State system faces deficit

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It was only four years ago that state lawmakers lowered retirement eligibility for state workers from 30 years to 28 years of service. It was an initiative guaranteed to curry favor with state employees while provoking a strong negative reaction from most taxpayers — at least those in the private sector — who expect to work 40 or more years before enjoying retirement.

The change in retirement eligibility, coupled with overly generous employee incentives, is in part responsible for a gaping hole in the state's retirement system. The system faces $4.2 billion in unfunded future needs.

In an attempt to put the retirement system on firmer financial ground, Gov. Mark Sanford wants to move retirement eligibility back to 30 years of service while also getting rid of the incentives in the TERI program for new employees. Current employees would not be affected by the changes.

The TERI (Teacher and Employee Retention Incentive) plan allows all state employees to retire at 28 years, receive pay for up to 45 days' unused annual leave, return to work at the participant's current salary for another five years and then, upon the second retirement, receive pay for up to another 45 days' unused annual leave.

"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."

The TERI plan and 28-year retirement were sold as tools to help the state recruit good state employees, particularly teachers. That's certainly a worthwhile goal, but the best way to recruit and retain the best educators and employees is through competitive salaries, not generous retirement benefits. Retirement is not foremost on the minds of young teachers or potential state employees.

Because Sanford's proposal doesn't affect current state employees, the changes would not immediately alleviate the state's unfunded liability. However, state Comptroller General Richard Eckstrom put together a task force to study ways to strengthen the retirement system. That group will issue a report in a few weeks.

In the past four years, the gap between how much money the retirement system has and how much it will eventually need has increased to $4.2 billion from $178 million — thanks in part to lawmakers' actions in 2001. Perhaps the best result of Sanford's proposed changes to the retirement system would be to keep the situation from getting any worse. That, by itself, would be an important accomplishment.