cost of insurance,” Case said. “The state is not holding its end of the bargain to retirees.”

Instead of taking the adjustments away, Jamerson said, lawmakers should work to guarantee the increases for current and future retirees.

“We will look to the General Assembly to fix this problem, and hopefully they will soon,” he said.

Eckstrom has other ideas. He says the state should scale back the benefits it offers future retirees. By doing that, the state could change its long-term obligations to retirees and improve the current health of the system.

He also accuses past system administrators of artificially adjusting the complex formula used to determine the retirement system’s health to make it appear more fiscally sound than it is.

“Enron has nothing on the state of South Carolina,” he said. “State officials have not comprehended the long-term damage done to the system by manipulating numbers.”

Gov. Mark Sanford, also a trustee of the pension system, agrees the system is in trouble.

“Nobody wants to address the facts,” he said. “(Eckstrom’s) calling an ace an ace, and I applaud him for it.”

State Treasurer Grady Patterson strongly disagrees.

In a written statement to The State, the Democrat Patterson calls the Republican Eckstrom a “political opportunist” who may be trying to “create fear and panic in the minds of retirees.”

“This situation reminds me of Chicken Little,” Patterson wrote. “However, the sky is not falling, and the retirement system will meet its obligations.”

Still, Patterson acknowledged some action must be taken to rescue COLAs for retirees. He’s optimistic that will happen.

“The retirees of our state will be taken care of,” he said.

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