COLUMBIA, S.C. (AP) - Even as the House approved a proposal Tuesday designed to stabilize South Carolina’s pension system, legislators pledged more changes are coming.
The bill that easily passed the House would increase employers’ contribution rates by 7 percentage points over the next six years, requiring the taxpayer-supported entities to cumulatively put an additional $3.2 billion into the system.
Senators began discussing an identical bill Tuesday. Debate will continue in that chamber Wednesday.
“If we do not shore up our pension, it will collapse,” said Sen. Vincent Sheheen, D-Camden, co-chair of a joint House-Senate committee studying pension reform. “We have to get something out of this chamber.”
The bill requires more than $42 million extra to collectively come out of the paychecks of about 223,000 employees next fiscal year. But the legislation specifies that will be the last rate hike for workers, who already pay among the nation’s highest rates.
Under the proposal, workers in the state’s main retirement plan would begin contributing 9 percent of their salaries July 1, up from 8.66 percent currently. Officers and firefighters in the smaller law enforcement plan would contribute 9.75 percent, up from 9.24 percent. That would end six consecutive years of increases.
“If we were to raise the contribution higher, they would be putting more money in than their benefit’s worth,” Sheheen said. “At that point, they would be better off not participating in the system.”
Without the bill, rates for workers in the main system will rise to 9.2 percent on July 1.
The study committee will get to work soon on round two, which will change benefits for new hires, said Rep. Bill Herbkersman, R-Bluffton, the other co-chairman.
Possibilities to be explored include transitioning new employees to a defined contribution system such as a 401K and closing the system to employers that aren’t state agencies and school districts. Less than 40 percent of employees in the system work for the state, Herbkersman said.
The hundreds of other employers include city and county governments, public utilities, colleges, hospitals, and even associations that advocate for public employees. The committee will explore whether high-paid doctors, for example, are draining the system or helping through their contributions, Herbkersman said.
“There are going to be a lot of unhappy people in phase two, but knowledge is the power,” he said. “The only decision we’ve made is that we’ve got to make a decision.”
Sen. Tom Davis, R-Beaufort, said he’s reluctant to pass a bill without the structural changes.
“I’m concerned that once the math problem is solved and you’ve increased the money taxpayers pay into the pension,” legislators won’t have the “political will” to tackle the rest, he said.
But House Ways and Means Chairman Brian White, R-Anderson, said crafting a single bill with all of the changes would sink its chances of passing this year.
“This bill is to shore up the immediate need,” he said.
A 2017-18 budget proposal advanced last week to the House floor includes $150 million to fully cover the pension bills’ required rate hike next fiscal year for state agencies funded primarily by state taxes. That money also covers half the increase for other employers in the system, including city and county governments.
Herbkersman noted the state is not committed to cover any of other employers’ rising costs in future years.
Rep. Jonathon Hill, R-Townville, said that could force local governments to raise property taxes to cover their share.
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